Sears Went Bankrupt, What Did The Retail Giant In 100 Years Experience?

In early 2019, after running around, Edward Lambert won over three months ago in bankruptcy auctions by using his hedge fund ESL for about 5 billion 200 million dollars to win bankruptcy protection. Sears's department store has temporarily avoided the fate of bankruptcy and liquidation.

This has won valuable time for Sears's pformation, but some experts say that the traditional retail department store industry has gone to the end, and Sears's hope of rebirth is slim.

In October 15, 2018, Sears filed for bankruptcy protection in court.

If it hadn't been for this news, the enterprise of the department store in the United States, whose business history has been over 125 years, has long been forgotten by the public.

From the founder and leader of the world commercial retail mode to the bankrupt Jedi now, what has happened to the century old shop that spanned three centuries? Its ups and downs and the dreams and puzzles of generations behind it are worth careful scrutinize by all the big companies today.

Mail order business started

At the end of nineteenth Century, two young people of more than 20 years old began to sell a box of idle watches and set foot on the first wave of retail trade, the mail order era.

In the third year of Sears's formal establishment in 1895, the two founders of Chicago's clothing manufacturer Julius Rosenwaldby were more optimistic about the prospect of mail order, buying shares from them and becoming the majority shareholder of Sears.

At that time, the target customers of mail order catalogue business were Americans living in the countryside, occupying 70% of the US population at that time.

The mail order mode not only improves the convenience of shopping, but also saves part of the intermediate links, which provides customers with lower prices than traditional grocery stores.

Once launched, it soon became popular in the United States.

In 1906, Sears became the first publicly traded retail companies in the United States. Its sales grew by more than 20 times in 1900~1920. It surpassed Montgomery Ward as the head of mail order business in one fell swoop, and was included in the Dow Jones industrial index in 1924.

Seizing the trend of urbanization and building solid department stores

In 1928, Rosenwald retired. His successor is Robert Wood who will influence Sears's trend in the next 40 years.

Wood studied the population statistics all the year round. He was acutely aware that the American population was being focused from the countryside to the city. The car represented by Ford began to spread in the US family. He judged that the United States will soon usher in a wave of overwhelming urbanization, which will have a revolutionary impact on the retail industry.

First of all, the urban population will rise sharply, and the main force of the future consumption will shift from rural areas to cities.

Secondly, the car has enlarged the radius of consumption, and the mail order business, with railway or even carriage as the carrier, will gradually shift to the consumption of consumers close to the city.

In 1925, Sears opened the first real department store in Chicago. In the same year, the number of stores reached 8, and the physical retail mode was fired.

In 1932, the number of stores reached 374. In the same year, the retail revenue exceeded the mail order business.

In 50s, there were more than 600 department stores in Sears. Wherever they went, they attracted a large number of consumers, thus stimulating other business forms to enter, and shopping centers gradually formed.

During Wood's leadership, Sears's revenue increased from $200 million to $3 billion, and profits rose from $14 million to $141 million, and its market value soared to $10 billion from $500 million.

Peter Drucker, managing director (Peter Drucker), regards Sears as one of the greatest companies in the United States during this period.

After 70s, it fell into a long recession.

In 1973, Sears built a new headquarters building in Chicago (Sears Tower), which surpassed New York's World Trade Center as the tallest building in the world. However, during this period, Sears went downhill.

Because underestimating the rapid rise of discount stores and hypermarkets, Sears's market share has gradually declined, while internal management has been disorganized, and chairman and senior management have frequently changed.

In 80s, the decision-making layer blindly diversified expansion, entered the retail and real estate and securities field which had nothing to do with retail sales, and sold the financial business in 90s. After wasting 10 precious years, it returned to the main business.

It was too late. In 1999, Sears was picked out of the Jones industrial index.

In 2005, Wall Street star investor Edward Lambert bought the same Kay Matt supermarket and merged with Sears to form Sears Holdings.

Lambert, who knew nothing about retail, used various hedge funds to manage portfolios in Sears's internal organization. Sears began to lose money and debts.

Lambert chose to sell high-quality store assets and private brands to repay debts, but refused to invest the proceeds in the main business. Sears has entered a vicious circle since then, so far bankruptcy protection has become the last straw to crush Sears.

Today's Sears has not yet been sentenced to death. If the reorganization is successful, the Centennial foundation will continue. But even so, Sears will be totally different, because the cost of all the core stores will be sold off.

Looking back at Sears's development, it seized the opportunity of mail order catalogue business and department store, realized rapid development and take-off, but missed the discount store and hypermarket business.

Source: China Europe Business Review Author: Horizon