Sears Has Become a Victim of Its Success

Submitted by SadInAmerica on Wed, 07/16/2008 - 11:11pm.

Will plunging profits soon spell the end of Sears, Roebuck and Company? The 122-year-old retail giant virtually created modern American consumerism. For anyone over the age of 40, its demise is almost unthinkable—yet it is perfectly appropriate in the world of "creative destruction" that Sears helped shape. 

In the 1970s, I grew up down the street from the headquarters of the Sears Catalog. It was Sears's "Big Book" that really changed American shopping habits, even more so than the large retail stores that still exist. For generations, rural Americans had bought dry goods from local merchants, often paying exorbitant prices due to a lack of competition and inefficiencies in the distribution and wholesale structure. 

Along with his partner, Alvah Roebuck, Richard Sears opened one of the first mail-order businesses. In 1895, they rolled out their first catalogue, a 532-page behemoth containing thousands of items, enough to supply every need a family could have. Sears was a master marketer, an apostle of advertising, and it pioneered such innovations as the money-back guarantee. By the 1920s, Sears was selling everything from houses (now highly desirable collector's residences) to violins. Local merchants couldn't compete, and the culture of mom-and-pop stores was devastated by modern marketing and low prices. 

Sears soon branched out to retail stores, which had already started emerging due to growing consumer demand stimulated by the mail-order business. By the eve of World War II, more than 600 Sears department stores dotted the American landscape. Production and distribution systems evolved and multiplied; thousands of smaller producers whose products were carried by Sears found themselves expanding beyond their dreams, providing employment for tens of thousands more workers. 

Sears exemplified the suburban lifestyle of the 1950s and 1960s, and its ubiquity made the suburbs an attractive place to live for consumers who now expected to get anything on a moment's notice. Sears helped launch America's credit card culture by issuing its first charge card in 1953. The high point of its attempts to meld commercialism with high taste was the Vincent Price Art Collection of the mid-1960s, for which the famed actor and aesthete chose selected works of art that were sold as high-quality reproductions. 

For decades, however, competitors have been chipping away at Sears's domain. The lessons it provided in targeted advertising have helped specialty retailers explode in number. Ironically, it was specialty catalogue sellers, such as Land's End and Eddie Bauer, that first ate into Sears's staple clothing business. Later, the company found itself under siege from retail outlet master Wal-Mart, which copied the Sears model of putting up megastores selling everything at unbeatable discount prices. By the late 1980s, Sears was dismissed as a middlebrow provider of drab necessities. High-end electronics and furniture stores, designer clothing brands, and hundreds of new specialty catalogs steadily reduced its presence in the consumer landscape. 

Sears has been trying to reinvent itself for close to two decades now, shedding its Discover Card business and ties to Dean Witter, revamping stores, and shuttering the iconic Big Book division. Hedge fund manager Edward Lampert bought 49 percent of the retailer in late 2004 and quickly merged it with Kmart, another storied retail chain. But the company's cash flow is down 65 percent so far this year, and it suffered a $56 million loss in the first quarter alone. 

Can Sears survive? In one form or another, the name will likely endure, but its future as a major retailer appears increasingly murky. It seems that Americans have moved on from Sears, just as they did from traditional merchants when the company first appeared a century ago. Like other firms before it, Sears has become a victim of its success in changing the business world. 

Michael Auslin - July 16, 2008 - source TheAmerican

Michael Auslin is a resident scholar at the American Enterprise Institute.

Image by The Bergman Group/ Darren Wamboldt

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Submitted by SadInAmerica on Wed, 07/16/2008 - 11:11pm.