Lessons We Can Learn From the Collapse of an American Icon
Guide to episode
- Sears didn't fail because of products - don't expect that yours will be your salvation. And it didn't fail because of the internet!
- Seeing change as it happens is almost impossible - but if we watch buyers we'll have a chance
- Buyer expectations are the key to ongoing success - we either understand and meet them, or we continue on whatever path makes us feel good....until we don't!
- SmartFactories and Manufacturing 4.0 will be the disruption equivalent for industrial manufacturing firms as the internet has been for B2C
Hi, I’m Ed Marsh. Welcome to this episode of Signals from the OP. Like a military OP or observation post, I try to crawl out ahead of the normal business battle lines to collect some intelligence for my manufacturing clients. I look for trends and market movement that might be threats or opportunities.
Today I’m going to start with a story as told by John Mauldin.
“There is a company in the United States that began by offering a few products directly to consumers, and then quickly expanded its offerings until they included almost everything a person could want. This company went directly to the consumer, bypassing local brick-and-mortar stores, and became enormously successful, meeting the needs of its customers all over the country. Of course, the local stores were often (as economists will say) “disintermediated,” which is a fancy way of saying they couldn’t compete on price and selection, let alone delivery and convenience, and went belly up. And with them went the jobs of the people they employed.”
You probably guessed the company name, right?
Actually, you probably guessed wrong. Mauldin was talking about Sears.
And today’s topic is Sears, prompted of course by its bankruptcy which looks headed to liquidation rather than reorganization. The question is what we can learn from it as industrial B2B businesses.
First, let’s put out on the table – SEARS WAS NOT KILLED by Amazon, and it was not killed by the internet. Proof positive are Walmart and Nordstrom. Remove Amazon’s AWS contribution to Amazon’s results and both of these brick and mortar competitors outperform it.
Certainly the internet has changed the way buyers think, behave, research and buy. But those behaviors are what’s important – and some companies respond better than others. (By the way, if you’re interested I have a Signals episode about the demise of Toys-R-Us as well which I’ll provide a link to in the transcript)
That’s the key takeaway here. Buyers expectations changed. What sears offered was access to information and products. There was a time when that alone was sexy, and enough to make it incredibly powerful. In 1983 the New York Times wrote “No one has to tell you you’ve come to the right place. The look of merchandising authority is complete and unmistakable.” And Sears’ head of retail said “In the markets we enter, we’ll be dominant.” While it’s chairman, speaking of a push into banking, said “on a scale of 10, not to be flip about it, I’ve got us at about 10.5”
Sears made more profit in 1954 than it’s market cap was before the recent slide. The people running it weren’t dumb – far from it. But the nature of change is that there’s no acute, defined moment where it’s clear that change has happened.
What changed over time? Buyer behaviors and expectations.
Now, here’s the challenge. We’re all consumers and we instinctively understand, as we pull out our mobile device or pull up to the house and see the smile box on the front steps, that we’ve changed how we buy.
And most of us differentiate between how our business has changed vs. our consumer behaviors. If you’re not in tech or healthcare, much of what you do to market and sell is similar to what you did 15-20 years ago – back when Sears was thriving. Of course it’s now enabled with email and websites. Voice mail is ubiquitous as are mobile phones, and fax machines are fading.
But the business models are basically the same. People are still buying, and many companies are actually busy with orders now due to a strong economy.
Because there’s no bang moment when it becomes clear that change has happened, it’s really, really hard to realize it until decay is advanced. In the meantime there’s always an outside cause to which we can attribute struggles.
But it will happen. Maybe it’s 3D printing and the demise of factories. Maybe it’s the shift toward a subscription economy and from a traditional capital equipment sales model. Perhaps it’s the commoditization of machines and elevated value of data driven insights and services.
We can’t predict right now which it will be, or what combination, nor when it will cross the rubicon. But it will. It’s easy to see what’s happened to sears in retrospect, just like Kodak and countless other failures. It’s so much harder to see while it’s happening.
There’s another lesson to take from it. Unless you’re a professional mechanic you probably have a toolbox full of Craftsmen tools. And you’ve probably owned Kenmore appliances. The product WASN’T the reason Sears failed. Yet most industrial manufacturers assume that continuous improvement of their product is the key to vitality.
That’s simply incorrect.
The good news is that we don’t have to be clairvoyant or exactly right to survive and thrive. But we do have to observe trends in tech and other industries, and listen closely to buyers. The way we manage complex sales, marketing, indirect sales channel, pricing and more, are increasingly in conflict with what buyers want.
And as long as we taunt buyers and customers it doesn’t matter how strong our franchise, reputation, brand, market position or product quality are.
Here’s the question. Can you become a customer-oriented firm? Can you learn about your customers’ customers and be more expert than they?
I’m Ed Marsh. Thank you for joining me for this episode of Signals from the OP. If you enjoyed it, please share it and subscribe – either to my youtube channel EdMarshSpeaks.TV or at the related blog SignalsFromTheOP.com.
And here's a bonus prediction. Amazon will swoop in and secure at least some of Sears' locations. Walmart will have a much easier time imitating Amazon's technology than Amazon will have trying to replicate Walmart's local connection with buyers. This may be their best chance!