If there’s one tech takeaway from Sears’ years-long unraveling, it’s this: that the iconic but irrelevant department store retailer garnered industry accolades for its omnichannel offering in 2016 and still failed to win over shoppers or successfully compete with retail leaders.
Sears, controversially helmed by former CEO/hedge fund exec Eddie Lampert, outperformed more than a dozen peers in Forrester’s 2015 Omnichannel Ranking of 20 U.S. and U.K. retailers, published in 2016, for perks like allowing customers to return purchases in the channel of their choosing. In some ways, Sears was ahead of the pack with omnichannel—now table stakes for top retailers—but that effort simply wasn’t enough to reverse years of neglect and mismanagement that culminated in its filing for bankruptcy protection earlier this month.
There’s a saying in retail that technology must be wielded in service of the customer, and though Sears correctly embraced the omnichannel revolution, it failed to consider other critical aspects of the customer experience. Forrester vice president and principal analyst Sucharita Kodali dismissed the notion that a failure to invest in retail technology brought about Sears’ downfall.
“Bad real estate, few store improvements, a revolving door of leaders and weak merchandising were the more likely culprits,” Kodali noted. “They did invest in digital and were one of the first to offer things like curbside pickup. It just wasn’t a compelling place to shop in a competitive retail environment.”
Richard Kestenbaum, a partner with Triangle Capital Investment Bankers, confirms that the department store’s downward spiral largely was unrelated to tech innovation. “Sears won awards for its omnichannel implementation and still went bankrupt because their problems weren’t about technology at all,” he said. “Retail is about giving the customer what they want and that’s where Sears went wrong. Sears failed to adapt, not to technology, but to changes in culture.”
Sears, Kestenbaum explained, was left floundering “in the middle” when consumers had already walked away, decamping to a retail industry bifurcated along the lines of branded off-price and value or high-end merchandise. “It was never able to regain traction and no implementation of technology was able to change that,” he added.
Kodali and Kestenbaum hit on an important point. For all of the interest and investment in digital, stores remain a central component of the shopping experience, as evidenced by Target’s and Walmart’s shrinking footprints designed to serve shoppers disinterested in wandering through the cavernous expanse of the classic big-box store format. Even digital native Amazon recognizes the importance of a physical environment, purchasing Whole Foods, opening a small fleet of Amazon Books shops, popping up an Amazon Fashion experience in London and launching its four-star store near Manhattan’s Penn Station to meet customers in the real world.
Coresight Research’s senior analyst John Mercer reinforced this idea. “There was a huge underinvestment in Sears stores just at a point when functional shopping was being skimmed off by the likes of Amazon,” he explained. “While brick-and-mortar retailers began to realize the need to invest in stores to compete with e-commerce and support traffic, Sears stores were unpleasant to shop and merchandising was poor, and simultaneously Sears lost ground to better store-based rivals and to internet retailers.”
At this point, any attempts to save Sears are akin to flagellating a dead horse. “We think Sears is in terminal decline,” Mercer said. This is not a retailer selectively closing underperforming stores; this is a retailer that halved its U.S. store fleet in the five years ending December 2017, announced a further 330 closures in 2018 (plus the newly announced 142 closures), and yet continues to turn in deeply negative comparable-store sales.
“Closing underperforming stores,” he continued, “should have yielded a turnaround in comp performance.” Instead, the lack of progress illuminates “leadership’s myopic focus on financial engineering, rather than being a retailer,” Mercer added.
After years of languishing in disrepair, the once venerable Sears brand name now commands little value or demand, according to Mercer, especially as new generations of consumers have embraced new ways of shopping.
“This is not a beloved legacy brand but one of declining relevance and apparently limited resonance with shoppers,” Mercer noted. “This is especially so among younger shoppers: Coresight Research data show that Sears has the oldest average shopper of all the department stores, apparently reflecting a failure to renew its shopper base.”
According to RSR Research managing partner Paula Rosenblum, Sears lost its way when Lampert took the reins.
“What can retailers learn from their mistakes? Honestly, nothing, because [Lampert] was never a retailer and never wanted to be. I think the big lesson that we learn over and over again is that retail is a real business and it doesn’t resemble real estate, the airlines, or any other industry,” she explained. “As the old saying goes, ‘Retail’s different.’ It’s an industry, and it takes industry knowledge and smarts to run a company.”
Rosenblum continued, “Sears was dead 5 years ago. There’s no saving it at this point.
“It’s barely a carcass now.”