Bruno Republic
Active Member
What's happening there? They're in what I call "retail death spiral". I've seen it happen at other stores (most similar example being Eaton's), and now I'm seeing it with Sears. Basically, what happens is that the company makes a few missteps, and sales begin a slow but steady decline. The company either misidentifies what is driving customers away, or is too focused on the short-term to address the fundamental issues, so instead they go on a cost-cutting spree. They cut back on selection, stock levels, service, updating of stores, etc., to bring costs in line with revenue. But this in turn makes the stores less appealing: regular customers find they can no longer get the products and services which they expected to find there, so they eventually abandon them. Casual customers find the stores look so shabby and neglected that simply being in them is an unpleasant experience that would only be worthwhile if they were bottom-end discount retailers, which they are not. Sales decline faster and faster, so the company continues to aggressively cut costs everywhere they can, which in turn makes the stores less and less able to generate the revenue they so desperately need. Eventually the company begins selling off their most valuable assets to stay afloat, closing stores, and it becomes obvious to anyone that the place is one huge sinking ship. By that point, any chance of successfully turning around the business is likely long gone.
With smaller chains, this process often happens fairly quickly, potentially faster than the casual observer would notice. Two consecutive bad years would sink many a business. But with larger companies (Eaton's, Sears, and Circuit City in the US), it happens slower as the company either has so much momentum and/or cash/credit from prior success. What ends up happening is a long, drawn-out process as we have here, where it takes several agonizing years to reach the bitter end.
What doomed Sears is Lampert's unbelievably bad management style, along with his practice of sucking as much cash out of the business as possible for shareholder dividends, instead of reinvesting it in the business.
With smaller chains, this process often happens fairly quickly, potentially faster than the casual observer would notice. Two consecutive bad years would sink many a business. But with larger companies (Eaton's, Sears, and Circuit City in the US), it happens slower as the company either has so much momentum and/or cash/credit from prior success. What ends up happening is a long, drawn-out process as we have here, where it takes several agonizing years to reach the bitter end.
What doomed Sears is Lampert's unbelievably bad management style, along with his practice of sucking as much cash out of the business as possible for shareholder dividends, instead of reinvesting it in the business.
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