If one compresses the timeline, it does seem like Amazon killed off Sears when in reality, Sears was already getting killed off in the 10 years before 1995.
In the 1980s...
- Home Depot, Lowes, Builders Square, etc home improvement stores were taking away business from Sears power tools (Craftsman)
- Best Buy and Circuit City were taking the consumer electronics business and appliances. Less customers buy Sears Kenmore.
- Target, Walmart, Williams-Sonoma, etc were taking housewares (pots, pans, etc) business
- consumers (especially kids) didn't want "department store brand" clothing from Sears/JCPenney because they were "uncool". They wanted the boutique brands (Guess jeans, Calvin Klein, etc)
- peak mall traffic was 1986 and malls started dying off after that. An easy way for me to remember that point in time is the 1985 movie "Back to The Future". When you watch the DeLorean spinning around the parking lot of Twin Pines Mall, remind yourself that you're seeing "peak mall".
- credit-cards criteria were loosened and easy credit was expanded. Sears no longer had a captive audience with the Sears credit-card that kept shoppers within Sears' "walled-garden". Before 1990s, if a young person had zero credit history, one of the first credit cards one attempted to get was the "Sears department store credit card". Once one built up credit history with it, he/she could then try to get Visa/Mastercard. In the meantime, they used the Sears card to spend money at Sears. To contrast the difference, today an 18-year-old college student can get a Visa/MC without a parent as a cosigner. That type of easy credit approval for a person with no job was unheard of in the 1960s/1970s.
There were lots of competitive forces that Sears' management didn't respond to long before Jeff Bezos arrived on the scene.
1962 was perhaps the most consequential year in retailing history: in Ohio the five-and-dime retailer F.W. Woolworth Company created a new discount retailer called Woolco; S.S. Kresge Corporation created Kmart in Michigan; the Dayton Company opened the first Target in Minnesota; and Sam Walton founded the first Walmart. All four were based on the same premise: branded goods didn’t need the expensive overhead of mass merchandisers, which meant prices could be lower. Lower prices served in turn as a powerful draw for customers, driving higher volumes, which meant more inventory turns, which increased profitability.
Sears, which had introduced a huge number of those brands to America’s middle class, first through their catalog and then through a massive post-World War II expansion into physical retail, was stuck in the middle: higher prices than the discounters, but much less differentiation than high-end department stores. By the time Buldak gave his statement the company’s fate as an also-ran was sealed, even though no one at Sears had a clue: Buldak’s stated mission of being “an integrated, powerful specialty merchant, with brand names and our own lines of exclusive merchandise” failed to consider whether customers gave a damn.
https://stratechery.com/2016/walmart-and-the-multichannel-tr...
FWIW, when I was 18 I had to get a secured card[0] and I was barely able to get it (I had to go to my bank twice to appeal the decision). It's definitely different from 40 years ago but it's not super easy for most college students, and a lot of it came down to the fact that I had a few grand sitting in a checking account and a job that paid $12.50/hr. Some of my friends who didn't have that got flat out declined multiple times (I have one friend who has applied for three different cards and she's been denied all three times, with no credit history at all).
[0]: Basically, the card had a $500 credit limit and you had to give the bank $500 for a year, after a year if you've made all your payments they give you your $500 back. It still sat in my savings account generating "interest", but I couldn't spend it
https://en.wikipedia.org/wiki/Credit_CARD_Act_of_2009
>Consumers under the age of 21 must prove that they have an independent income or get a co-signer before applying for a credit card. The Act also prevents credit card companies from ... wooing students with T-shirts, free pizza and other free gifts at university-sponsored events
[edit] The end of the story for me:
The credit card I got from that was amazingly bad. I had a bill put in the wrong mailbox in my dorm, so didn't get it until 3 days before it was due. I called up customer service:
Me: I can mail this today, but it is unlikely to make it there by the due date, I've always paid my bills on time, can I get a 1 week extension
CS: We can do an ACH for $20 or you will pay a late fee if the check you mail is even a day late.
Me: Seriously?
CS: Yes
Me: Okay, do that and cancel my account.
CS: Okay.
It's like they didn't even want me as a customer if I was going to pay my bills every week. Not a single attempt to retain me when I canceled my account. At this point, I had a Discover card, the CS reps for which were very kind, and my bank had just gotten my debit card on the Mastercard network (previously it was only an ATM card), so I had no absolute need for their card. Had this happened a few months earlier I might not have been willing to cancel as so many places don't take Discover.
I semi-suspect you know this, but if you pay in full every month, they don't get to bundle your debt up and sell it off as a security. Interchange fees are competitive enough that it's probably close to break even (and getting more so every year), but the securities are comparatively pretty sweet for the issuers.
* They earn money via the interest people way if they don't settle their bills in-full, and on-time.
* But they also take money for handling transactions at terminals, etc.
No "might" or "slightly" about it. It's significantly different now. When I was 18 you only needed a faint pulse to get 10s of thousands of dollars in credit. People would hand out credit applications in dorm rooms, at events, in front of classrooms, just anywhere and everywhere you could think of. It was a different time.
In less than a minute, BoA’s automated credit card application approved me and mailed out a $1000 limit card.
It seems strange that taking on a ton of unsecured debt would make creditors think it's more likely that you'll be able to pay off even more unsecured debt, but that seems to be how the system works, or at least worked two decades ago when I was in school. Perhaps the emergence of for-profit colleges that don't really offer their graduates the kind of post-schooling opportunities that traditional colleges do has changed the way that college loans are perceived since they no longer reliably predict future earnings the way they used to.
The only reason I had a vacuum at all in college was because Sears still stocked parts for 10 or 15 year old vacuums so I was able to repair someone's broken vacuum.
There are some "Sears home appliance showrooms", and an actual Sears about half an hour away, but there used to be 3 or 4 in that same area.
FWIW all my clothes were from Sears and JCPenney, my taste be damned. I know a lot of other kids my age (grew up in the 90s and 00s) were the same way, at least until quality tanked in the mid 00s.
Nonetheless, I had those quality jeans—you're absolutely right.
One of my American relatives worked for Sears mail order business from the early '80s till it closed. They were saying in the '80s it was an awesome place to work, good benefits, there was so much potential there it seemed.
MasterCard (then known as Master Charge): http://i.imgur.com/BzZONEG.jpg
Visa (then known as Bank Americard): http://creditcardforum.com/blog/wp-content/uploads/2010/10/b...
AMEX: https://i.pinimg.com/236x/15/6c/5d/156c5d0e135a6f2014a95608e...
Fun fact, American Express still to this day uses the name Charles F Frost (usually written C F Frost) for all their credit card ads. He was an advertising executive in the 60s.
Then sometime between 1975 and 1985 they seem to have started thinking they were successful because they were 'the best' and took their eye off the core competencies that made them nimble (logistics, accountable management practices) That is according to people who worked there at that time. Suddenly people who should not have been promoted (they weren't 'Sears people') were being promoted, and things were focused less on operations and more on public image.
The challenge is that you start managing to the effect rather than the cause. It is like companies that spend all of their time doing 'market research' and spend their time trying to be better than their perceived competitors at what their competitors are doing. They lose sight of why they were doing so well in the first place. "chasing your tail", "following the followers", lots of names for it, but they were being challenged by many up and coming brick and mortar competitors (K-Mart, Target, Walmart, Montgomery Wards, Etc.) By worrying about those threats they forgot to watch for the changes in the market, and that led to a lot of what would be difficult pain.
And yes, it is "easy" to see that looking backwards in time at their choices, but even in the 70's and 80's there were voices telling them that they were not focused on the right problems.
For one thing, the design of the palace becomes a huge distraction for top management. Once they move in, they start to believe they are the godlike businessman the palace suggests they are.
Yeah, the Apple saucer is a big risk.
http://www.urbandictionary.com/define.php?term=edifice%20com...
The urbandictionary link refers specifically to college presidents & universities, but there've been a few articles about how it applies to corporations as well.
https://steveblank.com/2009/05/15/supermac-war-story-11-the-...
There's the economy-wide skyscraper curse:
http://www.chinadaily.com.cn/bizchina/2009-03/16/content_758...
Also, the new HQ is only a mile from the old one and they're going to keep the old one too.
So it's not the huge cultural shift of a new HQ -- it's more like just a new set of buildings.
It's true, they spent a lot of money making a nice new HQ, but not even 1/2 the employees will move into it.
"Act 14" on this This American Life episode tells the story of what happened when the Vienna Sausage Company moved production to a new, purpose-built facility. If you'd rather read than listen, scroll down to "Act Fourteen" here, https://www.thisamericanlife.org/radio-archives/episode/241/...
It arguably exemplifies precisely what you're saying, except in a much more literal fashion.
See also: https://en.wikipedia.org/wiki/Early_history_of_private_equit...
Here I found an article from 1993 describing the move: http://www.nytimes.com/1993/01/26/business/sears-eliminating...
This was the same time the company was leaving the Sears Tower. I think Sears faced a number of bad decisions over the decades leading to its early and later decline.
Edit: Here is another article of the decision to cut the catalog - http://articles.chicagotribune.com/1993-01-26/news/930317224...
It ends with the extremely ironic, "Sears on Monday wasn't interested in the past. It was positioning itself for the future."
A quote from that 1993 article:
Still, most analysts hesitated to say that the revamping alone would put Sears back on its feet. "Put it this way: They're off their knees," said George A. Ashur, director of corporate bond research at Chase Securities Inc. "This is without a doubt good medicine for the company, but I have to see a few quarters of good returns before I'm ready to ditch the conservative show-me attitude."
Sears had the first good fulfillment system, but it was geared to the postal system and rail transport. It took about two weeks to get delivery on something from Sears, and you never knew what was out of stock until the package showed up. That allowed malls to beat them on convenience.
> The operation, which also published 50 small specialty catalogues, only recently began accepting Visa and Mastercard for purchases, and for many years, customers had to pick up their purchases at a Sears store even though other catalogues would mail items directly to homes.
Its easy to be nostalgic but it really sounds like sears had already fallen significantly behind by the time they shutdown their catalog.
It's not unique to Sears either.
I know a few people who work at the Target HQ in Minneapolis and have heard stories in the past of executives being astounded by online shopping, especially the idea that people would do comparison shopping while in the store. Target has significantly increased their digital offerings since then but it's still far from the experience of Amazon.
I look at Barnes & Noble as another company that is screwing the pooch by not doing a better job with Internet sales, and a better job integrating internet and meatspace (aka "click and mortar"). I do a lot of business with B&N but I almost never buy books from their online store. Why? Partly because their site sucks, looks & feels dated and klunky, lacks the selection of Amazon's site, and doesn't offer good recommendations like Amazon does.
And if I go into a B&N store and want to special order a book, I can get free shipping, if it goes to my home. But if I want them to ship it to the store so I can pick it up there, it costs extra. WTF? And if memory serves correctly, you can't return items bought online to a physical B&N store.
There's just so many ways that they are missing the boat and nobody seems to care.
My ideal B&N experience: go to their site, find the book I like, purchase it for the same price as Amazon (usually the prices are the same), then go pick it up at the store. But no, I can't do that. If I want to pick it up in store, I have to pay the "in store" price (which is often at 10-20% higher). No thanks.
Whoever is running their e-commerce operation really ought to be fired. Or if the lack of awareness is coming from higher up, somebody (CEO?) ought to be fired.
Amazon's Achilles Heel is browsing. Their selection may feature 100,000 relevant items to my search but I seem to only find shitty versions of products, or at too high prices, regardless of how I mess with the search filter.
Target is great when you have an idea of what you might like to buy: you can try on shoes, sit on furniture, feel the bedsheets - you get the idea.
Sometimes the hassle of not getting the right size/feel of a product bought online, and having to repackage it and wait for another delivery simply isn't worth it compared to driving out to your local Suburban Mall Hell to just go and buy things like mom and dad used to do.
I would say their major problem is the lack of curation. The Amazon Marketplace brought all the garbage of eBay sellers to Amazon, and mixed it in with everything else.
As a result, you have to carefully watch out for things fulfilled by third parties (often subject to high shipping and strange return policies), and items with sketchy review histories. I can't find an article on it now, but I've come across items where it seems like the manufacturer pulled a bait-and-switch. The initial reviews are all very positive, and all the recent reviews are low and talk about poor product quality -- yet the item still has a reasonably high score. Did they seed reviews themselves? Did they actually change to a lower quality product? Who knows.
There's certain categories of products that I find to be an an utterly frustrating shopping experience on Amazon -- cell phone accessories is the one that immediately comes to mind.
Looks like they got so used to having a monopoly that even after they lost it they couldn't let it go.
It's really crazy when you look back and think about it.
1990 is approximately the year when their earnings started to plunge toward losses. Earnings nearly got cut in half from 1989 vs 1990. At the time Walmart was still the #2 retailer, having just passed Kmart (for the curious, Walmart went from $32b in sales for 1990 to $485b by 2015; now Walmart is in a position where their earnings are falling and sales growth has been flat for years as Amazon starts to eat into them).
This NY Times article from January 1991, describes the atmosphere well:
http://www.nytimes.com/1991/01/28/business/big-change-is-exp...
Imagine if this kind of system went through a dial-up and the items were simply shipped to you. We would have had mass e-commerce in 1985. The French did actually have something like this via their minitel system, fwiw.
In the end, open-ish standards and SSL won the race, which is probably a good thing. I'd rather be stuck with a broken-ish web than locked into these various proprietary designs controlled by one corporation. Even if Sears/Prodigy would have delivered these services, they would have been crushed by the web.
[1] Business Use of the World-Wide Web, 1995, http://www.informationr.net/ir/1-2/paper6.html ("Commercial activity on the Internet has only recently been possible.")
PHONE shopping.
Yes. Where you have a phone and call someone to place an order.
Digital switching and the 1800 (nationwide toll free) number developed in the early/mid 1980's I'm sure had an impact here...
At the time, a modem was the same price, if not cheaper, than a printer or a floppy disk drive. It wasn't exactly a luxury expense.
Macintosh computers were available, but expensive and not a typical home computer. And bandwidth on dial up at that time was maybe 2400 baud, way too slow to send any kind of detailed images of products that consumers would want in a catalog.
It might have gained some adoption, but in that era I think most consumers would have found filling out an order form and faxing or mailing it in easier.
Ordering systems would have been trivial to implement if the political and commercial will was there. Not too long after this you had Prodigy, Compuserve, and AOL offering these kinds of services. I remember they let you order flowers, buy software, etc from their online systems.
The web and tcp/ip internet replacing it all didn't come until much, much later. From 1983-1995 online services were ruled by non-TCP/IP dial-up BBS services and proprietary services like Prodigy. Home internet didn't take off until 1995-1996 and even then it was fairly limited.
>Apple II or Comnmodore
On top of all the PC clones running DOS and Windows (Windows 1.0 was 1985), Amigas, Macs (as you mention), Timex/Sinclair, etc.
Macs were home computers, there were just less of them. Back in those days people paid large prices for home machines, so the pricetags might seem high today but the utility/novelty factors made up for it.
Only certain items. They certainly have fallen victim to slapping the Craftsman label on cheap plastic "things" out of desperation which has definitely impacted their reputation as of late, but for those of us who can't pay Snap-on prices for everything what remains of Sears' actual tools are still light years better than the malleable/rusty junk Lowe's, Home Depot, Amazon and Walmart sell.
Here's a list of which companies own which brands. A lot of them probably come out of the same assembly lines with different names slapped on.
The only Craftsmen tools I see on job sites now are wrenches and screwdrivers.
The basic hand tools and precision instruments are the Craftsman products I find are still worth using. The wrenches, torque wrenches, calipers, hammers, screwdrivers and the like. Nothing electronic or mostly plastic.
I wonder if that mentality just grew beyond the point of no return.
You also get to see differences between product you cannot see. I just saw a super glue benchmark and well loctite won, but some "neat" brands failed early.
It use to be normal to take the Sears catalog out to the outhouse and use it for toilet paper.
Retail is flat circle, you just move the counter between the seller and the customer. Some generations like picking out the products, some generations like having someone pick it out for them. Some like it getting delivered, some like picking it up.
Not much changes... people need goods... but no one makes all the goods they need.
Famous for being one of the least competently-managed joint ventures of all time.
TLDR: In 1985 Sears had vast mail order experience, co-founded an ISP (Prodigy), and had their own credit cards (Discover). All the components they'd need to dominate online retail. In 1993 they closed their mail order division. In 1995, Amazon launched.
[1] http://www.metafilter.com/62394/The-Record-Industrys-Decline...