We live in a digital age where you can buy virtually anything online and have it delivered to your doorstep. Online retailers like Amazon have fundamentally revolutionized the way we shop and spend our time online.
By Saurav Bhandary │Published: November 11, 2018
If there is one thing that has been rapidly growing over the last decade, it is online shopping. In today’s digital age, online shopping is more accessible now than it has ever been and consumers continue to increasingly shift spending online. And it continues to grow. You can buy just about anything online and have it delivered right to your doorstep in a few days or less. Online retailers like Amazon have fundamentally revolutionized the way we shop.
Sears, the original everything store that once was one of the largest retailers with more than 125-year history, filed for bankruptcy protection last month. The Sears Holdings company filed for “Chapter 11 bankruptcy after failing to make a $134 million debt payment” (Sullivan, 2018).
Sears was founded in 1887 and was first incorporated in 1892. Long before Walmart or Amazon, Sears was the original everything store. At one point, more than 40% of global appliance sales took place at Sears. By last year, that had shrunk to 3% (Isidore, 2018).
Today, however, Sears is drowning in $5.5 billion of outstanding debt (Kapner & Rizzo, 2018).
In the end, the original “everything store” failed to put sufficient time and money into redesigning its store experience and building a competitive digital platform, argues Helaine Olen in The Washington Post (Olen, 2018).
By the 1990s, Walmart’s low prices and a massive array of offerings had begun to give Sears a run for its money, CNN’s Chris Isidore writes. Then while Amazon was ascending the ranks of the retail universe, Sears was busy cutting its ranks and shuttering stores.
Hedge-fund manager Eddie Lampert, company’s biggest investor and also a major lender, took over the company in 2013. Under his leadership, the company sold off valuable assets such as the Lands’ End clothing line and legendary Craftsman brand in attempts to increase its cash flow (Greene, 2014).
“The Chapter 11 process will give Holdings the flexibility to strengthen its balance sheet, enabling the Company to accelerate its strategic transformation, continue right-sizing its operating model, and return to profitability,” Eddie Lampert said in a statement (Sears Holdings Corporation, 2018).
“This is the bankruptcy that everyone predicted a long, long, time ago, at least back to 2005,” said Jaime Ward, head of retail finance group at Citizens Bank.
Sears is not the only retailer combating upheaval from online stores like Amazon (AMZN). Sears’ rivals, including Macy’s and Kohl’s, changed their marketing strategies to increase their online presence and narrow the enormous gap with the internet giant Amazon. For instance, Macy’s has already started closing “underperforming stores” that helped cut costs and boost profits (Monica, 2018).
Its Chapter 11 filing will allow Sears to reorganize, and perhaps emerge from bankruptcy with a portion of its business still alive. As part of the bankruptcy filing, Eddie Lampert will step down as the company’s CEO but stay on as Chairman. “Over the past five years, the company lost about $5.8 billion; over the past decade, it shut more than 1,000 stores,” according to the New York Times.
The company said it would close 142 unprofitable stores by the end of the year. As of an Aug. 4 filing, Sears Holdings still had 506 Sears locations and 360 Kmart locations. The company hopes to keep the lights on at least through the holidays (Corkery, 2018).
Corkery, M. (2018, October 14). Sears, the Original Everything Store, Files for Bankruptcy. Retrieved from https://www.nytimes.com/2018/10/14/business/sears-bankruptcy-filing-chapter-11.html
Ellis, J. (2018, October 18). Long Before Walmart or Amazon, Sears Was the Original Everything Store. Retrieved from https://www.bloomberg.com/news/articles/2018-10-18/long-before-walmart-or-amazon-sears-was-the-original-everything-store
Greene, D. (2014, March 17). Clothing Retailer Lands End To Split From Sears. Retrieved from https://www.npr.org/2014/03/17/290759573/clothing-retailer-lands-end-to-split-from-sears
Isidore, C. (2018, October 16). Decades of bad decisions doomed Sears. Retrieved from https://www.cnn.com/2018/10/16/business/sears-amazon-cause-of-problems/index.html
Isidore, C. (2018, October 16). Amazon didn’t kill Sears. Here’s what did. Retrieved from https://www.cnn.com/2018/10/16/business/sears-amazon-cause-of-problems/index.html
Kapner, S., & Rizzo, L. (2018, October 11). Big Lenders Make Push to Liquidate Sears. Retrieved from https://www.wsj.com/articles/big-lenders-make-push-to-liquidate-sears-1539257424
Monica, P. L. (2017, January 5). Sears sells Craftsman to Stanley Black & Decker. Retrieved from https://money.cnn.com/2017/01/05/investing/sears-sells-craftsman-stanley-black-decker/index.html
Monica, P. L. (2018, August 2). Macy’s is doing almost as well as Amazon this year. Retrieved from https://money.cnn.com/2018/08/02/investing/macys-amazon/index.html
Olen, H. (2018, October 16). The Sears bankruptcy wasn’t inevitable. Retrieved from https://www.washingtonpost.com/blogs/post-partisan/wp/2018/10/16/the-sears-bankruptcy-wasnt-inevitable
Sears Holdings Corporation. (2018, October 15). Sears Holdings Initiates Processes To Accelerate Strategic Transformation And Facilitate Financial Restructuring. Retrieved from https://www.prnewswire.com/news-releases/sears-holdings-initiates-processes-to-accelerate-strategic-transformation-and-facilitate-financial-restructuring-300730768.html
Sullivan, E. (2018, October 15). Sears, Drowning In Red Ink, Finally Files For Chapter 11 Bankruptcy. Retrieved from https://www.npr.org/2018/10/15/657395298/sears-drowning-in-red-ink-finally-files-for-chapter-11-bankruptcy