Sears – when was the last time you stepped foot in a Sears store?
There was a great article this weekend (Friday) in the Wall Street Journal, by Suzanne Kapner.
Kapner did a solid job outlining the steps along the way that led to the (near-) demise of Sears. One point often overlooked, is how the mammoth retailer, flush with cash in the early 1980’s diversified into areas they knew nothing about. Or, in the words of Peter Lynch, “di-worse-ified” into uncharted waters. Remember, at that time, Sears was the dominant name in retailing (pre-Walmart).
The acquisitions of Coldwell Banker, Dean Witter and Allstate became a financial drag, taking away cash flow and otherwise necessitating management to take their eye off the (retail) ball. Combine these deals along with the attempted launch of the Discover card at the same time, and you have a great case study for MBA students in “how not to succeed in business (but really try hard).”
Compounding the issue was the catalog business. The Dow Jones Industrial Average (1924) added Sears the year before they opened their first store location (1925). As a mail-order catalog company, Sears stood on its’ own to qualify as a leading US company.
But by the 1980’s, both the catalog AND the physical stores needed attention. By 1993 the company shuttered the catalog business. Such a shame, as the internet really began to get traction in 1994.
It’s great to wonder/daydream “what would happen if” about different outcomes. What might Sears look like today, had they hung on the catalog division? How might Sears be different if they figured a way to put the catalog business online? We might be talking about a completely different organization today.
“Sears was destroyed by Amazon (or earlier, by WalMart),” conclude many observers. In reality, a few bad decisions destroyed the business. Sears management had no business diversifying (“di-worse-ifying”) into financial companies in the 1980’s. With the luxury of 20/20 hindsight, plowing money back into what they knew best (retail and catalog) may have been the better route. Management has a tough call when all that additional cash flow is staring them in the face.
If an organization cannot outline a clear path, that is, showing how an acquisition will fit the bigger picture, it’s better off sticking to its’ knitting.