1 big thing: A last chapter at Sears ...
Like the rest of Big Retail, Sears thrived for a century and a half on a low-wage, low-productivity strategy, hiring thousands of workers to wade through mountains of inventory and stock shelves. But its policy of sluggishness finally caught up with it, as the company today filed for bankruptcy with plans to close another 142 stores.
- As if to punctuate Sears' plummet, major shareholder Eddie Lampert kept up his show of seeking the best for the chain — stepping down as CEO while remaining as chairman.
Why it matters: Brick-and-mortar retail still rakes in a whopping majority — 91% — of shopping dollars. But Sears' fate is the latest and perhaps most dramatic example of how, since 1990, the productivity of department stores has stayed remarkably flat, while online shopping has surged, Axios' Erica Pandey writes.
Background: Sears' bankruptcy filing comes after a decades-long decline, during which a retail empire of about 3,500 stores in the U.S. and Canada and some 350,000 workers shrunk to 700 mostly unprofitable outlets and 68,000 employees. As the company bled assets, it saw a plunge in sales and productivity, which in retail is a ratio of sales to employee hours worked.
- The company underinvested in sprucing up its stores. Instead, it broke into fashion and beauty, banking and real estate, becoming bloated. Meanwhile, it neglected its flagship brands — its big-selling Kenmore appliances, DieHard batteries and Craftsman tools, the latter two of which Lampert sold off.
- "Their locations have become obsolete, and their product mix is no longer adequately differentiated," says Herb Kleinberger, a professor of retail at NYU's Stern School of Business.
- "The missteps arguably go back to the 1980s, when Sears became too diversified and lost the deftness that had once made it the world’s largest and most innovative retailer," Neil Saunders, a retail analyst at GlobalData, wrote today in a note to investors.
Cautionary tales from Sears and Barnes & Noble have big-box retailers spooked.
- Sears' 20th century competitors — Walmart, Target and Macy's — are pouring money into refurbishing their stores. They're accepting some short-term pain in exchange for longevity, Saunders tells Axios. "At Sears, it has always been about short-term survival."
- Walmart, Target and Macy's "are not going to be as productive as they once were, and they might never be as productive as Amazon. But they're doing the right things to stay relevant to customers."