Why Sears Is Going Bankrupt

Millennials are just different animals. A lot of businesses haven't figured that out. There are two main reasons that Sears is going bankrupt and the second one wouldn't matter too much if they fixed the first one with a bang.

Problem One

Imagine two Millennials meet up for lunch on a Saturday. They are sitting over their meals at a table and strike up a conversation. 

Millennial One, “So, what have you been doing today?”

Millennial Two, “I just got back from a trip to the Apple/Iphone Store.”

Do we have a conversation here? Sure we do. Houston, we have a conversation, the launch was successful. These Millennials are even on their Iphones while they are having this conversation or at least some brand of smart phone. We have relevance, connection, interest, curiosity, we have a conversation in a bag or box just busting at the seams to come out.

Back up and reset the scene. Now we try it again.

Millennial One, “So, what have you been up to today?”

Millennial Two, “I went to Sears this morning.”

Do we have a conversation here? Not much of one if any. The next line if there is one, they could just go back to their phones and eating, but if there is a next line it might be one of the following:

1. Sears?
2. What is Sears?
3. I just sent you a photo.
4. I just posted us on Facebook.
5. Have you seen what “The current media star” just posted on Snapchat?
6. Oh, I need to go to the Apple store.

Here is problem number one: Sears isn't cool. They aren't current. They aren't part of the social conversation. They are largely an unknown to this new generation. They are not on the map. They would be all of the above and more if they were cool.

Apple is cool, not as cool as when Steve Jobs was alive, but it is cooler than Sears by a light year or two. Maybe a billion dollars or two, even three when you compare the profit/loss statements.

Sears doesn't have Kim Kardashian, they don't have Paris Hilton, they don't have Yogi the Bear even. A dead Steve Jobs is better than no one at Sears. You can talk about Apple and Steve Jobs, but you don't have anyone on social media to talk about if you were to talk about Sears.

Problem Two

Why would you go to Sears? You have to have a reason to go somewhere and do something, what is the reason that takes you to Sears?

Take cost. Does Sears have the lowest prices? In people's minds Walmart, Dollar General, Dollar Tree, Amazon, Ebay, Somewhere else on the internet, these are the people and places with the lowest prices. If Sears did have the lowest price on something they would have a hard time getting people to believe it. So saving money or getting the lowest price is no reason to go to Sears.

What about selection? Do they carry it and is it in stock? Sears does have a large line of products, but unfortunately, it is more of a little of everything than a good selection of whatever you are looking for. Specialty stores and the internet have the best selection for most shopping events. I don't know anyone that goes shopping for tires, casserole bowls, pants and perfume all in the same trip with list in hand, but if you do, you are more likely to go to Walmart. So selection is no reason to go to Sears.

What about atmosphere? Well, they have oxygen in the air, but that is about it. They don't have reading areas, coffee shops in the store or places to charge your tablet or Iphone. They aren't Starbucks. They aren't Millenial friendly.

Convenience? Convenience is the cell phone in your hand and the Amazon app. It is the Itunes store. We had a record Cyber Monday this year and Amazon was a big winner. Sears was so far down the list the business news I heard didn't even report on their market share of Cyber Monday.

Management has a big problem at Sears too. They have been more worried about Wall Street than Main Street. More about the stock holders than the customers. Take care of the customers and the stock will take care of itself. You can't drive looking in the rear view mirror all of the time.

Sears has withstood Two World Wars and the Great Depression, but it isn't surviving old style business management.

I could keep going here, but you get the idea. There isn't much of a reason to go to Sears. I think that is sad because my parents used to shop at Sears when I was a child. There were good reasons back then. There isn't even much of a reason to talk about Sears, if they weren't in the news for going broke we wouldn't be talking about them here.

The problem is that Sears is just figuring that out.

I am not sure they understand the problem still. They are looking to sell off Craftsman, Kenmore and Die Hard, the brand names that people do identify with Sears. When Sears gets rid of Sears merchandise, what are they going to sell? Sears isn't even in the Sears Tower anymore. They lost almost three quarters of a billion dollars last quarter. $9.8 billion since 2011. They could have launched  thousands of start-ups with that money, but they couldn't save Sears.

What can you use to your advantage from the Sears lesson?

Is your business or your identity cool?
Do people have a reason to interact with you?

Best and be blest,
Scott Hogue CChH

Sources for this post include Bloomberg and CNN wire. All trademarks and company names belong to their respective owners.  Copyright 2016, Scott Hogue and Three Steps To Wealth All Rights Reserved.