Why Sears Really Died

On Monday, October 15, 2018, Sears filed for Chapter 11 bankruptcy protection. This cataclysmic event was inevitable, but it saddened many Americans who grew up shopping via Sears catalogs and stores.

How did the 124-year-old inventor of retail as we know it die?

The most-commonly mentioned culprit is Amazon. Wrong. The problems began before Amazon existed. Some people blame hedgefund manager Eddie Lampert, the current CEO and major shareholder of Sears. Wrong.

Lampert, an absentee CEO who runs the Chicago-based company via videoconferences from his Florida mansion, is nothing more than a financial gymnast. He knows and cares nothing about retail and customers.

To wit: According to an article by Lisa Fickenscher at the NY Post, “Declaring that he worked for investors, not shoppers, Lampert railed against the traditional tenets of retailing, yanking yearly budgets for remodeling and staffing stores that he insisted were wasteful.”

Newsflash to Lampert: If you don’t work for shoppers, you don’t work for investors, either.

Instead, Lampert has run Sears like a chop-shop, a place that dismantles cars and sells the parts. He has closed hundreds of stores and sold off the real estate. And, shockingly, Lampert sold the Craftsman name, a pillar of Sears, to Stanley Black & Decker for $900 million.

Lesson: no hedgefund manager, regardless of track record, who has as much disdain for customers as Lampert, should run any company. He should stick to managing funds, disconnected from humans.

Yes, Lampert drove the final nail in Sears’ coffin, but he’s not solely responsible for its death.

Reality: The downward spiral of Sears was well in progress before Lampert arrived in 2004: it began in the 1930s, caused by many management blunders.

As I detailed in Chapter 13 of "Brand Is Destiny: The Ultimate Bottom Line," Sears failed because it had no brand.

Too many CEOs, especially Sears CEOs, do not understand branding. They think products are brands. Wrong. They think company names are brands. Wrong.

A brand is a customer-validated value proposition, the emotional connection between customers and a vendor. It sets the vendor’s purpose and direction. The brand dictates the products a company sells, the people it hires, and the processes it implements.

Obviously, without a love for and deep understanding of customers, a company can’t have a brand. And, without a brand, the company will drift and crash.

This is exactly what happened at Sears.

Sears began as a successful catalog and always had a catalog mentality. Its stores looked like physical catalogs and never changed. At first, because it was the only game in town, Sears was wildly successful. It was the first retailer, in 1925, to sell to men and women. People liked its reliability and consistency.

Unchallenged success, which is what Sears had for years, often makes top executives complacent and arrogant. This hubris then pervades the company’s culture, negatively influencing decisionmaking and communication with customers. It also invites competition.

Based on my observations, I doubt that the company’s CEOs ever visited the stores and walked the floors to talk to shoppers — to grasp their needs and wishes, as well as the changing retail landscape.

Consequently, customers began defecting in droves. This situation was easy to fix, but Sears didn’t fix it.

Instead, Sears began diversifying into insurance (Allstate), securities brokerage (Dean Witter), credit (Discover Card), real-estate brokerage (Coldwell Banker), mall development (Homart Development Company), online services (Prodigy), and home improvement (Orchard Supply Hardware).

Eventually, Sears had to sell its stakes in all of those companies. What a waste of capital, time, energy, and momentum.

In 1974, Sears occupied its new HQ, the Sears Tower in Chicago, then the world’s tallest building. But, because of sinking fortunes — in 1992, it lost $2.3 billion and cut 47,000 jobs; in 1993, it stopped publishing its catalog — Sears was forced to sell its Tower in 1994.

How symbolic of a meteoric rise and fall.

Sears never recovered from any of this and degraded for the next 10 years until Eddie Lampert took it over, combined it with Kmart, and, through gross mismanagement, hastened its demise.

Let the death of Sears be a lesson to every CEO: ignore branding at your peril and that of your shareholders, regardless of past success.

Marc Rudov is a branding advisor to CEOs, speaker, media commentator, and author of "Brand Is Destiny: The Ultimate Bottom Line" and "Be Unique or Be Ignored: The CEO’s Guide to Branding." Find him at MarcRudov.com. For more of his reports, Go Here Now.