TFR | Strategy Consulting

“The King is dead, long live the King?”

Large retailers are celebrating the new american retail market share redistribution but many of them are coming to an end. The traditional proclamation “the King is dead, long live the King” dates back to the XIII-XIV century in Europe and was used as a way to maintain the foundations of societies. The leader changes, the system (political, economical, social…) persists. Sears isn´t the King (it was), but what is dying is Retail Monarchy or system.

Total Retail mentions some of the factors that brought Sears to Bankruptcy:

• From blue to red ocean: Founded in 1886 in Chicago as a mail-order retailer, Sears will be remembered as one of the first American iconic retailers. Traditional competition from other retailers such as Walmart, Lowe´s, Kohl´s, Ross Stores, JCP, Macy´s, Target, and others, reduced its initial “monopoly”.

• Online: Sears wasn´t flexible and clever enough to understand omnichannel or to identify new threats, beyond their core business. Amazon again.

• The Long Tail: Many niche players (on and offline) identified local, specific customer needs while Dinosaurs weren´t flexible enough to bring them to market. New generations trends (experience vs ownership, community, curation) and shopping behaviour reduced department stores traffic too.

• Digitalization: Sears had a low-innovation strategy, harming its adaptation to omnichannel or online trends. Unlike Sears, Walmart is highly investing in digitization thru its incubator Store No. 8 and many acquisitions like Jet.com, Bonobos, Eloquii or Bare Necessities. Fashtech is a must in retail 4.0 revolution.

  

• Diversification: Over-diversification into banking, real-state, insurance… activities too far from its core business.

• M&A: In 2004, Sears (a mall of brands) and K-Mart (location driven retailer) merged. The story was not a success.

• Customer experience: Failure to reinvest in the business and customer experience deteriorated dramatically. Department stores and traditional retailers need to close non-profitable stores and invest in customer experience (from scent marketing to customization areas, better customer service, RFID, Augmented Reality, Click&Collect…).

  

Sears is the latest retailer to file for bankruptcy in USA in 2018. Others on the list are Toys R Us, Claire´s, Nine West, Brookstone… and many will follow as they are low-digitalized (tools, skills, processes), have inneficient operations and massive debts.

Know more about the Retail Apocalypse and how fashion retailers are embracing the change:

• The Future of Department Stores. Why is there a lack of excitement when Millennials visit Department Stores?
• The New Fashion Retail Paradigm