A recent article in the Wall Street Journal entitled, “How Sears Lost the American Shopper,” was written not by the retail investors but by ex-employees who were dealing with the decisions made by senior management. This article was written from the employees’ viewpoint of what went wrong.
In the 1980s, Sears acquired multiple companies in the financial industry including: Discover Card, Allstate, Coldwell Banker, and Dean Whitter. All of these establishments required capital, which, of course, had to originate from Sears. The purchases initially resulted in shareholder value but when the time came to divest, time away from the retailer was required. This was coupled with the fact that Sears was not investing in its own stores during a time when technology was becoming necessary to run a successful business and the retail industry as a whole was changing.
A second area of failure from Sears’ standpoint was seen in the internal arrogance of the company. Initially, competition from companies like Home Depot and Best Buy was not viewed as potentially threatening. It was not until the late 1980s that Sears started to add to their line of retail appliances and began accepting additional credit cards.
By the mid-90s when Walmart was four times the size of Sears and other retail companies were on the uptake, Sears, who was simultaneously declining, decided for the first time to bring in a CEO who had not grown through the internal ranks. The new CEO elected to discontinue the once-famous Sears catalog business. At the same time, the company’s extensive distribution and logistics mechanisms were becoming antiquated. The elimination of the catalog resulted in the loss of 50,000 jobs. People from across the county who once had access to everything in the store, now had nothing.
The next failing change came when the CEO decided to place the emphasis on the company’s clothing line instead of on the well-known Sears’ hardware and appliance lines. Nation-wide Sears retail establishments rearranged their floor displays, placing appliances in the back of the store while clothing was moved to the front. The ensuing years were witness to more missed opportunities and poor management decisions, including the purchase of the retailer Lands’ End. Perhaps the final nail in the coffin was the acquisition of Kmart.
One can see that by taking their eye off the core business of retail, and ignoring future opportunities, the inevitable end of one of America’s iconic retails was a foregone conclusion.
What happened to Sears is not much different from what is currently happening, and what has already happened, to a number of breweries. It all sounds all too familiar. Part of today’s breweries’ struggles is related to not focusing on their core business. Many breweries seem to be in desperation mode and are rushing to prop up their businesses with new products, many of which are not malt based liquid.
The exception to this might be The Boston Beer Company who has transitioned from craft beer to teas, seltzers, and a myriad of different products. One can suggest that Boston Beer was in a better position, or at least a less risky position, in changing their core business. For other beer companies, the same cannot be said.
Layoffs, cutbacks, reduction in marketing, and resources moved to unproven new and risky products; all the same movements executed by Sears’ management, are now being performed by many beer companies across the industry. Soon, the beer industry will be experiencing the same unsuccessful results as Sears.
The ultimate goal of the ego is not to see something, but to be something.