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Into the Mist
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Sears Canada (1952-2017)

  • Thread starter CanadianNational
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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.
 
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It's a cute ad, and it does play on Sears' misfortunes in a remarkably honest way. Nonetheless, it doesn't give anyone any reason to go to Sears, nor does it improve the image of Sears. It's the kind of thing that plays well on YouTube, but won't actually help sell anything.
 
Someone I know had the perfect description of how Eaton's was in its final years, right before their even-more-disastrous attempt to reinvent themselves as a higher-end retailer: the stores "smelled of death". That's exactly what I sensed when I was in Circuit City a few months before the whole chain went under, and it's how Sears locations feel now. Stores that are nearly deserted and look abandoned. Shelves either empty or strewn with dusty merchandise nobody wants at any price. In the unlikely event that you find something you want to buy, there's another challenge: getting someone to ring it up for you. The few remaining staff are either overworked trying to keep the place going, or completely demoralized and unmotivated to do their jobs at all. Everything about the stores still open screams "abandon all hope". The atmosphere is effectively customer-repellent.
 
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It seems like Sears is doomed, both here and in the States. Although I do think it'll die here first since there's less motivation on the part of the US parent to keep the business here afloat. Kinda like how Blockbuster died here first, and then eventually died in the US as well.
 
With Blockbuster, it depends on how you look at it: The American Blockbuster ran into trouble and filed for bankruptcy protection in 2010, more than a year before the independently-owned Canadian operation did. However, the US operation went through a long downsizing/restructuring/change of ownership process which took until the end of 2013 to reach the inevitable conclusion (minus a few franchise stores which might still be in business even now). In Canada, the process took only six months, so they were history here by the end of 2011.
 
Blockbuster Canada was still considered (barely) profitable when the U.S. chain filed for bankruptcy in 2010 - Netflix had only then launched its Canadian website, so Blockbuster was not yet facing the same level of competition here as it was in the U.S. But the Canadian chain was dragged into bankruptcy by the U.S. creditors as the U.S. Blockbuster had used its Canadian operations as collateral. The creditors essentially looked north to recoup the money they'd lost south of the border. The receivers entertained various offers to buy Blockbuster Canada (most of the telecoms kicked the tires, as did apparently Sobeys), but decided in the end they could raise more cash liquidating the chain.
 
Bruno Republic said:
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.
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This is a good description and assessment of the situation.
 
Thanks. I worked for Eaton's from the late '80s to the mid-90s, so I've seen what this looks like from the inside. Another factor I forgot to mention is the human one: once the company is in serious trouble, they lose a lot of their most knowledgeable people who might be able to turn things around. The best/brightest/most dedicated people either get laid off, sense the inevitable and abandon ship, or are fired for opposing or being too vocal about bad management decisions. With them out of the picture, there are fewer and fewer people left who really understand the business or who could steer management away from further catastrophe, and the rate of decline accelerates.

Like Eaton's, Sears decline is being depicted in the media as the result of nebulous factors like "changing shopping habits" and "demographic shifts", but the reality is these are only minor factors. It's not like Blockbuster, where the entire business model suddenly became obsolete. Cataclysmic mismanagement is the real culprit. As long as Lampert (or anyone who believes Randian philosophy works in the real world) is at the helm, there is absolutely no hope for Sears.
 
I wouldn't have been able to describe and outline the situation quite as eloquently and detailed as Bruno has, but agreed, Bruno's posts are spot on. Eddie Lampert at the helm is just not working and should've walked years ago. As it stands, I really don't think Sears has a fighting chance of a turn-around.
 
Bruno Republic said:
Like Eaton's, Sears decline is being depicted in the media as the result of nebulous factors like "changing shopping habits" and "demographic shifts", but the reality is these are only minor factors. It's not like Blockbuster, where the entire business model suddenly became obsolete. Cataclysmic mismanagement is the real culprit. As long as Lampert (or anyone who believes Randian philosophy works in the real world) is at the helm, there is absolutely no hope for Sears.
Click to expand...

I actually haven't seen much coverage attributing Sears Canada's demise to changing habits and demographics. Some suggestions that Sears has failed to connect in any way with younger shoppers. But the blame has been almost overwhelmingly placed at the feet of bad management and, to a much lesser extent, increased competition.
 
My favourite Sears story involves the mothers' day flyer a few years back (2012?). Lampert forces Sears divisions to compete with one another - some "survival of the fittest" bullshit. So instead of cooperating, they are at each other's throats. When it came time to produce the annual mothers' day flyer in the U.S., the sporting goods division was able to outbid womenswear for the most prominent spots in the flyer. So millions of American homes received a mothers' day flyer from Sears with a front cover promoting BMX bikes for teenage boys.
 
Skeezix said:
I actually haven't seen much coverage attributing Sears Canada's demise to changing habits and demographics. Some suggestions that Sears has failed to connect in any way with younger shoppers. But the blame has been almost overwhelmingly placed at the feet of bad management and, to a much lesser extent, increased competition.
Click to expand...

Perhaps I'm just letting my own biases get in the way. I seem to only see the same vague "times changed, and they didn't connect with the new generation of shoppers" statements, instead of "terrible selection combined with repeated marketing blunders and inventory management problems". When Eaton's first went into bankruptcy protection in 1997, the media presented it as some incredible shock, whereas it was no surprise to me (I'd been fired from the company two years earlier, and had no contact with anyone still working there). It seemed that nobody wanted to place any blame on the company's management, and all I seemed to see where words to the effect that department stores were simply a thing of the past, and shoppers had migrated elsewhere. Well, the latter point was certainly true, but that was largely due to the complete indifference Eaton's management had about actually having any of the items people came to the stores for in the first place.

I've seen a few scathing articles about Lampert in the American media, but not much from ours. Maybe I'm reading the wrong news sources?
 
All the articles I've been posting here are largely the same -- Sears management saying that a turnaround is coming, with retail analysts saying that they are driving the chain into the ground. The CBC News article yesterday on the quarterly results was pretty typical -- Lampert is using Sears Canada as an ATM machine, they aren't reinvesting in stores, etc....
 
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