What Amazon Can Learn From Sears—Yes, Sears

Pride cometh before the fall

Sears was the largest retailer in America until it was surpassed by Walmart in 1991. - Credit by Getty Images
Headshot of Lisa Lacy

Interested in commerce? Hear from Zappos CMO Tyler Williams and other executives at Adweek Ignite: Ecommerce July 10-12 in Seattle—apply here to attend.

Generations ago—long before Jeffrey Preston Bezos was even a twinkle in his parents’ eyes—Sears was the retail giant Americans turned to when they wanted to buy stuff.

Sears evolved from a watch company to a mail-order catalog to a department store. Along the way, like Amazon today, Sears sold products as varied as books, bicycles, pianos and sewing machines—but, unlike Amazon, Sears also sold live chickens, guns and cars.

“Amazon today is the Sears catalog of its time,” said Doc Searls, a fellow at the Center for Information Technology and Society at the University of California, Santa Barbara, who wrote the book The Intention Economy: When Customers Take Charge. “Using Amazon is exactly like Sears—Sears was famous for being able to buy anything. You could buy a house and build it yourself.”

The Sears catalog was published from 1893 to 1993.
Getty Images

And Sears had a good 100-year run, as it kept up with the times in the 19th and 20th centuries. In addition to its catalog, Sears created its own credit card for servicemen returning from World War II, developed hundreds of shopping malls and pioneered celebrity merchandise from figures like Sir Edmund Hillary—who, along with sherpa Tenzing Norgay, was the first climber confirmed to reach the summit of Mount Everest and who began collaborating with Sears on camping equipment in 1972—and supermodel Cheryl Tiegs, whose line of clothing and footwear debuted in 1981.

But then along came the internet, which Sears seems to have sorely underestimated, and its subsequent attempts to regain relevancy—like, say, a partnership with the Kardashians; an ad with Mike Myers, who coincidentally happens to be the younger brother of a longtime but now laid-off executive; and even a deal with the devil, which is to say an Amazon partnership for Alexa integration in Kenmore appliances—were not enough to reclaim its former glory.

Robert Hetu, research director with the Gartner Retail Industry Services team, said Sears successfully made the jump from a catalog to a retail store, but, like many brands, missed the boat on digital. Sears, he said, was fundamental in creating brands, experiences and revenue while understanding multiple channels and the connection between catalog and stores throughout the mid- to late-20th century.

“What they missed was the second transition—they stopped producing their catalog the year before Amazon launched. What they failed to see was the next phase,” Hetu said. “They failed to see that, yes, the traditional catalog was maybe not the way forward but the digital catalog would be. Theoretically, if they had the vision, they could have figured out how to move the catalog into ecommerce, but they didn’t do that.”

Game changing?

Sears responded to a request for comment on its efforts to regain relevance with a statement touting its “game-changing” Amazon partnership in which customers can buy its Kenmore appliances and DieHard batteries and consumers in 22 states can have tire orders delivered to Sears Auto Centers.

Nevertheless, reports of Q1 losses of $424 million and 48 nonprofitable stores closing this year came as no surprise. As of May 5, a spokesperson said, there were 529 Sears stores left (and 365 Kmarts). That’s reportedly down from 2,000 when chief executive Eddie Lampert took over in 2013.

“Amazon emerges 25 years ago just as Sears Roebuck did as a general merchandise business from out of nowhere and creates a brand-new challenge between the world of merchants and consumers,” said Mark Cohen, director of retail studies and adjunct professor of business at Columbia Business School and former chief marketing officer and president of softlines at Sears. “Sears had an enormous head start [with] brand equity around this market, and it built an enormous reputation by way of surety and excellence. Everyone in its wake had to live up to its expectations, just like everyone had to figure out one-click transacting after Amazon made it the gold standard.”

Hubris

The downfall of many figures in Greek mythology can be attributed to hubris. And that’s part of what caused Sears’ demise as well, Cohen said.

That includes: displaying lawn mowers and tool sets as malls became fashion centers; switching to everyday low prices overnight, which confused customers who were anticipating sales; making price decisions for weekly newspaper ads six months in advance; and supporting executive ineptitude, including former chairman and CEO Alan Lacy, whom Cohen called “an expression of gross incompetence,” and Lampert, whom he called “a hedge fund operator who did a brilliant job of stripping [the company].”

(To be fair, Cohen was relieved of his duties at Sears in 2004.)

In a blog post in May, Lampert said he still firmly believes Sears can be transformed, and he is invested in Sears Holdings “in every sense of the word.”

However, he has also created a complicated web between Sears, his hedge fund and a real estate investment trust called Seritage—and he reportedly stands to benefit even if Sears implodes.

Signs of impending doom

They say those who don’t learn from history are doomed to repeat it. Bezos studied computer science and electrical engineering at Princeton, and while it is unclear whether history was a prerequisite for either program in the ‘80s, he is at least presumably aware of his own historical mark on retail—which includes putting Sears on the ropes.

One harbinger of failure could be if Amazon becomes overly prideful, which Cohen said would happen if it, like Sears, started to believe whatever it does will be successful and competition is meaningless.

Another bad sign for Amazon would be if it became sloppy with its notoriously enthusiastic commitment to customer service. And, if it doesn’t pay enough attention, Amazon could find itself out of touch with consumer preferences and behaviors.

Amazon also could start throwing money away without regard for consequences. But, Cohen said, so far, Amazon has been investing in growth, which includes hardware like the Kindle and the Echo, as well as content, Whole Foods and same-day delivery.

Amazon has never been beholden to Wall Street, where Bezos has essentially told shareholders, “If you don’t like what we’re doing, sell your stock,” and as long as Amazon can finance what it is doing itself and remains in control of its destiny, it is likely to stay on a path that continues to yield growth and success for the foreseeable future, Cohen said.

Amazon also hasn’t made what Cohen called “mindless investments” like Sears did in insurance company Allstate and real estate company Coldwell Banker, which “takes them into places with no core competencies and places that require diversions of cash flow at the expense of underlying cash flow.”

The Alibaba threat

Alibaba's Singles' Day drove more than $25 billion in sales in 2017.

Amazon sells crystal balls, but it’s unlikely it can see the future of retail. Efforts like cashierless convenience store Amazon Go, however, reflect a more measured approach to not only gauge the future of retail, but also shape it.

But that’s not to say Amazon has a lock on retail indefinitely.

Take Alibaba, or what Searls called the Amazon of China. Singles’ Day—Alibaba’s equivalent Prime Day—sold more than $25 billion in goods in 2017, including $12 billion in the first two hours. Meanwhile, Amazon’s 2017 Prime Day reportedly brought in just $1 billion.

And Alibaba certainly isn’t resting on its laurels in China. According to the company, 225 “countries and regions” completed transactions on Singles’ Day 2017, and top countries participating included Japan, the U.S., Australia, Germany and South Korea. Mary Meeker’s 2018 internet trends report also noted Alibaba has investments in platforms in Pakistan, Indonesia, India and Singapore.

Further, Searls said, Alibaba is even more data-driven because of different privacy regulations in China—tracking is more widespread, so more data is available—which gives it an advantage. Searls also noted Alibaba is part of China’s global ecommerce expansion while Amazon is based in the U.S., which is becoming “more and more of a tariff-isolated government protectorate under the current administration, run by a guy who clearly hates Amazon.”

And if Alibaba does a better job doing what Amazon does than Amazon does, Amazon could end up the trucking company for Alibaba, Searls said. That’s in part because Alibaba’s digital payment platform Alipay is expanding globally and, as a result, more consumers may become accustomed to using Alibaba to find and buy products. And, if that’s the case, Amazon, which excels at logistics—and getting products to consumers quickly—could find itself relegated to acting as Alibaba founder Jack Ma’s courier someday.

“It could be that Alibaba will do to Amazon what Amazon did to Main Street,” Searls added.

As soon as you’re at the top of your game, you’re at your most vulnerable, Gartner’s Hetu said.

“In today’s environment, once you’ve figured it out, you’re in trouble,” Hetu said. “You have to figure out the next thing. The thing you figure out might last another few years, but at some point, that thing will no longer be relevant.”

Amazon declined comment for this story.


@lisalacy lisa.lacy@adweek.com Lisa Lacy is a senior writer at Adweek, where she focuses on retail and the growing reach of Amazon.
{"taxonomy":"","sortby":"","label":"","shouldShow":""}