Now bankrupt, Sears was once the Amazon and Walmart of the day – The Motley Fool

Creative destruction. The economist Joseph Schumpeter coined the term to refer to the process of mutual elimination of businesses as they evolve. Today, no company represents this evolution better than Sears Holdings (NASDAQ: SHLD), the mother of Sears and Kmart.

Now a dinosaur in the retail business and officially bankrupt, Sears was the largest US retailer as recently as the 1980s. It dominated the postwar and much of the twentieth century. Many of the innovations and strategies launched by the company have been borrowed by Walmart (NYSE: WMT), the largest US retailer of the last generation, and later Amazon (NASDAQ: AMZN), the decisive retailer of the e-commerce era – and there are only a few similarities between them.

Source of the image: Sears.

Ancient history

Like Amazon, who was initially only a bookseller, Sears started modestly in the 1880s focusing on a single product line: watches. Also like Amazon, Sears adopted what was the e-commerce of its time, the mail order catalog, taking advantage of the decision of the US Post Office in 1896 to make home delivery in rural communities . By using mail order, Sears was able to capitalize on another emerging technology of its time, similar to the Internet, the railroads. The connectivity provided by the railways has made rural communities more accessible and, just like Walmart nearly a hundred years later, Sears has built the foundation of its retail empire on rural America.

After his new partner Julius Rosenwald joined Sears in 1895, the company expanded its selection of products to include bicycles, sewing machines and strollers. She seduced customers with low prices and a wide selection, two model strategies for Walmart and Amazon. The Sears catalog had titles like Book of good deals and The big price Maker, and the company focused on customer satisfaction. In an echo to Amazon's mission to be "the most planet-centric company," Sears told his customers in his catalog. "We solicit more honest reviews than orders."

By 1906, the company had a giant three million square foot distribution center in Chicago. She gave the illustration on the back of each catalog, essentially announcing her dominance. More than a quarter of Americans then received the Sears catalog, sometimes titled Wish book, precursor of the wish list of Amazon.

While the country is urbanizing and automobiles are starting to replace railways, the company is adapting and opening its first department store in Chicago in 1925. It is growing rapidly with more than 300 stores in 1929 Amazon has followed suit today with the acquisition of Whole Foods and opening small stores like AmazonBooks and concepts such as Amazon 4 Star and AmazonBooks.

Sears managed to grow even during the Great Depression because bargain prices were an important part of his brand, a likely influence on Sam Walton, who had promised daily low prices, and when it was a question From clothing, Sears focused on basic fashion items for competitors, much like Walmart and Amazon did.

The number of Sears stores doubled during the 1930s and counted 700 stores in the 1950s. It has spread to Mexico and Canada, becoming a standard anchor point in shopping malls and an element essential of post-war prosperity.

Signs of trouble

In the 1970s, the American retail business began to change. Shopping centers are beginning to emerge to compete with traditional malls and department stores, and discount stores like Walmart, Target, and Kmart has expanded, negating Sears' competitive advantage. Like much of the department store sector, Sears began to lose market share to more agile retailers as Walmart exploited the niche Sears once dominated: America. rural. In 1991, Walmart led Sears as the largest US retailer in terms of sales.

Sears also distinguished itself by closing its catalogs and ancillary warehouses business in 1993, just before the internet, and moving away from its traditional strength in retail to financial products such as insurance and credit cards. Sears sold this business in 2003 to Citigroup for $ 32 billion and again focuses on the retail business under the direction of President Eddie Lampert, who merged Sears with Kmart. However, Lampert was excessively focused on extracting cash from both channels rather than investing in the sector. The performances of both channels have deteriorated considerably, which resulted in the filing of the balance sheet of this week.

Lessons for Amazon and Walmart

The story of Sears is another reminder that everything is changing, and the dominance of the retail business today is not a guarantee of leadership for tomorrow.

Amazon CEO Jeff Bezos seems to intuitively understand this, and the fear of losing his company's competitive edge underscores his "First Day" mantra. Mr. Bezos explained to Amazon employees that it was still the first day within the company. In other words, the company always had to think of itself as an innovative start-up rather than as a convinced actor, even as Amazon became one of the largest in the world. As a reminder of what happens to companies that go beyond the first day's approach, Mr. Bezos said, "The second day is a period of stasis, it is followed by a lack of relevance. An atrocious and painful decline.This is followed by a death. " This is very similar to what happened to Sears.