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Are We Witnessing the Decline of Sears?

the Decline of Sears

There was an article over at The New York Times which seemed to indicate Sears is having a tough time of it these days. In short, it begs the question: Are we witnessing the decline of sears as we know it? Five years after the company merged with Kmart, the company is showing a 10% decrease in revenues. That compares to gains of over 30% from the likes of Walmart. Think that just speaks to how good Walmart is? Target showed an overall gain of over 24% and the aging Macy’s and JC Penny’s stores even went up by 5% and 6% respectively. Any way you slice it, Sears looks to be in trouble—and it’s hard to be surprised since they’ve spread themselves extremely thin, capturing every service market imaginable on top of splitting their stores between clothing and hardware.

Here was an interesting quote from the article which gave me pause:

Edward S. Lampert, the billionaire hedge fund manager who engineered the merger and is chairman of the company, has promised that Sears Holdings will be “unrecognizable” in 30 years. To drive sales, it is emphasizing online shopping, mobile apps and an marketplace with other vendors, along with heavy promotions in stores.

The Decline of Sears in 30 Years? Try 5

In 30 years? Sears may be extinct in 5-10 if it doesn’t make some radical changes. If anyone has paid attention, Sears has done a really poor job of keeping up with real estate markets and the progression of stores to newer locations and nicer neighborhoods. Instead, Sears seems to be physically, and economically, trapped back in the 80s, with locations that are (for the most part) older, and certainly not in the hottest markets where people like to shop en masse. Sears has around 2000 stores, and according to the article, around 1,500 of them aren’t much to look at.

On the appliance end, Sears is coming up against newcomers like Lowe’s and Home Depot, who are offering a one-stop shopping solution for homeowners. This year, Sears lost major appliance sales to both retailers and seems to be on the decline overall, while its competition is coming up fast. On the other hand, discount retailers like Wal-Mart and Target are loosening Sears’ grasp on housewares and clothing.

Can the Decline of Sears and the Freefall be Stopped?

So here’s the problem the article brings up: how does Sears pull out of this apparent nosedive? If they divulge themselves of older properties – who’s going to buy them up? Many of the strip malls and depressed locations are already facing abandonment and depreciation on an astounding level. As for the stores in the more populated and attractive locations, they can’t afford to either expand (to increase sales) or sell (to raise capital) – a conundrum which leaves them a bit of a lurch.

So, is a re-branding or renovation of existing properties in the works? Not as far as anyone can tell. The company has invested only a fraction of what other retailers like Target and Wal-Mart have put into their retail locations. Even publicly-traded Dollar stores seem to be outspending Sears. Given their issue with locations and reach, it’s no longer a surprise why Craftsman tools are now available at many Ace Hardware stores.

Taking a birds-eye view of the situation, and pulling from my own experiences, it’s hard to imagine how Sears, as it stands now, can exist 10 years from now (and I’m being generous on the timeline here). It seems that it’s making many of the same kind of mistakes Circuit City did in misevaluating the market and how to address a changing landscape of consumers, online shopping, and a movement towards larger one-size-fits-all retailers.

Will Sears still be recognizable (or even around) in 5 years? 10 years? The company has a market cap of $7.8 billion, but big companies have faced decline and have fallen in the past. Post your thoughts on Facebook.

Source: New York Times

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