‘They Cut To The Bone’: How Sears’ Cost-Cutting Strategy Sealed Its Fate

October 15, 2018

Sears’ may have filed for Chapter 11 Monday, but the writing’s been on its increasingly bare walls for years.

The company on Monday announced it would start a reorganization process to try to continue operations, including closing 142 store locations and hiring a chief restructuring officer. CEO Eddie Lampert, who joined the company in 2003, will step down from the role while staying on as a board member. Thanks to a $300 million financing loan from banks, remaining Sears and Kmart stores and their online sites will stay up and running, for now.

It’s easy to blame Amazon as the Sears killer, as many are doing. The Seattle-based e-commerce giant is providing obvious competition and changing customer expectation dramatically.

But a series of bad decisions and inaction was what sealed Sears’ fate over the last 15 years. Little investment in improving the store and customer experiences, a turnaround strategy hinged on cutting costs rather than increasing revenue, and too-little-too-late programs put in place to reinvigorate business turned Sears’ path to bankruptcy into a drawn-out funeral procession.

“It’s been hard to watch for a retailer with such a long history, but you can’t really point to anything and say, ‘OK, they tried this, that didn’t work.’ That’s the head-scratching thing,” said Jason Goldberg, svp of commerce and content practice at SapientRazorfish. “You could tell that the company wasn’t investing in its stores, but it’s unclear where they were investing in. It wasn’t e-commerce.”

There have been other missteps. Shop Your Way, a membership program launched in 2014, evolved over the past four years to resemble a big promotions platform. All customer were automatically enrolled as members, which lowered prices of items across the board. Not only did that fail as a loyalty program, it underlined Sears’ failing as a data-driven consumer company. As a former catalog business, Sears could have been well-positioned to use customer insights to its advantage, but it never acted upon data-driven strategies.

“The reality is that it never focused enough on the evolving needs of the modern customer. Companies that focus relentlessly on the customer are the ones that are thriving today,” said Mary Beth Keelty, CMO at the agency PMX. “As opposed to taking a step back to assess the strategic changes that needed to happen around how to engage their existing and targeted customer base, the brand ultimately chose to make operational and financial modifications.”

 Read the rest of the story, here in Digiday.  

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