Capitalist
28-03-2005, 10:13 AM
This essay is by Gary Hoover.He founded Bookstop, which he later sold to Barnes and Noble. Then he founded Hoover's Online, which he later sold to Dunn and Bradstreet. [u]It shows how a big player can lose its edge pretty quickly.</u>
Sears and the game of retailingGary Hoover
September 25, 2003
Suppose for a second that retailing is a game, not unlike Monopoly or one of the rummy style card games such as Canasta. If you can get Boardwalk and its neighbors, or all the houses on one block, and hold them, you are in fat city. In a game like Canasta, it doesn't matter whether you have eights or kings as long as you have seven of them and hold onto them.
Let's look at Sears' hand thirty years ago. What did it have?
It had an incredibly high level of trust with its customers, and those customers represented almost every household in America. No company in the world sold more goods directly to consumers.
It had large stores spread all across the nation - everyone knew where their closest Sears store was, how to get there, where to park. It was a part of everyday life. (The only important exception was New York City.)
They built this status first with their mail order operation, so everyone also knew that you didn't have to get to a Sears store to shop with them. No matter where you lived, the full richness of the Sears assortment was available to you.
That richness was the second source of their strength. Coming out of
World War II, Sears' leadership saw the pending rise of the American
suburbs. They built those big stores with lots of parking in locations accessible to the new suburbia. But most important, they focused those stores on what might be broadly termed home goods - appliances, tools,and automotive products. In these categories, Sears was unassailable. As recently as the 1970s, the Sears' Diehard battery was one of the greatest store-brand successes of all time. Kenmore, Coldspot,Craftsman, and other Sears brands ruled their categories. Their main venture outside merchandise - Allstate Auto Insurance - was a perfect match.
Given that everyone in America (except those New Yorkers) was buying
their washers, dryers, lawn mowers, and tires at Sears, the company had enormous traffic. Expanding upon longstanding catalog traditions, the company offered that traffic a multitude of ancillary categories - from underwear to popcorn. But these were not the core strengths of the company. Sears' run of aces was solidly in home products.
Most of important of all, because of this collection of strengths and
traditions, Sears had meaning - Sears stood for something, and everyone in America knew what it was.
Of course, when you are playing a game, certainly one like retailing,
you aren't playing by yourself. There are two things to think about -the changing "environment" (that really means changing customers) and the changing competition.
So what happened to Sears' fundamental environment in the last 30 years?
First, people showed a continuing love of the general merchandise store. Wal-Mart today is as strong (in terms of market share) as Sears ever was. Costco and Target are not doing too badly, either.
Next, an aging baby boom moved from apartments to houses and from
smaller houses to bigger houses and from smaller yards to bigger yards. Overall, they continued their long-term flood to the suburbs, and sometimes even to small towns and semi-rural areas (close to Sears'roots).
These changes drove Sears' sweet spot through the roof. Automotive,
appliances (including home electronics), and hardware took off. Most
remarkable is the fact that a hardware store chain (admittedly on
steroids) called Home Depot is now the world's second largest retailer. Best Buy is doing over $20 Billion a year in sales and Autozone does more than $5 billion (and has some of the highest gross margins in retailing).
In this environment, a retail chain with excellent familiar locations,with high levels of consumer trust, with convenient general merchandise "one stop shopping" but wit
Sears and the game of retailingGary Hoover
September 25, 2003
Suppose for a second that retailing is a game, not unlike Monopoly or one of the rummy style card games such as Canasta. If you can get Boardwalk and its neighbors, or all the houses on one block, and hold them, you are in fat city. In a game like Canasta, it doesn't matter whether you have eights or kings as long as you have seven of them and hold onto them.
Let's look at Sears' hand thirty years ago. What did it have?
It had an incredibly high level of trust with its customers, and those customers represented almost every household in America. No company in the world sold more goods directly to consumers.
It had large stores spread all across the nation - everyone knew where their closest Sears store was, how to get there, where to park. It was a part of everyday life. (The only important exception was New York City.)
They built this status first with their mail order operation, so everyone also knew that you didn't have to get to a Sears store to shop with them. No matter where you lived, the full richness of the Sears assortment was available to you.
That richness was the second source of their strength. Coming out of
World War II, Sears' leadership saw the pending rise of the American
suburbs. They built those big stores with lots of parking in locations accessible to the new suburbia. But most important, they focused those stores on what might be broadly termed home goods - appliances, tools,and automotive products. In these categories, Sears was unassailable. As recently as the 1970s, the Sears' Diehard battery was one of the greatest store-brand successes of all time. Kenmore, Coldspot,Craftsman, and other Sears brands ruled their categories. Their main venture outside merchandise - Allstate Auto Insurance - was a perfect match.
Given that everyone in America (except those New Yorkers) was buying
their washers, dryers, lawn mowers, and tires at Sears, the company had enormous traffic. Expanding upon longstanding catalog traditions, the company offered that traffic a multitude of ancillary categories - from underwear to popcorn. But these were not the core strengths of the company. Sears' run of aces was solidly in home products.
Most of important of all, because of this collection of strengths and
traditions, Sears had meaning - Sears stood for something, and everyone in America knew what it was.
Of course, when you are playing a game, certainly one like retailing,
you aren't playing by yourself. There are two things to think about -the changing "environment" (that really means changing customers) and the changing competition.
So what happened to Sears' fundamental environment in the last 30 years?
First, people showed a continuing love of the general merchandise store. Wal-Mart today is as strong (in terms of market share) as Sears ever was. Costco and Target are not doing too badly, either.
Next, an aging baby boom moved from apartments to houses and from
smaller houses to bigger houses and from smaller yards to bigger yards. Overall, they continued their long-term flood to the suburbs, and sometimes even to small towns and semi-rural areas (close to Sears'roots).
These changes drove Sears' sweet spot through the roof. Automotive,
appliances (including home electronics), and hardware took off. Most
remarkable is the fact that a hardware store chain (admittedly on
steroids) called Home Depot is now the world's second largest retailer. Best Buy is doing over $20 Billion a year in sales and Autozone does more than $5 billion (and has some of the highest gross margins in retailing).
In this environment, a retail chain with excellent familiar locations,with high levels of consumer trust, with convenient general merchandise "one stop shopping" but wit