Why Did Sears Fail? It’s Not What You Might Think
And … *poof*, there goes another North American retail icon. How on earth could this have happened?
Here’s a hint: Don’t blame Amazon.com, the internet or Walmart.
There is, of course, never just one thing that leads to the downfall of a company. It’s almost always a progressive and insidious erosion created by poor leadership and short-sighted decisions. Sometimes this erosion can be happening for decades before anyone realizes there’s a problem. By then, it's often too late to fix.
In the case of Sears, the erosion began close to 30 years ago. And it's a lesson that every company needs to heed.
Sears’ Failing Was Once Unfathomable
I’m a child of the 60's and 70's. Back then, Sears had a unicorn-like level of customer loyalty. My father’s workshop was filled with Craftsman tools. Our closets were filled with Sears clothing. It was the first place to visit for furniture, appliances and home decor. Customers talked about Sears the way you’d talk about your favorite uncle. Dependable. Reliable. Someone who would never let you down. Customers genuinely cared about Sears.
The reason for this great customer love affair with Sears in the first place really boiled down to the company's mind-set. Sears wasn’t just a retailer; it was a neighbor. It carried everything a middle-class family needed at prices people could afford. It featured consistently good customer service. There was always someone to help when you needed them. The company understood that if you look after your customers, your customers will look after you.
Sears Lost Sight of What Made it Successful
To say that competition was stiff 30 years ago is an understatement. The juggernaut called Walmart was taking the world by storm. It had grown to 1,198 stores — up from just 125 stores a scant 12 years earlier — with no signs of slowing down. It was then that Sears started down its fateful path.
Sears began channelling its inner accountant. How do you maintain profitability? Easy. Reduce costs. Eliminate the iconic catalog. Reduce staffing. Sell off assets. It abandoned the very good neighbor mind-set on which the brand was built.
I think the mind-set that began the brand erosion is best epitomized by one thing: the Sears warranty.
I was about 12 years old when my father walked into the house holding the Craftsman electric drill he had purchased just a week earlier. It was now in several bent and twisted pieces, as he had inadvertently backed the car over it. “Come on son,” he said to me, “we’re taking a trip to Sears.”
On the way there, he explained that one of the reasons he bought all of his tools from Sears is that they would replace anything, even when the damage was because of a customer’s own stupidity. When he got there, I saw it first-hand.
The salesman looked at the drill, had a good laugh with my father, then simply gave him a new one. Just like that. On the way home, my father said something that burned its way into my memory: “Why would I shop anywhere else?” Why indeed.
Somewhere in the late 80’s, however, Sears quietly changed this practice, putting restrictions and time limits on product returns. Preventing the 1 percent of customers from abusing the company's generosity took priority over the 99 percent who appreciated it. Suddenly, Sears became little different than any other retailer.
Now, the warranty, of course, wasn’t the lone cause for Sears’ demise. But it is symbolic of the many decisions made by Sears that gradually eroded its near fanatical loyalty. They aren’t the first to have done this, and won’t be the last. You don’t have to look any further than Facebook to see the same pattern. You can even see the telltale signs beginning with today’s juggernaut, Amazon. It’s a cautionary tale for all of us.
3 Things to Remember
- Care more about your customers than you do their wallets.
- Don’t focus so much on customer transactions that you lose sight of customer relationships.
- Never, ever lose sight of what made you successful in the first place.
Shaun Belding is CEO of The Belding Group of Companies, a global customer service training and customer experience consulting firm. Shaun speaks globally on customer service and leadership, and is author of six books, including "The Journey to WOW: The path to Outstanding Customer Service and Loyalty."
