As a former associate at Sears, I wanted to take a deep dive into why I believe, the choices of former Sears executives have killed the brand and subsequently killed the shopping mall.

Disclaimer: The thoughts and analysis expressed in these articles are strictly my own, and do not represent the intentions or representations of my employer, or former employer(s). Media sources were produced by me unless otherwise mentioned.

Background: I worked at 4 Sears stores across Arizona and Illinois, I got to work at one of the smallest stores and their residing flagship store. I worked at Sears between 2013 and 2019, I worked in hardlines as a tools and lawn and garden associate, and as an Appliance sales associate. I was one of the top salesmen in the company in 2016 and 2017, and I served on the Home Appliance council, where certain Sears associates gave input into where their home appliance business was heading.

I believe media and new sources have skewed the way Sears has fallen, I want to show what choices were bad, what was good, and where I think Sears and shopping malls are heading in the future. I wanted to paint the overall picture and some of the things I saw on the inside of Sears. This post is not meant to show where Sears is failing, but rather paint a larger picture on why decisions were made and where I think the company may be heading in the future.

Sears’ Past

Sears was a retail behemoth, they were THE place to shop for anything. They had the premiere credit card, they owned Allstate insurance and Discover credit cards as well as their retail business.

Sears, Roebuck and Company was the premiere shopping center, and even the premiere shopping source as they started in the 1880s selling catalogs. Catalogs made Sears a behemoth, when they were selling 1% of the United States GDP in 1920s. In 1925 Sears opened their first retail store, went public and exploded into developing malls and locations for them to sell their items.

But they made one crucial mistake:

Sears Tower was the epitome of Sears. It was their new headquarters for their business to showcase their power. They built the tallest building in the world at the time in 1973; it showed their dominance in the retail sector, but this was their greatest error. They spent so much money that they didn’t need to by building the Sears Tower, that it brought their financials to a standstill. Sears Tower cost Sears over $150 million USD in 1973, which is $850 million USD in 2019 dollars with inflation included.

Sears couldn’t move into the offices, and they couldn’t fill the space with other occupants. Sears started leaving Sears Tower in 1992. By 1994, Sears had sold the tower and was completely out of Sears Tower by the next year. This was a monumental loss for Sears; not only did they waste money building this, but they had to move people to the building, then move people out of the building. This money was withheld from stores, and could have been used towards improving fixtures and buildings instead.

But how did Sears get this large? How did they have to create the world’s largest skyscraper at the time just to house their employees?

The answer is Homart. Homart was Sears’ division for developing malls and opening new spaces for Sears to open locations. Homart worked with cities and completely built and ran mall locations purely to open Sears stores and diversify across the United States. They continued to develop new locations until they ran out of money, and Sears sold Homart to General Growth Properties (GGP) on December 27th, 1995. This was partly due to Sears not having money from the failure of Sears Tower. With Sears having very little cash on hand, and no longer opening new stores, Sears found themselves no longer finding new ways to bring in cash flow.

This was the first downfall of the mall, new mall locations were no longer being built by the largest company in America, and this meant new malls were being planned far less often and the ones already built were beginning to lose their prestige. Malls had begun to no longer be invested in by their owners, and stores that were losing market share were not being replaced by the mall owners.

In the 1980s, Sears opened the Sears Financial Network, which brought Sears into an industry that they did not know and took their focus off of their stores. This brought money that could have been used to update stores instead into their financial network. This allowed Sears to build an alternate income source, and while this did work for Sears, their executives were not focusing on their core retail business.

“There is no reason why someone shouldn’t go into a Sears store and buy a shirt and a coat, and then maybe some stock” - Phillip Hercel

This was a troubling time for Sears, they were struggling to develop a brand identity and was expanding into categories that they had never ventured into before. This diverted Sears’ executives from focusing on their retail segments, and was the first signs of Sears’ retail dominance.

In the 1990s, Sears launched a new campaign called the Softer Side of Sears. This further brought Sears’ focus off of its core business which was their hardlines business. Sears had powerful brands at their reilm, like Kenmore, Craftsman, and Diehard. Sears had core areas like appliances (Brand Central), home electronics, tools, lawn and garden, and automotive. Sears deviated public focus on their hardlines brands, and this hurt the business as Sears was spending money on their softline department instead.

Sears Holdings and Subsidiaries

In 2005, Kmart purchased Sears for $11 billion, bringing together Kmart and Sears under a new umbrella, with Kmart’s executive core renaming themselves to Sears Holdings Corporation. This was interesting for many reasons, Kmart had just declared bankruptcy, and bought Sears to help them come out of bankruptcy. This does not make financial sense in my head, and I cannot see how Kmart possibly could have seen this as a good option. While Kmart had the opportunity to gain some of the higher income customer base that Sears had, Sears was about to downgrade to Kmarts’ lower income customer base. This destroyed Sears’ reputation, and caused Sears to lose many higher quality suppliers. This can be shown in Sears’ home department, where large named items left shelves and the website and instead low-quality brands showed up on shelves. Electronics suffered greatly, especially around 2015 when K-mart brands showed up in their consumer electronics and large names started leaving shelves. No more Sharp, no more Sony, reduced LG selection, and in 2016 Sears pulled their entire Consumer Electronics division from their stores.

Seritage retail is an interesting case of Sears trying to raise short term capital from their real estate portfolio. Sears spun off a majority of their mall locations to Seritage Growth Properties, who manages these properties and leases them back to Sears Holdings. Most were high volume locations for Sears that were located in high traffic mall locations. In most of Sears’ closures in 2018 and 2019, most of the properties listed on their site (https://www.seritage.com/properties) have closed. Seritage will most likely hold onto these properties, or redevelop them into locations for other retailers, where they can get a higher rent from tenants that are not Sears.

Sears’ Credit Card business was sold for over $2 billion and Sears used the money to pay their shareholders, instead of reinvesting it into their stores. Sears saw this as a quick way to gain cash in one of Sears’ most profitable business ventures. However, by selling one of the most profitable parts of their business, they soon found out that over the long term they would have a major decrease in revenue for the company. A similar outcome came when Sears sold off it’s Discover card, where Sears also realized the income loss after selling the brand.

Lands End is a specialty clothing brand that Sears purchased in 2002, and Sears flourished with purchasing it. Sears brought Lands end clothing into its top stores, and accepted returns of Lands End clothing in all of its stores. Where Sears’ focus was never mainly on clothing, they now had a formidable brand of clothing in their locations. Sears let Lands End flourish by themselves, and before Sears entered bankruptcy, Sears spun off Lands End into their own company. Above, a photo shows Lands End new retail locations that are standalone. As of 2019, Lands End lists on their FAQ that they are pulling completely out of Sears locations as of 2020 (https://www.landsend.com/article/lands-end-stores-frequently-asked-questions/) and items can no longer be returned at Sears, and Sears will no longer sell Lands End in stores or online.

The Great Indoors was Sears’ attempt at a large scale shop for home remodeling items, home services and other home improvement products. These showed the scale of Sears’ hardlines business, but having these in the middle of the recession showed that they were not profitable. Home Depot’s similar experience, EXPO, had a similar selection and folded around the same time as the Great Indoors.

Sears Canada was separate from Sears Holdings, and while Sears Holdings held a major stake in the company, they never fully owned them since Sears Canada’s inception. In 2017, Sears Canada filed for Chapter 11 bankruptcy and later in 2017, Chapter 7 bankruptcy and liquidated the company. This is not necessarily a failure on Sears Holdings part, but is an important note in Sears’ history. Canada is an interesting market, a place where other US names like Target could not stay open. This might say more on Canada’s retail strategy rather than Sears, however Sears did not go about the state of their income and company quite well. This does foreshadow how a US bankruptcy and liquidation could play out in the United States.

In 2013, Sears paid out over $500 million in dividends instead of using it to reinvest into their stores. This meant Eddie Lampert, Sears’ largest shareholder got a bulk of the money given out in dividends. Payouts like these to large shareholders meant a large negative cash flow that could have been used in their stores. 2013 was the first year when Sears started closing a lot of stores, and this money could have been used to upgrade stores.

Shortly after the dividend payments in 2013, Eddie Lampert took over as CEO of Sears Holdings. At this point, I was an associate at Sears Holdings. I witnessed a few key items that changed at Sears, one was digital transformation. Sears actually did some interesting technologies - Sears was able to introduce digital signage in their stores. The digital signing allowed customers to view reviews, see consumer reports rating, see specs, delivery times, and email themselves the product, which saved them time when trying to find the product online.

Sears introduced faster in-store pickup and even in-vehicle pickup. Sears’ investments were looking to bring their technology into a 21st century experience. They introduced their Shop your Way program, which was a rewards and customer insights division that allowed customers to interact with Sears and Kmart customers. In the image above, Sears also invested in digital signage. Compared to their home appliance competitors, this was a great move. The tablets used for pricing, reviews, and specifications was far ahead of some of their competitors.

Innovel Solutions was spun off of Sears into their own company, but what is Innovel? Innovel was Sears’ distribution centers and delivery division and with the spin off of Innovel solutions, they expanded to deliver for other companies, such as Costco.com’s and Amazon.com’s Home Appliance delivery and installation. They warehouse products for these other companies as well. They no longer rely on Sears for a majority of their income and are self-reliant on business that they can bring in.

Listed on Sears Optical’s website in December 2019 is that all locations are closing. With these existing stores, most of the 3rd party Sears branding has left their stores. These include Sears Portrait Studios, Sears Tax Centers, and other doctors and companies.

Sears’ Present

In 2018, Sears declared chapter 11 bankruptcy, to get rid of debt and restructure their business. Sears was on the brink of bankruptcy, but was sold to Eddie Lampert, who stepped down as CEO when Sears Holdings filed for bankruptcy. Eddie Lampert called the conglomerate Transform Holdco, and owned all of Sears Holdings’ assets and left Sears holdings to exist as a company with nothing. Sears Holdings has not been ruled as insolvent, and is currently fighting in court to stay relevant and gain money through lawsuits.

Transform Holdco purchased 425 Sears and Kmart stores post-Sears Holdings bankruptcy, and they had planned on continuing to transform the business.

Transform Holdco purchased Sears Hometown, which completed in October, 2019. Sears Hometown stores are independently run, franchised stores. They are small format and sell Home Appliances and some other hardlines items. Sears Hometown stores existed in smaller cities, or alongside full-line Sears stores. Alongside the sale of Sears Hometown, Transform Holdco was required to sell Sears Outlet, which sells used and reconditioned appliances.

Sears continued to close stores, and by November 2019, Sears announced they were closing 1/3 of all their locations and would operate 182 remaining stores.

What Sears is lacking right now is a brand identity, they don’t have a clear path forward that they are releasing to the public. They have dabbled in so many business areas and they do not have a clear message they are trying to convey to their customers. They have lost focus on their core business and their shoppers are noticing that they are leaving important markets and losing their merchandisers. Sears lost Whirlpool as a vendor to their stores, which was a major hit to their Home Appliance business.

After Sears was sold to Transform Holdco, they suffered a major blowback in the form of suppliers. Sears Holdings had owed a lot of money to the suppliers before the bankruptcy occurred, and Transform Holdco suffered the outcome of those money being owed. Sears owed money to Whirlpool and Frigidaire, both of whom are suppliers to their Kenmore brand of appliances. Suppliers were changed for a lot of their divisions, or Kenmore existed those product categories. Examples of these changes (as of December 2019) are listed below for Kenmore’s large appliances:

Product Old Manufacturer New Manufacturer

Kenmore Wall Ovens Frigidaire Exited Product Category

Kenmore Cooktops Frigidaire Exited Product Category

Kenmore Water Heaters A.O. Smith Exited Product Category

Kenmore Water Softeners A.O. Smith Exited Product Category

Kenmore Laundry Centers Frigidaire Exited Product Category

Kenmore Garbage Disposals Frigidaire Exited Product Category

Kenmore Top Freezer Fridges Frigidaire (Most) Daewoo (Most)

Kenmore Freezers Frigidaire (Most) Daewoo (Most)

Kenmore Portable Dishwashers Whirlpool Exited Product Category

Kenmore Pro line Various Discontinued Lineup

Kenmore Vacuum Bags Panasonic Existed Product Category

Other changes for Sears’ products is Craftsman. Sears sold off the Craftsman brand to Stanley, Black and Decker in 2017. Although Sears still has rights to the Craftsman name royalty free for the next few years, they have diminished their Craftsman assortment in their stores. The stores also had no Craftsman Lawn mowers or riding mowers, which is disconcerning entering Spring time, where these items are sold most during the year. Other Craftsman items flying off shelves are Craftsman bench power (Miter saws, band saws, etc), Craftsman’s Evolv line, and other odds and end in the tools area. The stores are trying to get stock, as the white stickers attached to the prices show that the stores are requesting stock of these items, however Sears is not getting supplies to fill their shelves. Examples of their tools and lawn and garden stock is shown below:

Sears also sold off their Diehard branding to Advanced Auto Parts. They can no longer manufacture Automotive items, but they did get approval to the brand in non auto-related items. With news surfacing previously, Sears will be using the name for the replacement of a lot of their Craftsman lawn and garden items. Sears also sells Diehard work clothing and footwear, alongside its namesake automotive items. Transform Holdco did retain rights to sell the Diehard products in it’s stores, as well as branch out into other product categories. While this will temporarily hurt the bleeding and prevent paying royalties for Craftsman for these products, this is a bad image on Sears. With Craftsman existing Sears, I expect to see Diehard take on some of those previous product categories in the future.

Sears’ Future

I still believe the brand and stores have value and a future, but management needs to realize what is making them money and what is not. They need to re-evaluate their stores, listen to their customers and use historical data to make decisions to better their future. Some of these decisions are what I am predicting below:

• Sears will sell off DieHard, and remaining automotive centers will be sold off and renamed into DieHard automotive, or another name. (I wrote this before the sale happened, Diehard did get sold to Advance Auto Parts, and took over the Diehard automotive centers. Sears does retain rights to non-automotive Diehard branding as explained above. Oddly enough Sears did not mention closing any automotive centers, but I believe they will all close after this announcement)

• Sears will continue to close their full-line mall stores, the mall locations are not a profitable option anymore with few exceptions, and with Seritage Growth Properties owning most Sears locations, they can redevelop the locations and bring in other retailers/companies to fill the spaces. With Sears closing locations that are on Seritage properties, there is either a Seritage push to get rid of Sears, or/and Sears wanting to close mall locations. Seritage will benefit with higher paying tenants, and Sears would benefit by having less real estate and be able to get rid of unprofitable business segments.

• If Sears will continue to exist, they will transform completely. Here is what I expect from Sears:

  • Sears locations will not be mall based, they may be in strip malls or standalone locations

  • Sears’ new locations will largely occupy Sears Hometown locations, Sears may use capital to buy out franchisee owners, or switch the business to completely franchise-based.

  • These locations being 10,000 square feet - 20,000 square feet means Sears will exist some major categories: No more softlines (clothing, accessories, jewelry). These may exist as Sears Home and Life stores, a concept Sears has come up with to sell hardlines items.

  • Sears will continue carrying Home Appliances, Mattresses, and other home related items. They may continue outdoor items, but with the sale of Craftsman to Stanley, Black and Decker, they will either need to start paying licensing fees or rebrand these to DieHard. I think the exception will be Kenmore branded items, such as grills that will continue to exist. They do still have a strong Home

  • Sears will exit their other service categories, such as Sears Optical, Sears Portrait (possibly completely defunct already), and AVIS car rentals (along with the sale of Sears Automotive).

  • Sears needs to innovate with technology, they need to overhaul their mobile application, they need to bring technology into their offerings that makes them stand out in their retail categories.
    

• Transform Holdco will close all Kmart locations. They are unprofitable and useless to continue operating in their current state. After the announced November 2019 closing, I believe there are about 20-30 Kmarts left in the USA.

• Sears may focus on just their “Top stores”, which are their top 25 sales locations left in the United States. This however posts a problem, as Sears top locations are historically large, and with a diminished assortment, Sears will have trouble filling the empty space in their store locations.

Another Opinion

As a secondary option, Sears may be already starting its liquidation quietly. In the last 3 years, Transform Holdco purchased all assets from Sears Holdings. Store count (As of early 2020) will be below 200, at 183.

Sears no longer owns the Craftsman or Diehard brand names, with its last large brand name being Kenmore, I expect Transform Holdco to sell this off soon.

Sears no longer owns most of its properties, with Seritage Growth Properties now owning most of them and kicking Sears out of them, I expect Sears’ physical locations to continue to shrink. Sears may continue to exist online, but physical locations are hemorrhaging money. Even their previously top income stores are trending negative.

Sears has been hosting a lot of “Blowout sale” where they reduce prices on a large selection of items in the store. A lot of the products they no longer are carrying end in .94 price point. This is also evident in the availability of their Home Appliances, a lot of items have switched to “EZ Order” which means Sears no longer warehouses these items and they must ship directly from the manufacturer. This could be because Sears is having trouble paying these vendors, or because they don’t want to pay to warehouse these items because their sales have diminished so much. Innovel has customers that will pay more than Transform Holdco to warehouse and deliver items, and with a diminishing number of Sears stores, the product flow has also slowed down.

Poor communication was a major thing I noticed when I was working at Sears. When there was any news, sometimes outside news sources were more informative than internal news sites. Management is not transparent in their goals and intentions. When product categories are diminished or existed, stores are left to figure that out for themselves. Sears management don’t give their intentions on decisions, or ask for feedback from associates. This hurts the business, and as a business that is trying to reinvent themselves and stay alive in a retail environment Transform Holdco needs all the help it can get. Leveraging data from associates and their customers makes sense to help turn the company around. With management not listening to associates, or leveraging data to improve their stores I think Sears’ future looks bleak.

With the past of Sears in mind and some of the more recent executive decisions at the company, we may see all Sears locations look like some of the following in the near future:

Feeling nostalgic about Sears? Take a look at the curated playlist I made of in-store music that was played within Sears stores during my employment term:

https://open.spotify.com/playlist/67BbbRQpt0QX9ZshIuMixQ?si=iPqgAbmLR3StoK-H7XUl0A

References:

https://www.seritage.com/properties

https://www.nytimes.com/1995/12/27/business/sears-completes-sale-of-its-homart-unit.html

https://www.youtube.com/watch?v=psb5ur2ALPU

https://www.youtube.com/watch?v=iNbE3YS8jB8

https://www.youtube.com/watch?v=AbBluh92Kac&t=29s

https://www.marketwatch.com/story/here-are-the-96-sears-and-kmart-stores-that-are-closing-next-2019-11-07

https://www.archdaily.com/62410/ad-classics-willis-tower-sears-tower-skidmore-owings-merrill

https://marketmadhouse.com/the-strange-world-of-eddie-lampert/

https://www.chicagotribune.com/business/ct-biz-sears-bankruptcy-creditors-whirlpool-frigidaire-20181015-story.html