Reasons 2-10 Why Sears and Kmart Failed

Make no mistake about it: Eddie Lampert’s financial deconstruction of Sears Holding is the number one reason the retailer is now in bankruptcy. Over their more than 100-year existence nobody did more to destroy the company than Lampert.

That he is both a brilliant businessman (for himself) and perhaps the worst retailer in history are not in dispute.

But there were many other factors that caused both Sears and Kmart to become less competitive, fail to adapt to changing times and ultimately to lose customer relevancy that predate Lampert.

Here are reasons two through ten:

Both Sears and Kmart tried to become more than just retailers – and both failed.

Few people remember that at one time Sears owned Allstate Insurance, the Discover credit card (both of which it created), a stock brokerage firm and a national real estate agency.

It was an innovative strategy to become a full service provider for many of its customers' needs and frankly, exceeds anything being done by Amazon, to which it is sometimes compared.

Under one of an ever-changing executive guard, all of those units were sold off so theoretically the company could focus on the business of retailing. It would have been better off to keep them and be a well-rounded consumer center.

Kmart also expanded beyond its namesake nameplate, once owning a home improvement chain, a bookstore group and a warehouse club. Perhaps all would not have endured and the argument was at the time that they were distractions to the core Kmart business.

Maybe, but again, having a suite of retailers to sell a broad range of products to shoppers is a compelling argument if executed correctly. They were all sold off over the years leaving Kmart as the only brand in the house.

Sears was the wrong store in the wrong place.

As the post World War II suburban boom created a massive explosion in the retail world, Sears chose to put its ever-expanding store base into regional malls rather than strip centers. This turned out to be a disastrous strategy.

Malls became the place where people bought apparel and shoes and jewelry and hung out at the food court. It was at strip centers where people shopped more for hard goods like washing machines and lawn mowers.

Sears was stuck with stores selling products that mall shoppers didn’t want and what they did want Sears wasn’t very good at. On the other hand, other retailers took the prime strip center real estate and prospered. Sears never recovered.

Kmart never dominated mass apparel as it should have.

Over its prime years in the 70s, 80s and 90s Kmart was terrific at identifying fashion trends and selling them on its floor. It was better at it than any other retailer in the channel, including Target.

But Kmart never managed to leverage that strength the way it should have. Even in the past decade as the rest of the store deteriorated to embarrassing standards, its fashion offerings were still above-par, with good brands, innovative advertising and fresh looks. But it never was enough.

Sears should have stuck with the Softer Side

In the 80s and 90s, Sears, under Arthur Martinez and Bob Mettler, created an exciting persona for the store with the Softer Side, emphasizing its fashion areas. It was a big change for a retailer where colored t-shirts had been the previous big trend statement.

Stuck in mall locations where people shopped for clothing it was the right strategy for Sears to get those shoppers into its stores. And it worked…for a little while. Eventually, it was phased out, as were Martinez and Mettler. It could have made a big difference if Sears had stuck to that side of its business.

Kmart should have stuck with Martha.

In the 1980s and early 1990s Kmart introduced the Martha Stewart line to its home area and it ultimately became the single largest private label program in the history of home furnishings retailing, doing close to a billion dollars a year at retail at its peak.

It was a terrific program, executed well both on the product development and selling floor sides and it changed the way shoppers thought about mass merchandisers.

Kmart eventually balked at the high cost Martha extracted from it to carry the brand and it was discontinued. Had it kept Martha it would have had a strong foundation unparalleled in the world of discount home.

Sears never expanded its core house brands correctly.

There’s no dispute that Kenmore, Die-Hard and Craftsman are three of the best brands in hard goods, maybe in all of retailing. And Sears did a good job maintaining those labels and keeping them top of mind.

But what it didn’t do was feather them out enough throughout the store. Kenmore could have been a much bigger powerhouse in kitchen appliances and in other categories where reliability and functionality ruled. Die-Hard was pretty much kept in automotive and Craftsman in hardware but each could have also found additional life in other categories, including apparel where a customer – mostly male – existed. These names could have been lifestyle brands rather than just product labels. It was a major missed opportunity.

Kmart never developed solid hard goods brands.

As successful as the store was in apparel and with Martha, it never was able to truly develop powerhouse names in categories like hardware, outdoor and appliances. These were core categories for the strip center shopper but instead he went across the parking lot to Home Depot or Lowe’s when he wanted these products.

Kmart never could service this trade with a dependable brand consumers wanted.

Sears didn’t get the service side right.

While Sears had repair and other at-home and in-store units devoted to maintenance and other service functions, this could have been a massive business for the company if it had developed a broad national strategy. Imagine a Sears-branded home – not just appliance – repair and remodeling business that could have rivaled anything anybody else has ever done. It could have been the competitive difference to fighting off Home Depot and Lowe’s in that side of the business.

It always seemed to be an after-thought or an add-on business for Sears when it could have been a core competency and a foundation for its entire existence.

Kmart never saw Walmart coming.

You could say this about most of American retailing but it’s particularly true for Kmart, which was the largest retailer in the country until Walmart passed it in the 1990s.

Walmart was doing so many things differently – and right --at the time that perhaps Kmart’s management didn’t truly understand how successful they were becoming. Whatever the reasons, Walmart blew past Kmart and never looked back.

Maybe they couldn’t have stopped them but maybe they could have developed an alternative strategy, as Target did, to remain a force in the channel without trying to go head-to-head with the Boys from Bentonville. Instead Kmart never got what was happening.

Both Sears and Kmart could have survived all of these merchandising, strategic and real estate mistakes under different ownership and management in the 21^st Century. When Lampert took them over they were both broken but far from beyond repair. He ultimately brought a new level of retailing hell to both brands that sealed their fate fairly early on in his tenure.

The bankruptcy of Sears Holding is all on Eddie Lampert. But six decades of bad decisions played their parts in today’s sad, sad news.

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