Reports that Sears Holdings is filing for Chapter 11 bankruptcy have to be the least surprising news of the week.
Paralleling that announcement came the one about the pending closure of nearly 200 stores by the end of the year.
Who’s surprised? It seems as though this retail dinosaur has been on its last legs for years now. Even when Sears merged with Kmart in the early 2000s, I recall one of my business colleagues remarking that it was “one dog of a company buying another dog of a company to create this really big bowser enterprise.”
“Most. Useless. Merger. Ever.” was how another person I know described it.
Indeed, it seems as though Sears’ biggest contributor to its financial bottom-line in recent years has been its real estate holdings. Sales of Sears commercial properties have contributed mightily to the company’s balance sheet, while retail sales seem almost like an afterthought.
Even as the National Retail Federation is forecasting holiday sales to rise nearly 4% this year – a hefty jump in comparative terms – Sears was destined to share in precious little of it.
According to MediaPost columnist Laurie Sullivan, everyone should have seen the handwriting on the wall when Adthena released its latest online retail activity reporting. Tellingly, Amazon and Walmart collectively account for nearly 45% of all online retail clicks.
“Old school” department store firms such as Macys and Kohls do significantly worse, typically taking between 3% and 4% of clicks apiece.
But Sears has been a poor performer compared even to the weak showing of traditional department stores; Adthena reports that Sears accounts for just 0.7% of online retail clicks.
To add the final nail in the coffin, anyone looking closely at what’s been happening with Sears’ print and online display advertising expenditures can see that the company was busily rearranging the deck chairs on the Titanic. Media measurement firm Statista reports that Sears/Kmart decreased the dollar amount it spent on such advertising from ~$1.5 billion in 2013 to just ~$415 million in 2017. That’s more than a 70% drop during a period of economic recovery.
When the numbers between market growth and advertising decline cross like that, you know exactly where things are headed …
Will Sears or Kmart even be brand names in another decade? It’s difficult to see how.
One thought on “Sears Holdings’ bankruptcy filing: the worst-kept secret in the business world.”
Here’s something that many people don’t know: Sears was the first big retailer to go online with a content portal, which first launched in 1988.
You read that right. 1988 – six years before Amazon was founded.
The service was called Prodigy and it was initially a joint venture between Sears, CBS and IBM. CBS left the venture in 1986, before the service launched, and Sears sold its stake in 1996. Prodigy went public in 1999 and was then acquired by SBC Communications (now part of AT&T) in 2001.
By 2000 Prodigy had just over 3 million subscribers and was the fourth-largest Internet service provider behind America Online, Microsoft MSN and EarthLink. But shortly after SBC acquired Prodigy, it launched a strategic alliance with Yahoo! and stopped offering new Prodigy accounts. Today, Prodigy is defunct.
From its inception, Prodigy provided online banking, stock trading, advertising and online shopping services before the advent of the World Wide Web, but couldn’t capitalize on its first mover advantage — due in part to the graphics presentation technology limitations of the time, and also the mistaken perception that online shoppers would pay premium prices instead of expecting discounts.
If Sears had only waited ten years before placing its technology bet, might things have turned out differently?