Sears has another chance to avoid closing down | Hacker News Reader

Sears has another chance to avoid closing down

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Sears had everything. Global supply chain, check. Top notch distribution operation, check. System and infrastructure to take orders and handling billing, check. Name recognition and established customer base, check.

They threw it all away, ending catalog operations in 1993 a year before Amazon.com opened in 1994. They owned part of Prodigy in 1984! Yet somehow thought it was a better move to expand into bigger box retail. Anyone remember The Great Indoors from 1997? It was going to have huge potential.

What a waste.

Those who are first will later be last for the times are changing...

Is there anything people don't buy online these days?

>Is there anything people don't buy online these days?

Tons of stuff. [ADDED: e-commerce is 10% of retail in the US.] Ironically, especially in the categories that Sears was best known for selling. Major appliances, lawn equipment, home improvement generally, (to a lesser degree) clothes.

All my major appliances were bought online. Amazon delivers home improvement services now (via partners) in some markets. These may be things that move online slower, but they to move.

A few years ago, the ancient (circa 1998) microwave in my house failed. I merrily trundled off to the local appliance store and bought a new one, and had them install it. Seemed to work, but eventually I realized it must be drawing too much electricity. Like something out of Green Acres, I had to limit what lights and other appliances were on in the kitchen if I wanted to use the microwave.

I had an electrician come out and look at it. He opined that, due to the way the house was wired, it would be a pretty major undertaking to fix the underlying problem. So I just went along with turning lights off when I cooked.

I finally sold the house, but couldn't pass this problem off to the next owner.

The only place I could find that still sold a microwave so old and feeble that it wouldn't overload my circuit, was Sears.

Thank you Sears! Hopefully I will never need that again, but I am thankful for your help.

I'm curious, do you remember what the difference in power draw between the old and new microwaves was?

Standard microwaves are 1100 watt, but there are also 700 watt microwaves. Those extra 3 amps must have set off his circuit breaker.

Sounds about right. Also, this was an above-stove unit, limiting possible choices. Probably could have more easily found a standalone unit that worked.

Especially if it was an odd size. The downside to built-in microwaves is that it took many years for the industry to decide on what sizes they would support, so older installs are always a crapshoot. If you have a weird one it can be hell finding an appropriate microwave. My parents had a very old microwave (1980s era) built into their house that was much bigger than almost everything on the market today, finding a replacement for it was impossible, they ended up having to buy a smaller one and making a custom shim to fit it in the old cavity.

> I finally sold the house, but couldn't pass this problem off to the next owner.

As someone who's had his share of problems passed on to him when buying a house, I'd like to know (1) how the next owner found out about the problem and (2) how they managed to strong-arm you into fixing it.

I told my selling realtor about the problem before they house was ever shown to anyone, and agreed to fix it before moving out. It would have been wrong of me to have just left a problem like that.

There's a lot of stuff I don't buy online.

Clothes -- I like to try them on first.

Tools -- I like to see if they are well made and how they feel in my hand. Photos on a website don't provide this.

Food -- I want to check produce and meat before I buy it. And it's easier to stop at shops I'm passing on my way home anyway.

Household supplies -- I don't want to deal with disposing of shipping boxes, styrofoam peanuts and air pillow packs for stuff I can just grab off the shelf at the local Target.

Big-ticket items (appliances, furniture, etc) -- I want a local business standing behind the product and the warranty.

Stuff I buy online are typically things like books (no local bookstores anymore) and odd items that are hard to find locally (like the mic/audio splitter cable my kid needed for his X-box controller).

Pretty much in agreement here, although I do find it more convenient to buy appliances through the big box store's website than to go in person and spend an hour guiding an associate through the options in their arcane inventory system.

Also you get to avoid most of the 99% profit-for-them "warranty" hard sell. I try not to hold it against the salesperson as I've done that kind of job and I know they don't have a choice but it's still incredibly annoying.

For our last 2 appliances (fridge, washing machine) we went to the store and found last year's model on sale at a steep discount to anything online. Also managed to haggle a little.

Isn't warranty provided by the manufacturer and not the retailer, and hence better to buy big ticket items online (likely cheaper since there is no local retailers markup).

Even for clothes, yes offline stores do give us the ability to ability to try, but online offers more choices, colours, fabrics, sizes and brands than any one physical clothes store could possibly offer, so I do think online has an edge.

> Isn't warranty provided by the manufacturer and not the retailer

The cost is usually covered by the manufacturer, but the local retailer is usually a point of service.

Sure, but people can and do buy these things online as well, and some of these are well-suited for a hybrid approach. With clothes, for example, once I find my preferred SKU of trousers or shoes or whatever, I will just buy replacements online rather than return to the store where I bought my first pair, because they're a mass-produced product.

What's more is that more and more people do buy these things online. Clothes and tools especially.

Clothes are probably one of the bigger things. General grocery items, especially produce. Things that are a pain to return (large appliances). Things you usually need now (hardware/auto store parts).

I will say, I try to never buy monitors online... I've just experienced too many that die prematurely and would rather have someplace I can take back to the same day. My current monitor is actually a 42" UHD TV. I had bought a monitor in that size (40") but it was DOA, and didn't want to wait the round-trip for a replacement. Not the first time I've had monitors die young either. At least they don't weigh over 70 pounds anymore.

I know other comments are pointing out reasons this is not true but honestly it feels that way to me too.

All of my Christmas presents this year were bought on Amazon and delivered direct to my family who live 400 miles away within a day of me ordering them.

Even some of the categories of things other people have listed as things people don't buy online are things I do buy online. Tools for example, if I'm buying something to get a job done I'll pick up something from the catalogue type stores (Screwfix / Toolstation in the UK). On the other hand if I'm buying a decent tool to last I'll pick it out online, usually after reading and watching reviews, and then looking around to find the cheapest price for the exact model.

I was buying a pair of trainers for my partners Christmas. She picked them out on a big department stores website. I went to the store and they didn't keep them in stock. I tried 3 other stores in one of the UKs largest shopping centres and they didn't have them in her size. I tried another shop in a different part of town which didn't have them and finally gave up and ordered them on Amazon. They arrived 2 days later (this only a week before Christmas).

The other point is Sears Catalog was empowered by the railroads, then along comes the Internet and they miss the analogy.

The internet was billed as the "Information Super-Highway" not the "Information Super-Railroad". That's why they didn't see it.

There was an enormous Sears near where I grew up. It always felt shabby and badly run. They had lost the recipe even then, when they still had the catalog business.

I get the impression from Sears and other big companies that lose their way that they become the playgrounds of big management egos that want to leave a mark and get written about in business publications, whether or not their ideas work.

Same experience. Sears was an anchor tenant at the local mall for decades. In that time they never did a significant rehab. When they finally closed a few years ago, it was still like stepping into the 1970s to shop there.

My guess is that they got their lunch eaten by Wal-Mart and Target. Wal-Mart beat them on cost and margin.

And you can't operate a mega-chain on premium customer service since the average customer shops on price or convenience.

Department stores have been dying for a long time.

I should have made clear just how ancient I am. When I was a kid, it was still the heyday of department stores like Lytton, Goldblatt,and Marshall Field which had their own candy shop selling their own candies, and a department called "millinery." Some of these stores were notably stuffy and seemed to cater to my grandmother's generation. But they were still prosperous. I had never seen a Wal Mart.

The dysfunctional Randian management model imposed by their CEO had more to do with their failure than any external woes:

https://outline.com/dnb2UK

I remember them being in the single best position to do what Amazon did half a decade before Amazon was even a real thing. Even if they got their catalog online, searchable with images, and call in to finalize their orders, they'd have been ahead of the game.

They could well have done more optimizations with time... but they had no interest in the internet, and felt the web would be just another fad after Prodigy failed.

I knew it was the beginning of the end for Sears when they shutdown their catalog division and call centers. Just as the internet was ramping up and mail order was going to become huge.

Name recognition

This can't be understated, and is something a lot of new companies don't understand. If people know your brand and trust your company, they will hand you money.

Anecdata: My parents were massive Sears loyalists. When they bought an appliance, my father researched the various GE models, then bought the Kenmore version. When he wanted a video game console, he researched and decided he wanted an Atari 2600. Then he went out and bought the Sears Tele-Games version.

Half of their house addition was built with Sears products. If Sears had a lumber yard, it would have been closer to 90%.

>If Sears had a lumber yard

In a way, they did.

https://en.wikipedia.org/wiki/Sears_Catalog_Home

I own one of these. It was built in 1935 and unlike Sears, it has a good chance of surviving another century because it’s made of solid brick. It’s a Craftsman-style Bungalow that apparently was build extra wide (or at least wider than other homes in our neighborhood), so the upper bedrooms are more spacious than it might appear from the outside.

There are links at the bottom of the page to the catalogues. Looking at the 1908 catalogue - my goodness those houses are gorgeous.

I wonder if there is some sort of design trademark on them. I would love to build a house like these in Australia.

And Sears, like Walmart now, was big enough that they could go to manufacturers and get special versions of products to makeup the "Kenmore" brand. I remember looking at fridges back in the day and the Kenmore version had just minor differences that made it slightly better than the 'same' model from the actual manufacturer.

The difference between Walmart and Sears through is that Walmart pushes manufacturers to build the cheapest possible product so their versions are worse rather than better then the manufacturer's own branded products.

But also cheaper, which is what a lot of their customers are looking for.

I thought this as well until I heard a counter-point [0] which was very convincing.

The reason Amazon is successful is not because you can shop online (from a catalog) and receive items in the mail. The reason Amazon is successful is because you can do those things and receive your items within two days. Before Prime existed, Amazon had very quick fulfillment, and after Prime two-day it became even better.

The Sears catalog ended in 1993 but the Sears Wish Book continued to exist after that. In 1999 I remember ordering something from the Wish Book required 3 weeks to receive the item. If they didn't have the desire to improve that, then they would never have become Amazon.

> If anything, Sears was the worst positioned to become Amazon. What they had was just completely wrong and more of a burden than a benefit. Had they tried to retool with their massive catalog it likely would have been a disaster. Amazon had a real benefit starting small with just books which let them learn the ropes on the cheap. [0]

I think this is especially relevant here on HN because it shows how startups are required to solve problems. For many problems, a behemoth company has no reason to improve, and a lean startup can rush to a solution faster in many cases.

[0] https://np.reddit.com/r/news/comments/a6nwj7/sears_bankruptc...

Yeah, I think you're completely on point. Sears has been on verge of folding for at least a decade, and they've done little to nothing to implement any innovation that would give them another swing. It left plenty of opportunity for smaller startups to swoop in and stay ahead of the market Sears lost out on.

So what I'm hearing is "so big they had to fail".

I wonder if Amazon will ever get to that point. It's hard to imagine.

As it grows larger, the "Amazon marketplace" is getting more and more filled with garbage knockoff products and fake reviews. There may eventually come a tipping point where they lose user trust.

I'm almost there now.

My hope is that smaller, more focused online retailers and marketplaces emerge that can compete in specific verticals. For example, I already go to non-amazon sites where I prefer to buy music gear and computer hardware.

This is more popular in EU. In many countries Amazon even does not operate, and even in Germany people try to prefer different place if they can.

Most people in my circle already won't buy anything they put in their bodies from Amazon, because the risk of Chinese counterfeits is just too great.

If that happens, I don't think the problem will be perceived as "Amazon" — people will say "online shopping" is untrustworthy, like how "social media" is responsible for the world's ills, not "Facebook".

Unmentioned here as far as I can see is their attitude to worker’s rights. That’s massively off-putting for me.

I feel like every time there is a discussion about Amazon on the Internet, this point is brought up.

I spent about $9,000 on Amazon across 139 orders in 2018. I buy a lot on Amazon. I've never had a problem with receiving knockoff products. I don't understand how this can be such a prevalent issue when I've not run into it, given how much I use Amazon.

The only thing I can think is that, if I'm buying something expensive, I'll strictly only purchase items "Sold by: Amazon.com Services, Inc" or alternatively, I'll use a marketplace seller if the seller is the manufacturer of the item I'm buying.

> I'll strictly only purchase items "Sold by: Amazon.com Services, Inc"

Most users don't think to check for that, though. I know my mother-in-law doesn't...

They intentionally don't offer the option to filter for it many times, otherwise, I would have that permanently selected.

> The only thing I can think is that, if I'm buying something expensive, I'll strictly only purchase items "Sold by: Amazon.com Services, Inc"

If you are trying to avoid counterfeits, that's not really helpful, since the problem with counterfeits is magnified by commingling, by which items sold by Amazon itself, and FBA sellers that do not opt-out of it are mixed and orders fulfilled with goods that may have been sourced by any of the sellers.

For many things that is an issue.

But I still buy laptops and other electronics from Amazon.

For many it is here. If I can get the same product from walmart I do because returns onstore are easier and the product comes quickier without prime. Products always come at the very end of the fullfillment date but with walmart they fill the order before the expected date.

Even with Prime, the couriers Amazon uses to service some areas take long enough to deliver that most other online retailers are preferable.

For me, they’ve “fixed” that. I finally got their amazon couriers blacklisted, so they are shipping usps.

But, if i order from an account without prime, they wait 11 days to ship, thus giving me 12 day delivery (just within their promised 2 weeks). If i order from an account with prime, it alternates between next day and two days.

Editing to add:

Last order without prime, Dec 28. “Shipped” yesterday (usps shows it arriving to them at 4:35 this morning from amazon, out for delivery today).

How'd you manage that?

UPS/USPS do great in my area, while if it's Amazon or FedEx I'll get it a week from never.

Constant complaining to customer support when the package kept being marked “building closed” when they decided they didn’t want to deliver (this is a house, not an apartment, so no building to close).

After 3-4 packages arrived a week or so late because of the same issues, they finally blacklisted amazon delivery. Since then, it’s been usps.

I had to do the opposite because USPS is so bad about delivering packages. The Amazon branded couriers basically saved me as a Prime customer.

There was an article [1] from 2017 about USPS couriers lying about packages being delivered to keep up their Amazon delivery statistics. This routinely happened to me.

[1] https://www.aol.com/article/finance/2017/12/05/postal-worker...

Anecdotally, I've seen a significant perception shift regarding Amazon over the last year, even among my non-techie friends. When this group of friends starts talking about these things I know it's moving beyond the Hacker News crowd to the general public.

It used to be the place where you could get anything for a good price in 2 days and trust the quality.

Now the selection is getting iffy in favor of house brands, Prime has a ton of strings attached (add-on, pantry, now) if it's offered at all, Amazon delivery is awful, the prices aren't nearly as good as they used to be, reviews are mostly fake, and you have to work to avoid knockoffs.

Most people I know have dropped Prime and significantly reduced their orders. They haven't stopped entirely, but it seems to be more of a "Wal-Mart" in their minds - a quick and easy necessary evil, not something they particularly enjoy.

It probably doesn't signify their decline yet, but it certainly seems to be a new stage in their lifecycle.

I also see the same shift. There's too much garbage to sift through and too high of a chance of getting something counterfeit.

Whoever thought the operational cost reductions of "commingling" was worth the loss of trust in the Amazon.com was wrong in my opinion. I think people with disposable income would rather pay a little extra to guarantee they get a legitimate product, and it's not hard to google the model number or product name and select from Target or Lowes or Best Buy.

Over here in Europe when I hear something negative about Amazon from non-techie people, it's always about working conditions. I guess the recent Spanish strikes have helped to publicize that more. Some people are thinking of avoiding ordering from Amazon, but I doubt that actually translates to that much of real action yet.

Indeed. Conversely as a Frenchie Prime still offers next-day shipping and works as well as it ever did (that is, pretty well most of the time). It's pretty amusing to me that we seem to have a better deal with Prime on the old continent than on Amazon's home turf.

Bezos himself has stated:

> "Amazon is not too big to fail ... In fact, I predict one day Amazon will fail," Bezos reportedly said when addressing a question about Sears recently going bankrupt. "Amazon will go bankrupt. If you look at large companies, their lifespans tend to be 30-plus years, not a hundred-plus years."

> "If we start to focus on ourselves, instead of focusing on our customers, that will be the beginning of the end ... We have to try and delay that day for as long as possible."

https://www.businessinsider.com/jeff-bezos-says-amazon-will-...

> I think this is especially relevant here on HN because it shows how startups are required to solve problems. For many problems, a behemoth company has no reason to improve, and a lean startup can rush to a solution faster in many cases.

Pretty much. Jurvetson calls it the luxury of being a new entrant. It's very hard to steer the Titanic away from an iceberg.

Yes, first movers in general have a disadvantage. For example, this is part of the reason why Sega's hardware business died.

Admittedly, that was only part of it: there was some mismanagement behind Sega's decline too. Actually, you could say the same thing about Sears: the final nail in their coffin wasn't Amazon learning from Sears's lessons but rather Eddie Lampert's deliberately and systematically looting the company over a period of several years. If not for Lampert, Sears would just be another Macy's.

No question that they operated poorly on top of just being in an eventually bad position for the future. Sears could have innovated or had a separate department like Xerox PARC and others did that kept them alive a long time, but unfortunately fast movers and disruptors will always have that advantage no matter what you do. Hence why FB and others just buy out all the small companies.

While this is generally true, imagine if Sears had honestly realized their competitors potential and tried to compete. They had the country covered in stores and could have easily cut shipping times down by shipping from the nearest one.

Their stores were also a hodgepodge of junk all randomly mixed, and they never made their store a desirable place to stroll.

We could say the same for other big box retailers. I don’t know any that even comes close to te amazon experience, short of Yodobashi.con in Japan.

I think it requires something very special for an organization to accept to canibalize itself. Apple is the only exemple that I would see at a behemoth scale.

What is "The Amazon experience"? Ads being served as the first few rows of results? A review system that cannot be trusted? The same item listed multiple times by different sellers? Extreme price variance when choosing different colors and sizes?

The experience today is not what made them great in the past. 10 years ago the negatives you list didn't exist.

Perhaps all of these too big to be good utility services- Amazon, Google, Facebook, even Apple should just offer “classic” slimmed down versions of their previous offerings, for a paid subscription in the case of the online services.

How would this help eliminate any of the current issues? Why would giving them money and/or building a slimmed-down version reduce fake reviews, fake articles, ads as search results, et al?

Use the subscription fees to cover up the lack of search result ads, to pay for better policing of fake reviews, moderating, etc.

That's a relatively decent development AFAIK. 10 years ago I mostly trusted results and reviews. I suppose it's getting a lot worse lately because 1/ Amazon being hugely successful means that it's a prime target for advertisers and scammers and 2/ Amazon being hugely successful means that they have less of an incentive to solve the issue now than they did back then.

These are all valid point. I’d add to that bad knock off items mixed with the real ones.

But most of these issues are plaguing every other major site. Ads that stick with you for days and days whatever site you look at are becoming the norm.

No ec site review system can be trusted in my opinion, they are usually way to easy to game. For anything that actually matters reputable and dedicated review sites end up to be the most useful.

Different sellers and different price are fine to me, it actually helps to mitigate the knock off issues in my experience.

All in all amazon has degraded a lot in these aspects, but I feel the whole industry took the dive and don’t see competing retailers coming up with fresh ideas.

apparently amazon can't even replicate it in their own Amazon Book stores. QR codes just to get prices? really?

Walmart is following this exact strategy right now.

How are they doing?

After years of getting many if not most things from Amazon, my last several big ticket tech items were bought from Walmart online. The prices on identical items were better at Walmart.

Other things I've stopped buying from Amazon are the frequently-counterfeited categories of items (USB chargers, etc etc). I'll just go to Microcenter or Walmart or wherever local whose supply chain I have more faith in.

Also you can do pickup at Walmart on a ton of items and have it in an hour or less—and usually at the same price or lower, now that Amazon charges sales tax; very few places have prime instant or whatever the same-day service is for Prime.

Lately I've seen WalMart labels on stuff I've ordered from Amazon. Feels kind of surreal.

At that time, they may not have had a central database of what items were in stock in which stores. Might not have been possible to route the order to the closest store that had the item.

Agreed that Sears never moved much beyond the 1970s in store layouts and merchandise display/organization.

Hmm, I could be misremembering, but I think there was almost a decade between the point when Sears had all the legos but didn't know how to assemble them, and when Amazon really started using fast shipping as a differentiator. And I think the "Prime" account branding came still later into the picture.

Before shopping at Amazon ramping up, right around 2000, I remember Sears logistics starting to break down with kafkaesque calls into Sears service and parts departments. I guess the point is, I think the decline of Sears mostly had to do with internal complexity and breakdown of effective management than anything directly to do with Amazon.

HN user xigency is right, Amazon has always been light years faster than Sears.

Personal anecdote:

My mother, back in the late-nineties came to me one day and told me how she had figured out how to get stuff from the jcpenny and sears "even faster". Because she could just search Amazon, "and they actually deliver it to me by the end of the week!"

"I bet you thought they only sold books right? It's something new they have!" yada yada yada blah blah blah. She was pretty proud of herself to be telling me about the new stuff on the web, but I digress. Point is, she was like a kid in a brand new candy store. Only a candy store that sold toys and video games too, and opened up across the street from the kid's house.

TBH, I think there's a much better case to be made for Sears doubling down on some of its core assets and creating Home Depot before Home Depot did. Its store footprints weren't right, which is no small thing. But they were already a significant home improvement and major appliance store. They probably had a window when it was clear that discount retailers (and some high-end stores) were the future of "department stores" and if they couldn't go there--which they probably couldn't--their future lay in focusing.

They literally had the best tools in the world - my dad swore by Craftsman, told me never to bother buying any other brand. Then they threw it away on a demonstration of Randian philosophy.

Even while our dads were swearing by Craftsman, better tools existed. You're right that Craftsman was good enough for most people's needs. Craftsman is still an OK brand for hand tools (not power tools). It was just easier to get Craftsman, because they sold it at a store that wasn't too far away. Back in the day you could only get Snap-On etc. if you were affiliated with e.g. a mechanic's shop that was on a Snap-On truck route. Now thanks to Amazon, Home Depot, etc. there are more ways to get quality tools.

Sear's return policy for Craftsman pro tools was exceptional; lifetime warranty. If it broke, bring it in to exchange for a replacement.

I was just going to mention this! The warranty is the real reason my father had quite a few craftsman tools. Well, at least the ones he used the most, anyway.

Snap-On may makes quality tools, but their prices reflect it. Unless you're actually a mechanic that uses those tools constantly, the prices are tremendously prohibitive. Enter Craftsman. Combined with the warranty, they were a FAR better deal with 90% of the quality.

This happens so often, I would not be surprised if it was a widely accepted business process. The MBA's come in and run a good brand into the ground. It happened a lot with bike brands.

Note that Target stores have always been entirely owned by Dayton's department stores. Some years back they realized the department store was much smaller and changed the company name to Target but there was never a big shift, just lots of little shifts that turned the department store into the discount retailer.

Fair enough. My main point is that the fact that Sears once had a rather famous catalog business seems a fairly tenuous competence on which to base "They could have been Amazon." As you suggest, challenged as segments of retail are in general these days, Sears under different management could presumably have taken things in a number of different directions that wouldn't have resulted in it going bankrupt. Whether that meant Target, Home Depot, or some category that doesn't really exist today.

Where's the startup that is solving the pile of Amazon boxes in my backyard that I am too lazy to breakdown?

Not to be snarky, but there needs to be a name for selective amnesia when an idea that seems obvious in retrospect is ignored later on.

In this case, the thing that made Amazon so great, before Prime existed, was that it had the "Things you might also like" section.

AFAIK it was one of the first online stores that used machine learning to recommend new and related items you didn't realize you wanted and to have user ratings for each item.

It was especially powerful for books/movies/music just due to the sheer volume of different titles that makes it hard to find new content you might like.

There are a lot of retailers that had the logistics and infrastructure for online sales, but the kind of marketing that Amazon did for up-selling was wholly new and something that could only be done online. So even if Sears could do it, it wasn't obvious back then to anyone that they should do it or how to do it.

Even now, the Walmart and Target web stores recommendations are just ok compared to Amazon. Even eBay seems less comprehensive in its recommendations.

Is that really a primary growth factor? I've never once acted on an Amazon recommendation, and it's always felt almost entirely useless - "you just bought a vacuum, here's 15 more vacuums just in case you're a vacuum-obsessed lunatic"

I would sacrifice so much karma for more upvotes for this

Worth it

True, I think like most market incumbents, Amazon has become lazier lately. The vacuum-obsession problem, the proliferation of counterfeit goods, and subpar third party sellers are all more recent problems.

But if you just bought 1984 for example, there's a good chance you'd also want to buy WE, Brave New World, Erewhon, etc. The algorithm made sense for the book store, but it makes less sense for the "Everything Store".

FWIW, I just got a better book suggestion from your comment than I ever got from Amazon.

I wonder if some of this is just....the very low average item quality on Amazon these days.

My recommendations right now have seven separate ten-dollar tire valve extenders, two screen protectors from the same brand (only one of which is for my phone- and that one I already bought!), a $1,000 drone i accidentally clicked an ad for last week, two more screen protectors from other brands, four Qi chargers, and five cases for my phone (I already purchased a case for my phone through Amazon).

Very persuasive!

That, and the ONLY analytics based feature I used was the "After viewing this item most people purchased" section WAS THE ABSOLUTE BEST for shoppers. It made me feel like I could look at a vacuum, but then be directed to the BEST one. It was like, I'm doing all this crazy research and stuff, but how could a billion other people's research help me here. It seems like they run experiments now where once in a blue moon you might see that section.

I know why they got rid of it - and Amazon has this problem all over the place, but some products just sit, while others, with really no difference just fly off the shelves.

This feature still shows up almost constantly for me... there are a few flavors (some of which appear contemporaneously on a single product page for me) including "after looking at this item people purchased..." and "similar items to this item..." and "people who bought this also bought..."

Wouldn't it be nice if you could just choose what information to get, unless of this dice-rolling and analytics and cookies approach?

I doubt it is. Recommendations can be great for certain kinds of purchases -- books, Amazon's original niche, being an obvious example: "people who looked at this book also tended to look at these books" can be a meaningful signal. But I don't think that's what helped Amazon to astronomic growth, particularly when we're comparing it to Sears.

Yup.

The recommendations were useful to me while I was still browsing, not so much after I'd made a purchase. It made browsing a lot easier.

Their book recommendations were generally relevant to your interests. Much like early Netflix, once they had enough data on what you liked they could correlate that against other customers with similar tastes.

> I've never once acted on an Amazon recommendation

i have!

Also, they let users review the products. Not very long ago, it was a novel idea to let customers tell other customers via the store's own website that this or that product is no good.

They used mechanical Turk to build recommendation lists.

Amazon’s “recommendations,” complication and clutter are a mess. They are not a desirable feature for me. They also often don’t have the best prices. I still use them a lot, but feel ripped off by Prime. I have an Alexa, but wish I didn’t. Walmart’s online is good, uncluttered, low priced, and if you’re pissed, you can get in your car and physically return it immediately for a refund. I use it when I can, to try to dollar vote against Amazon.

In the early days of Amazon their book recommendations were much better than any other online source I knew of. I would often visit their product pages to find new books to checkout at the library. At one point I bought some books I didn't really need because I felt guilty about always using the site without buying anything.

These days I find the recommendations pretty useless and have a slightly different opinion of buying products there just to help out the company.

Free 2-day shipping was an absolute game changer. Customer reviews was also a huge competitive advantage that brick-and-mortar retailers lacked since it let you quickly identify which specific product was most popular for what you were looking for: much better than asking a store rep for their recommendation.

I'd really be interested in a graph that showed some growth metric like revenue or number of orders plotted against a timeline of when Amazon introduced certain features. I remember seeing one for Facebook that was really illuminating.

The recommendations have never been the selling point for me.

Instead, the thing that got me to use Amazon was that it provided you with access to a long tail of books—and later, other stuff.

Bookstores and record stores did do "special orders", but there was a lot of friction in the process. You'd have to find out about the book, visit the store (twice!), and if what you wanted was even available, you would wait a few weeks for your order to be bundled in with the next shipment from the publisher.

Amazon removed all of that—and the reviews even made it less risky. Want to read the next book in a series? Check out the reviews and if you want it, done deal! Need some obscure technical title? It'll be AT YOUR HOUSE next week.

In a way, I miss the serendipity of browsing bookstores. There was a time when it was a circa monthly ritual to go into Harvard Square on a weekend (I think stores were mostly open on Sunday by then) and make my way through all the new and used bookstores as well as run other errands. But, really, although I still like going into a good bookstore now and then, having this vast collection of (however imperfectly) reviewed books that can be in my hands within a few days--or immediately via digital--is pretty magical.

I do wonder how typical your experience is, though. I personally never found much by doing that (partly I was paralyzed by choice without a good algorithm for narrowing things down), and consequently stopped the random browsing in bookstores long before the bookstores themselves mostly disappeared.

When I was much younger (pre-teens and teens), I was a voracious reader and would spend a lot of time at the library. But even there, I would mostly stick to the long-running series that I knew well, or prolific authors that I knew I liked.

For me, it depends on the store.

Some places feel "well-curated": they may not have a ton of books, but it seems like the books they do have were carefully chosen. Maybe there are "theme" collections (local authors, ghost stories for grownups, Russian authors", etc) or well-read staff members making recommendations. I love browsing these places.

Other places seem to go with the "pile of books" approach. There's a lot of them, roughly organised ('fiction') and many of them are obvious tat ('Lose Weight the Dr. Oz Way' or something. I find it easy to leave these places without buying anything.

The word for "when an idea that seems obvious in retrospect" is "hindsight bias"

That's generally not a useful bias to base beliefs off of :)

I would wager that had a very tiny impact on the ultimate success of Amazon, more likely you do machine learning and are inflating its importance due to self-involvement with the subject.

For me it's the speed of Prime, plus the fact I don't have to bother entering my card or PayPal details. It's almost annoying when I can't find what I want on Amazon and have to go elsewhere.

Removing friction is tremendously valuable. Same reason people use Uber even in cities like New York: not having to pay at the end of the ride.

And Amazon's return policy. I remember specifically buying clothes from an online retailer a few years ago and when things didn't fit, I got charged a 10% restocking fee. I'd mostly bought from Amazon but decided to go outside the box. Sure enough, I went back to Amazon.

When I lived in the UK, I discovered retail shop hours at 9 to 5, except Thursday and Saturday when you have to fight crowds. Also, things were more expensive. So Amazon won again.

All the monopoly complaints aside, the rest of the retail world doesn't compete very well.

Hell sometimes Amazon doesn't even require a return. They will just say keep it and send out the one you actually wanted.

I've had this happen on a Wal-Mart order as well.

There was a significant gap between Amazon launch and having two-day shipping — it took years of behind the scenes development before orders started arriving notably faster than other retails. Sears' numbers include regular postal delivery in both directions so switching to online ordering would have cut them in half with no other changes (and don't forget the efficiency wins from orders arriving as validated electronic data rather than handwritten order forms).

The reason why Amazon was successful early on was selection and pricing. They had _everything_ rather than the generally limited selection most people had from local stores and the pricing, especially for things like technical books or genre publications, was often very favorable. Yes, some people lived in major cities with awesome bookstores but for most of us in suburbia the selection was what the local supermarket / drugstore carried or a non-trivial drive.

The pricing benefit really cannot be understated.

Amazon was 40% less than list for books -- which was a massive amount, even if you lived in Barnes & Noble markets (and B&N wasn't as pervasive in 1996/1997 as your average mall bookstore was), where there were similar markdowns.

And of course, you could get any book you wanted from Amazon.

And then Amazon very quickly moved into media like CDs and DVDs. I used to order DVDs from various online retailers in the late 1990s and although Amazon wasn't my go-to in 1999/2000 (there were plenty of startups that sold at ridiculous losses and coupons that 16 year old me took advantage of), I appreciated their selection -- not to mention the gift certificates.

I think a lot of us forget that Amazon wasn't the only big e-tailer in the late 90s, it's just the one that survived. There were lots and lots of bigger and smaller places that straight up went out of business after the .com crash, but Amazon, despite taking a massive beating, survived.

Price was a huge reason for its success -- but I agree with others who point out that Sears and other incumbents had a chance to take them on, if not on price, than on selection and speed, way earlier than they did.

Instead, many businesses chose to partner with Amazon (Borders, Toys R Us) for a time, to their ultimate detriment.

Very good points. I'd like to add that Amazon began in a time when the typical person didn't trust ANY online shopping options. To my recollection, Amazon and eBay were the two biggest players that found ways to give people confidence that they could safely shop online.

YES! That's an excellent point too -- though I think this is where legacy retailers really lost out because I know my mom for example, was more comfortable giving her credit card to a known brand than some random website. My first order from Amazon was in 1997, when I was 14, and I did it using a gift card I got as a holiday gift from GeoCities (as thanks for being free tech support -- this truly is the most 1990s story ever), because my mom wouldn't hand over her credit card and I didn't get a Visa check card until I was 16.

In 1996, Mom had been screwed over by phone reps for CompuServe's attempt at a true ISP stealing her credit card to order shit from Tiger Direct (told you this was a 1990s story) and was leery about anything online for years after that (and Tiger Direct was technically a mail-order catalog but it had a website).

But you're right that eBay and Amazon were two of the earliest trusted, in part because they were the two biggest/first to market. (And also, both proved themselves to be trustworthy, which was important in the age of fly-by-night e-tailers).

The same is true for PayPal.

Re: Trust; I always found it a bit ironic back in the late 90’s/early 00’s that people would not trust ordering things over the Internet, but happily call a mail-order number and give a complete stranger (and anyone within earshot) their name, address and credit card number.

Were they wrong though? I'd wager far more credit cards have been stolen via the internet than by eavesdropping?

Absolute numbers don't mean much in this context.

Why not? I’ll happily dictate my credit card number into my phone, heck I’ll throw open my apartment window and loudly yell my credit card number into the street, along with the expiration and CVV2, with zero fear that someone or something will actually be listening and recording it / writing it down.

By contrast I refuse to send my credit card number in an email or post it on a non-SSL site.

Guess which way I’ve only ever had my credit card number stolen?

Because the Phone Number, Mail-In Order Catalog and the Human Voice from other side of Phone are all Real World Interaction. With traces to be made that relate to Real World. On the internet Everything is virtual.

>To my recollection, Amazon and eBay were the two biggest players that found ways to give people confidence that they could safely shop online.

This so much. I remember people's fear of filling in their Credit Card info online. And people who thought sharing Uber with a Stranger would be a no no.....

How time changes.

Great observation. I remember eBay and PayPal’s partnership being extremely important in making people feel protected. As I recall, there was well-advertised buyer protection by using them. Good feedback systems for buyers and sellers in both cases have proven a valuable asset.

>Amazon was 40% less than list for books

Furthermore, it's easy to forget just how hard it could be to track down even an in-print book and how long it could take to actually get your hands on it. Some big city bookstores were better but, in many cases, (assuming the bookstore would special order books at all), it would basically be put into the next batch order from a publisher which might be a month or two.

Yup -- I remember in college (in the early 2000s) how slow it could be for a bookstore to get a book in that a professor required for class (there was a book of poetry I literally could not find in the state of Georgia and my professor let me photocopy the work she had assigned until I could get my copy from Amazon b/c she recognized that I had literally called every single major and minor bookseller in Atlanta and the publisher and none could get me a delivery time ahead of Amazon, which was still going to be after our test) and by the time I graduated, most of us just reflexively went to Amazon rather than trying to fight over 6 copies Barnes & Noble or the college bookstores would manage to get in.

Which brings an unrelated point of how much understanding a typical university professor has for the idea that their course may not be the be-all-and-end-all of student's life. Making an unavailable book a requirement for a course? Ahh how much I don't miss those days of being at the mercy of every university prof or bureaucrat's whims :-)

Some profs just over ordered books. Some students bought books from other privately owned book stores across the street. Some students dropped out of class and hence did not buy books that were needed for 2nd half of the semester.

Above reasons contributed to quite a bit of the books not getting sold.

But yeah, I had to uncrate the dang books, and a few weeks later, crate the same books to ship back to publishers.

I bet I'm one of the very few of the student body who learned how to work with Pallet trucks.

I rarely bought books until I attended the first few classes. Some classes had books on the list that were never even used. Literature professors were the worst: hey go buy this book for 20-40 dollars, you will need to read about 10 pages of it.

That reminds me of the time I worked in the stock room of student book store in a major university on the west coast of US in mid 1990s. The stock room was in the basement of the school student bookstore. Before and beginning of each semester, we'd get crates of books, books that only college student taking a class would be required to buy.

The crazy thing was, once the semester was nearing the end, we'd pack up all the unsold books (some classes had many unsold books) and ship them back to the publisher, at a significant loss from what I remember.

The student union was run independently from the university as a non-profit and was running a big deficit. However, the office people upstairs had humongous 24 inch CRT monitors, ones that surely cost a pretty penny. In 1998, 17 inch CRT sold for nearly a thousand dollars. I just looked it up. But I digress.

> In 1998, 17 inch CRT sold for nearly a thousand dollars.

Huh?

Don't forget the reviews! Buying the right one is often more important than buying one today.

> Don't forget the reviews! Buying the right one is often more important than buying one today.

Amazon itself seems to have forgotten this; reviews used to be very useful, but either they're not trying very hard to combat fake reviews or they're not up to the challenge, because they're almost useless now for big-ticket items.

In my experience the reviews are most useless for small items, where fake reviews can easily manipulate the reviews or are even the only reviews available.

> In my experience the reviews are most useless for small items, where fake reviews can easily manipulate the reviews or are even the only reviews available.

Yeah, 'big ticket' wasn't the right word; probably I meant 'commodity'. I meant to exclude things like reviews of obscure books, which sellers apparently usually don't bother trying to game, since they seem to be reasonably reliable (at least, last time I checked, which was a while ago …).

In the late 90's and early 2000's Amazon was one of the few online retailers I actually trusted to buy things from. It sounds crazy now but the concept of ordering online was not nearly as consistent and as safe as it is now.

I don't remember that big of a price advantage, but they definitely had a HUGE selection advantage compared to the book stores in my city.

To a certain extent the price didn't matter much because it was the only way to buy a lot of books.

If memory serves it usually wasn’t that dramatic but there were significant outliers where it was 50+% cheaper and I don’t think I ever saw it go significantly the other way so there was a strong inertial tendency to just buy it on Amazon rather than put time into shopping around.

One other neat thing was international availability — Amazon.co.uk had Terry Pratchett books months ahead of the US release, so I could read them at the same time when people on Usenet were.

Yeah a brick and mortar book store could never compete with an online retailer warehouse when it comes to selection.

Eventually book stores started to create their own websites but by then it was too little too late.

Yup -- and some (Borders) made the strategic mistake to literally just use Amazon. When Borders finally broke off the relationship, not only was it too late [1], it was at literally the worst possible time it could have done it, from a business perspective -- given the financial crisis.

Toys R Us did this too and as a result, never built a really solid e-commerce strategy. In fact, when Toys R Us left Amazon in 2006 (after years of litigation to get out of the contract) [2], it had the unenviable position of being behind from a tech perspective in a massive way. Not only that, the experience was considerably worse than it had been under Amazon.

[1]: http://www.internetnews.com/ec-news/article.php/3749336/Bord... [2]: https://www.wsj.com/articles/SB113798030922653260

Borders tried early on - IIRC they had a partnership with IBM in... 1998 - again IIRC it was early 99 that their first public site went up. My recollection was that you had to register an account before you could search, which many in my office laughed out loud about. They (Borders) were a company down the street from us (a web company) and Borders had gone with IBM instead of us, so there was some bad blood there (but it had started before I got there I think).

Knew a couple other folks at Borders, and visited them at work a couple of times. Borders was just clueless at tech, and BN was starting to take a lead in tech, which helped them with sales a lot more.

I agree here. I don't remember price being an advantage at all in the 2000s. I remember it being roughly comparable to local stores, and a refrain was often "but at least you don't pay the sales tax!"

Perhaps on certain things like accessories- IE cables that stores normally had huge margins on- you could find generic equivalents for cheaper prices, but not in a general case.

Until maybe 2009 or so, it was always about selection. I spent a good portion of the 2000s using their recommended book list to figure out what I was going to read next, and when I was almost done with my current book, giving my self a ~5 day lead time to order the next, because that's about how long it generally took. It was an easy tradeoff to make, since a few clicks was a lot less effort than going to a store. I was also reading a lot of somewhat specific programming books in those days that weren't carried by most stores.

I agree with your memory. I think they would undersell bestsellers, but Amazon has always been meh on price.

I'm not well versed on the subject but I recently learned that Amazon's share of a book's purchase price is HUGE at around 40% (21.60 on a $54 book)

I suppose the lesson is that there is a lot of value in being a distributor as I also know someone who is a part owner of a brewery and he says the same thing.

Source: http://fabiensanglard.net/gebbdoom/

That is the case at pretty much any retailer. Grocery stores, drug stores, clothing stores, etc.

Don't forget app stores, music distributors, etc!

> Amazon was 40% less than list for books -- which was a massive amount, even if you lived in Barnes & Noble markets (and B&N wasn't as pervasive in 1996/1997 as your average mall bookstore was), where there were similar markdowns.

This.

But even for pure list, Amazon didn't pay sales tax so had a 5-8% advantage.

Amazon killed all the technical bookstores in short order because of that pricing advantage that they didn't deserve.

> I think a lot of us forget that Amazon wasn't the only big e-tailer in the late 90s, it's just the one that survived. There were lots and lots of bigger and smaller places that straight up went out of business after the .com crash, but Amazon, despite taking a massive beating, survived.

It's my opinion that The Dot Com Crash is what created Amazon.

Here's how:

I worked in Redmond Washington during the crash, and there were thousands of people who lost their jobs due to that. I knew so many people who were struggling to find work.

This was Y2K, when Seattle wasn't the tech powerhouse it is today. T-Mobile didn't exist, Google hadn't opened any offices in Washington, and tech companies were failing left and right.

I think that the crash gave Amazon an opportunity to hire people. There was a lot of talented people out of work.

Arguably, this may also explain why T-Mobile has become so huge. I worked there before they were T-Mobile, and I can remember how tiny we were. You could fit our entire operations team into a conference room.

Nowadays, T-Mobile is HUGE and I think a lot of that may be a combination of geography and timing. In 2003, Sprint was bigger than T-Mobile, but they're based in Kansas and the Seattle area just has a much larger pool of engineers to support a company like that.

> Amazon was 40% less than list for books -- which was a massive amount, even if you lived in Barnes & Noble markets (and B&N wasn't as pervasive in 1996/1997 as your average mall bookstore was),

The two main mall bookstore chains (Waldenbooks and B. Dalton) were, despite keeping their names, owned by and integrated with Borders and B&N respectively by the time Amazon existed.

One way Amazon was able to compete on price was by not having nexus in most of the country. Consequently, Amazon didn't collect sales tax on behalf of states and consumers, on the whole, never declare use tax. I still see that mentioned on most deal-hunter sites: "tax kills the deal" or "order from X and you don't have to pay tax." It's tax-free in the same sense that all tax evasion is tax-free. But, sales tax is levied at the state level and states don't have the resources to audit everyone.

That's not to say that Amazon didn't execute well. And their selection was excellent. It's just really easy to compete on price when your checkout total is 5+% cheaper than an in-state competitor even when the items were priced the same. Of course, this only applies to states that levy a sales tax, but that's still a large portion of the US.

Mail order operations didn't collect sales tax either. Amazon didn't invent the interstate tax dodge. Sears did.

I've read your comment a few times and I can't really tell if you're trying to refute what I said or if you're agreeing with it. I don't think mail order operations ever amounted to more than a tiny fraction of what online purchases are today. They were certainly nowhere near as convenient.

Setting that aside, my point was Amazon had a built-in price advantage that brick & mortar retailers did not. Use tax really should have been the normalizing force there, but no one declares it and it's hard to enforce. So, all things being equal, consumers would shop where they could realize a price savings. The story of brick & mortar retailers transitioning to e-commerce is more nuanced than some titan resistant to change being taken out at the knees by some peppy up and comer. Amazon was quite aware of this and fought very hard against any change in rules regarding collection of sales tax.

Everyone is jumping over themselves to counter everyone else's memories and theories on "how Amazon became successful" so I hate to add to the ruckus but there is one factor everyone seems to be forgetting that is crucially important in my opinion. That factor was Amazon's approach to customer service, a factor that predates their earning the moniker of "The Everything Store" and was a necessary atep toward success as they first had to get people comfortable with buying things online.

There were several popular books written on the subject of Amazon's customer service model (or ones that used them as a key example to their thesis) that were written long before Amazon ever offered prime and even before they really started taking off. The Amazon of the mid-00's was a major player, but still small enough that they had to differentiate themselves from competitors (at the time) like Ebay and Newegg. Outside of selling media (books, CDs, DVDs, games etc), Amazon's inventory was still mostly limited to the kinds of goods one could also find on those sites (clothing, accessories, electronics) which had them stuck competing on price. What eventually began separating Amazon from the pack was the fact that they would go to extraordinary lengths to take care of the customer. Their return policies were why I stopped shopping exclusively on price well before Prime became a thing as the confidence that I could teturn an item in reasonable condition (as in I could still return something after discovering a flaw after opening it) for free (in almost all reasonable circumstances) and without having to do anything more than print a label and drop the box back by a UPS pickup location was a gamechanger in building my confidence in online retail. It was to the point that making s return with Amazon was easier than making a return to a store and thar was the edge they needed to convince consumers fo choose Amazon over not only other online retailers, but ohysical stores as well.

The rise of 2 day Prime shipping undoubtedly fueled their exponential growth and made Amazon what it is today. However, I doubt they would have ever had the ability to build the infrastructure needed to make Prime work if it wasn't for the initial wave of consumers becoming loyal customers due to their reputation for customer service.

In hindsight, Bezos was playing chess while the retailers were playing Uno. I'm generally suspicious of a CEO making that much of a difference, but in this case, clearly, his vision was worth billions in business advantage.

> In hindsight, Bezos was playing chess while the retailers were playing Uno.

Keep in mind, his long term goal is to put people on other planets. So he's definitely playing the long game. Blue Origin is a huge factor here.

That's a fairly recent mindset. When he launched Amazon his plan was to sell books online. That was it.

I think free shipping is the reason Amazon was successful. Nobody wants to pay for it. That and cheaper prices.

Honestly, I think both of those perspectives don't quite explain why Sears died.

Sears died because Eddie Lampert spent years systematically looting the company. If not for Lampert's dismanagement [0], Sears would be in roughly the same position as other department stores like Macy's or JCPenney. Yeah, sure, they're not doing super great, and Amazon is kicking their asses, but they're still keeping their heads above water.

[0] Sic. I'm trying to coin a neologism here. Dismanagement is to mismanagement as disinformation is to misinformation. Mismanagement and misinformation come from incompetence; dismanagement and disinformation come from malice.

> I'm trying to coin a neologism here. Dismanagement is to mismanagement as disinformation is to misinformation. Mismanagement and misinformation come from incompetence; dismanagement and disinformation come from malice.

I've seen “malmanagement” used the way you seem to be trying to set up “dismanagement”, by analogy to the distinction between misfeasance and malfeasance. (Dictionaries seem to view it as a simple synonym of “mismanagement”, though.)

Looking over the comments and replies here, it seems everyone has their own version of "the real reason Amazon was successful was X..."

My own conclusion reading this is that Amazon was just highly competent across the board. They were online in the mid-90s. They were quick with shipping (eventually, if not right at launch). They were competitive on pricing. They quickly had a huge inventory. They had the "you might also like..." algorithm that's impossible to get from a print magazine. They had online reviews. They offered Prime in 2005.

I think they even had no way to improve rather than (or in addition to), no reason. Their existing operations never allowed for going from 3-week delivery to 2-day delivery.

Obviously (to me), Sears could have easily re-tooled to make Amazon stillborn. But, like Kodak, they were a bit too protective of their own business model to want to compete against themselves. That's why disruption even works.

Google may have a strong position driven by search, but disruption will come for them, too.

The high value of Sears real estate holdings alone distorts the valuation of the company and doesn't help in making good decisions for running the store.

Amazon's business model commands a continuously increasing selection and best-in-class customer experience.

Cannot succeed without both.

> [For many problems, a behemoth company has no reason to improve, and a lean startup can rush to a solution faster in many cases.

This is 50% of the thesis of The Innovator's Dilemma, the book that introduced MBAs to the the word "disruption".

The other half if why this happens to behemoth companies, which is that they are listening to their customers. In this case, the customers are those who are OK with waiting 3 weeks and would just like a wider selection or lower prices. People who would but if delivery were faster by definition aren't customers.

Startups have to address the non-customers because otherwise they'd have to pry them away from their existing supplier -- generally a much tougher task.

Here in Germany Amazon had books and later other products. Fast shipping came way later. And even now their shipping is not really that impressive. 2 days most of the time with prime. 2-3 days is normal for most stores

It's normal now, it wasn't normal 20 years ago when Amazon started here. They also had free shipping from the start, also very rare back then.

This is true. Sears is easy to pick on, but the truth is that Amazon is seemingly the only company that was early to understand ecommerce and how to effectively gain market share by continually innovating and creating customer-centric practices like free shipping on all orders over $25, which was unheard of before that. Just having a lot of money and knowing the internet would be big was table stakes to start an ecommerce site, but certainly not sufficient to guarantee success. If it were Amazon wouldn't be what it is today.

Ordering something on Amazon, while it can be fast, can take two months or more to arrive from China, and everything in between.

Amazon started as purely a book store in 1994 and stayed that way for a good while; it was not immediately obvious to sell every damn thing imaginable. Bezos was cautious about what to try selling online. In 1998 they announced they would move beyond books, but without specific.

Amazon did not turn a profit until 2001; they really took it on the nose in the beginning, and had to weather the dot com bust.

Before Amazon expanded into things other than books, the site most known for that was eBay. In popular culture, every meme and joke about anyone buying or selling anything online was about eBay for the longest time.

...and eBay didn't have to solve any logistics or shipping problems because they crowdsourced it.

Big companies have an extraordinary ability to overlook what small competitors are good at. Instead of thinking, "This company is setting a new competitive standard that we don't know how to meet," they attribute it to immaturity and lack of scale. I worked for a company that got acquired by a Fortune 10 company, and the people from the "mothership" were downright smug and condescending when they heard how fast we expected to do things, because clearly we were not doing things right if we thought we could them done that fast.

I bet when Amazon's fulfillment speed was brought up as a competitive advantage, the Sears execs looked at some spreadsheets, did some calculations, and said, "This is stupid. They're losing a ton of money shipping stuff so fast. They won't get far before some adults take over and force them to smarten up."

The reason Amazon is successful is AWS. They can buy stickiness in retail by offering lower prices subsidized by being the biggest cloud provider.

Lol I paid for next day before the holidays and got my stuff 7 days late. Demanded and got refunded shipping.

> I think this is especially relevant here on HN because it shows how startups are required to solve problems.

that's quite a leap. and i don't see how that follows from what you've said.

And the reason Amazon will die is because "Prime" is no longer 2 day and most "Prime" returns aren't actually free. In fact there is a whole category of "Primes".. If Target or Walmart successfully execute on local delivery + free returns they could really give Amazon a run for its money.

IMHO this is one of those cases where the idea is pretty simple: move our catalog online, but you can't do it because it would undercut your existing business. The idea that someone else is just going to do it instead is always lost on these big businesses. They always want to protect the old way of doing business because it is tried and true, but that is only safe if the world never changes.

That said, Sears could have stuck around for many more years with better management and not being sucked dry by wall street.

Eddie Lampard's ego tour was the real nail in what could maybe have been a salvaged niche success story.

My childhood home was purchased in a kit from Sears in the early 1900's. Such an interesting and expansive catalog operation, and a model that's starting to come back around with modular homes from Blu and other companies offering kit homes 100 years later.

Had to throw in the 99PI link for anyone interested in learning more about Sears homes.

https://99percentinvisible.org/episode/the-house-that-came-i...

> They owned part of Prodigy in 1984!

Widely considered one of the worst-run businesses of all time. No wonder they thought expanding into bigger box retail was a better move.

In some alternate universe, we're all using Sears Web Services and no one has heard of Amazon.

I did not know about Sears owning part of Prodigy. I bought Blades of Steel on NES through Sears on Prodigy. Back then delivery was weeks and not days.

Sears would never have been able to compete with Amazon on prices because Sears needed to fund operations for a large number of retail stores and Amazon did not.

The Chapters Indigo approach to this has just been pricematch Amazon online, and charge more for the same items in their retail stores.

>Global supply chain

I know you said "supply chain", but do Sears really have much presence outside the US?

I'm asking because I never heard of Sears before coming to the US. Might not be zero (I find there is Sears in Mexico at least), but definitely not strong compared to Walmart, Carrefour, etc.

> I know you said "supply chain", but do Sears really have much presence outside the US?

Depends how you count it. Sears Canada had about double the number of stores per capita as Sears USA. By the end, they were mostly a separate corporate entity from Sears USA, and shuttered all their stores over a year ago.

Guess I should say outside North American.

As far as I can think of, the number of retailers with significant worldwide operations is very small. Costco and Walmart both have about 20% of their operations outside of North America. Uniqlo is 40% Japan, 30% PRC, 30% elsewhere. No real others come to mind.

IKEA is the big one that springs to mind for me.

Fair point.

Not sure Uniqlo should count though, lots of similar brands in fashion have massive global operation (H&M etc.).

How about Carrefour (53% outside of France), Aldi (owns Trader Joe's in the US)?

edit: 7-11?

Not disagreeing with you, but where is Wal-Mart, a big box store that kicked Sears ass, in your calculus?

One day, Amazon, Google, and Apple will also die. It's the circle of life. Sears operated for 126 years - astounding in our era.

maybe they will turn into world government, like in Wall-E.

Any organization has a lifecycle, governments included. There are thermodynamic constraints ensuring this. See Geoffrey West's "Scale" for elaboration.

But as a counterpoint, why would anyone build this business? Compare Amazon's profits [0] to Walmart's [1]. Assuming I've got the right chart, and recalling that the profits are coming from AWS (ie, unrelated to the catalog business), is it obvious that a sane management team would want to replicate Amazon?

We're talking two decade of basically no profits. Risk free rate of profit (ie, bonds) was something like 5% for a lot of that period, although there is obviously a lot more to consider. This is longer than long term from an investment standpoint - compare it to jobs who took Apple from "return the money to shareholders" to "most profitable company in the world" in a bit more than a decade.

[0] https://ycharts.com/companies/AMZN/profit_margin [1] https://ycharts.com/companies/WMT/profit_margin

Sears is where I got my Pong game as a child that started me down this path.

To be specific it was a Coleco Telstar Marksman.

The difference is at the heart:

Amazon is really a software company.

Sears was not.

Software is eating the world.

Can't edit, but for those who didn't understand that comment, see what it was referencing: https://www.quora.com/What-did-Marc-Andreessen-mean-when-he-...

and the people responsible for throwing it all away will never be punished. They all probably got nice packages over the years.

> Sears had everything. Global supply chain, check. Top notch distribution operation, check. System and infrastructure to take orders and handling billing, check. Name recognition and established customer base, check.

I've never understood this line of thinking. I worked in engineering at Sears, and I left the company in 2000. So I was there when Amazon was getting big, and I quit Sears to go work for a company in Redmond Washington.

Sears just didn't have the engineering manpower. When I'd wander around the Sears headquarters in Hoffman Estates, I saw tons of people working on marketing, clothing, and advertising. There weren't a whole lot of people working on the Sears website.

From my perspective, in 1999 our engineering team was mostly concerned with whether the cash registers worked (Sears was ahead of the curve when it comes to the sophistication of their registers) and whether customer service worked (we had over five thousand customer service representatives working out of a series of Regional Credit Card Operation Centers AKA RCCOCs.)

Competing with Amazon isn't trivial; even in 1999 Amazon employed thousands of people.

More importantly, Amazon lost a ton of money to get where it is today. In 1999, Amazon lost something like thirty cents on every dollar that they sold.

As someone who actually worked at Sears, it's inconceivable to me that Sears could have stomached the idea of losing that kind of money. And I don't see any scenario where they'd make the kind of investment in people, even if they could find them.

https://www.nytimes.com/1999/11/28/business/amazon-s-risky-c...

"Sears had everything. Global supply chain, check. Top notch distribution operation, check. System and infrastructure to take orders and handling billing, check. Name recognition and established customer base, check."

At that time in the industry sure, but they failed to pivot. This supply chain by todays standards would be laughable.

Sometimes having parts of a business already in place actually makes it harder to do something new. The same way tearing a house down and building new is often easier than trying to remodel.

This is why I’m so fascinated to see which carmakers can transition to electric. Lots of people think it’s easy the automakers just don’t feel like it. I’m curious if that’s true or if there’s an inertia thing going on.

Ahh, I came to this thread far too late, but hopefully this won't be missed. In 1980 The Yankee Group (a tech consultancy) reached out to my dad to help them understand how Sears could respond to the growing tech phenomenon. For reasons too long to get into, Gates and my pops (a Canadian) knew each other and were even both covered in The Intelligent Machines Journal out of Palo Alto in the same issue during the waning days of the '70s.

So my father and these Yankees told Gates that Microsoft should meet with these clueless Sears guys, since they'd probably move a number of computers over the next couple years and it would be helpful for them to think "Computers? Microsoft." So he begrudgingly did.

In the meeting someone brought up investment and Gates said they could have 20% for $8m. You never know how all these things go. Sometimes someone you never heard of tells you something true and your relative position stops you from seeing it.

Haha, that's interesting to hear.

So if Sears invested in Microsoft in 1980, Sears of today could've been like Yahoo, whose investment in Alibaba kept Yahoo afloat a few more years but ultimately continued down the downward spiral?

I gather that the few people at Sears who were aware of the investment invite from Bill Gates may not even be alive, considering it was 39 years ago.

Yahoo was different though. People would buy Yahoo stock as a proxy for Alibaba since it wasn't publicly traded.

May be it so negatively influence Microsoft it killed it. It is not a money deposit. You can run down your firm which core to your business you can run down other non-core business. Not many run mixed business work (GM in one stage but not even now).

60 minutes interview with a young Jeff Bezos, 1999

https://youtu.be/VuI-ss5aQU8?t=629

"how do you view that phenomenon [laugh] that Amazon is worth more than Sears!? [condescending laugh]"

"a couple of geeks [laugh laugh], who sketched out some software, could destroy Sears Roebuck [laugh]"

same 60 minutes "expert", telling young Bezos, Amazon stock was wildly expensive

https://youtu.be/dTxuzW9RAO8?t=20

"Amazon is worth more than a major industrial company, like Texaco ... that didn't blow your mind?"

In 1999, AMZN peaked ar $80.

Two years later it was trading at $10, and didn’t recover until 2007.

The interviewer was right; Amazon was over valued.

Or was it radically undervalued in 2001?

I'd say it wasn't, because AWS didn't exist to be undervalued as a business factor.

What kind of profits were they showing in 2001? I'm not going to look it up, but I'm sure they were negative. There were a lot of people back then who couldn't figure out how Amazon would ever make money when they sold everything at a loss.

Amazon worth more than Sears? Can you imagine?

All things are clear with the power of hindsight. But if it were so simple you'd already know which company to throw your money at today and be a billionaire in a decade. Do you?

True, but why laugh at Amazon? What can you possibly gain by picking on the "little guy"?

The reporter is supposed to be an expert in this field. That's why 60 minutes hired him, instead of someone else, for the job. I am sure there was no shortage of applicants who wanted this job.

Why couldn't he be more open-minded and supportive of a startup like Amazon? Instead of constantly laughing at Amazon and Jeff Bezos (like his choice of cars)

So why be a snob? As you said, no one knows what will happen. Why laugh at the little guy? You don't know what's going to happen

Economics Nobel price winner Paul Krugman once said that the internet’s effect on the world economy would be no greater than the fax machine's. I don't expect a journalist to perform better.

Being open minded and supportive is probably a stretch when something sounds so outrageous that you simply can't believe it's anchored to reality in any way. I assume this is how it felt back then. Probably there were situations where you yourself became derisive of certain things you simply couldn't conceive could be different only to be proven wrong some time later.

You can’t proclaim it a right decision or wrong decision without comparing exits as well. It’s the delta that’s meaningful, not the value at that single point in time.

There's significantly more information in 2018 or even 2008 to indicate Amazon was worth that valuation. A companies potential has to be adjusted by risk if you want a good valuation, and in 1999 there just wan't enough evidence. This is validated by it dropping dramatically after the bubble popping.

In fact they were only saved because he had secured financing mere months before the collapse, had that not happened Amazon would be listed among the likes of Pets.com.

True.

But, the 60-minutes reporter didn't justify his claims based on risk or on math. He was skeptical because Sears is huge, and to him it was laughable [and yes, he did literally laugh many times in that interview] that Amazon can someday be worth more than Sears. To him it was "messed up", and a sign of things wrong with the world

Only is a big caveat, for the "dotcom" that survived the bust and became the biggest company in the world.

Even if they were established they’d have a tough time getting financing in the .com crash. A bit of luck is always necessary.

My grandmother received an invite.

We are a seattle-native family. Through people we knew at the time, they asked her to invest in their company and she could have 10% of the company if she gave them money.

She discussed it with my grandfather and they both agreed: "Nobody is going to drink that much coffee." and rejected Starbuck's offer.

There was a good podcast about the founding period on NPRs how i built this. Worth checking out

Wait, I’m confused. This agency that’s consulting for sears sets up a meeting for bill gates to sell his computers to sears?

How is that in the interest of sears?

Because in the early 80s nobody understood computers or how individuals at home were going to use them and Sears knew they didn't know. For example, some people thought that computers should be waterproof so you could install them next to your sink in the kitchen so you could use them to help you with recipes. Sound crazy? What's an iPhone? A waterproof computer that helps hundreds of millions with recipes.

There were so many good ideas in the early 80s but Gates was such a genius that he understood how to separate which ones were coming first. He thought about things from first principles in a way that Musk does today. The Yankees knew databases and stuff, but they didn't know the future, but they knew that my dad thought in the same way. That he thought about the future. My dad was more of a telephony guy than a computer guy and he saw how much of a genius Gates was, so he roped him in to help out his Yankee friends.

> so you could install them next to your sink in the kitchen so you could use them to help you with recipes.

Yikes, you just reminded me of a TV ad I saw in the late 90s, of a housewife using a device like that. I remember a CRT-style monitor, but it's faded enough that I can't remember any other details.

In 1969, there was the Honeywell Kitchen Computer: https://www.computerhistory.org/revolution/minicomputers/11/...

Sears died because of Lampert, that's the beginning and end of the story. While they were far from perfect, post-Kmart "acquisition" both the service and stores became garbage and he used Sears as a personal slush fund.

This should be the top comment. Lampert's mismanagement has been thoroughly described, e.g. the Slate Money podcast from 20th October gives an overview.

Yeah this article does a great job of painting Lampert as heroically struggling against foes that turned out to be insurmountable, but there's a lot to suggest he was simply siphoning the wealth out of the company, with this being the final and inevitable result.

Couple of HN links with the opposite slant to this article:

https://news.ycombinator.com/item?id=18085640

https://news.ycombinator.com/item?id=18244870

Lampert took over in 2013, they were already going down hill by that point. Sears was taken over by bankrupt Kmart in 2004 and the combined company started losing money by 2010.

What are you talking about? Lampert was running K-Mart in 2004... his hedge fund acquired their assets when they went bankrupt. He immediately turned around and took loans against all of K-Mart's real estate to fund the acquisition of Sears.

http://www.nbcnews.com/id/6509683/ns/business-stocks_and_eco...

So instead of investing in actually making Sears better (like Target and Walmart did), he thought it was a good idea to spent nearly all of Sears' cash reserves buying back its shares (at prices as high as $170)? Now shares are $0.33. Is he just an incompetent buffoon, or did this strategy line his pockets? For example, was he buying shares owned by ESL with Sears' money? If so, that's highly unethical. Seems par for the course with Wall Street.

This seems like standard operating practice for vulture capitalists (Bain Capital) that swoop in and extract the value from the firm before discarding its debts and bankruptcies and moving on to the next firm.

I wonder if any company in a similar position has just done a total liquidation and turned over all cash as a one time super dividend. That seems like the honest and fair way of doing it. Though it's probably less lucrative than a debt-fueled stock buyback and dump strategy.

I don't know about the rest of the country, but they had spent the last 2 years rebuilding their flagship store in Oak Brook Center west of Chicago. Last I was in the mall last fall, it was still under reconstruction.

Probably far too little, far too late...

Both Sears and K-Mart were crappy dumps 30 years ago. Not saying a competent manager couldn't have turned them around, but they've been on their way down for a long time.

>"... 'eyyy.. I'm 'nvestin' ' ere...."*

--Lampert, probably...

> 30 years ago

I strongly disagree; 30 years ago, 1989. KMart had the popularity and store count in the SE that Walmart didn't. Sears was the top destination (and even still had its booming catalog business)

20-25 years ago seems more accurate.

Lampert might have "saved" AutoZone, which AFAICT was the feather in his cap to make him "the next Warren Buffert", but if you asked me I'd be hard-pressed to tell you how the shopping experience changed. I speak from ignorance, and the laziness that prevents me from researching deeper, but I assume he did some accounting tricks, sold a few inefficient assets, etc. But as the owner of some old vehicles and a frequent shopper of auto parts stores, I couldn't tell you when Lampert took over AutoZone based on any changes to the shopping experience. So when it comes time for a new WhatsIt for the '81 VW, I'd just as soon go to the local NAPA because they'll probably actually have the damned thing.

This brings me to Sears: did he ever shop at his own stores, or was he busy pouring over the books and figuring out new ways to implement corporate versions of The Hunger Games? Because the shopping experience at Sears was never great, IMO, and it only got more depressing when Lampert took over. Tool quality went to shit, appliance quality went to shit, and the shopping experience sucks. You can juggle books all you want, but that won't get customers in the door. And if I do make it in the door, the lack of service and the dingy store will ensure that I never return.

So in summary, I argue that Lampert either got lucky with AutoZone, or what worked there did most certainly not work for Sears because at the end of the day customers ask themselves, "do I want to shop there?" And Sears in recent years gave customers very little reason to say, "Yes".

As a sidenote, WTH is he willing to throw good money after bad with his $4.4 billion bid? I'm stumped as to what rabbit he thinks he can pull out of that hat.

Rebuilding trust and brand value will take years or decades. Don't undervalue accounting tricks, reorganization, focusing on efficient assets, etc. Getting rid of dead weight is much more important than trying to reinvent the retail experience. You need to stop the bleeding first.

That's some good insight, definitely need to bail the water out first. Prime example that comes to mind is Gibson: get rid of money-losing electronics (Teac, et. al.) and go back to making instruments. Even that might not save you, but it's a shot.

I could see Lampert doing the first part, stop the bleeding, but once that was done perhaps he was stumped with the "now what?" part. OTOH, AutoZone has been going big guns for a while now, what do I know? :-)

Autozone has a similar feel to visiting a mechanic, so it is probably OK that it is dingy inside. Sears was just depressing.

>I speak from ignorance, and the laziness that prevents me from researching deeper,

More "customer focus", (no more haggling on warranty, less pushy upsells, "sure ma'am, we'll install your wipers for you" ,etc, etc.) and they greatly improved the house brands and logistics. Basically they dumped a bunch of money into their product lines and stores with the idea that people would shop there more if the parts weren't shit and the service didn't suck. They also own Alldata which they probably turned into a massive cash cow around the time Lampert was there (which was when electronic service manuals started becoming a real thing).

I personally thing it worked well. They're basically the McDonalds's of auto parts. The customer service experience is pretty much the same in any store and part quality is consistent and you almost never get the really, really terrible stuff that you sometimes get when you buy the cheapest parts online.

Ah, good ole' NAPA, where you pay twice as much for half the quality (in their house brand anyway). At least, that's why I avoided them like the plague a quarter century ago when I was building muscle cars. Also, they always seemed to prioritize their garage delivery service over their walk-in customers. Although,that was a long time ago, and perhaps they've gotten better over time.

>Ah, good ole' NAPA, where you pay twice as much for half the quality

It's all about knowing who makes the part that goes in the branded box. At present their "blue boot" ball joints are the only way to get Spicer ball joints.

>Also, they always seemed to prioritize their garage delivery service over their walk-in customers.

Varies by location. It's a franchise model after all. Napa uses probably the longest leash of all the chain parts store franchises.

> where you pay twice as much for half the quality (in their house brand anyway)

Their oil filters are similar if not the same as Wix.

My first online shopping experience was with Sears over Prodigy in 1991.

You could browse online, or order from the paper catalog (which is more likely what you'd do because NAPLPS graphics didn't lend themselves well, or at all, to product depictions). Then they'd ship to you, or you could go to the order pickup area at your local Sears store.

They had a touchscreen kiosk there where you'd punch in your order number, and be directed to a cubby where your stuff was waiting for you.

They had today's "buy online, pick up in store" thing, but nearly three decades ago.

Being too early is as bad as being wrong.

The point isn't that they were too early, it's that they gave up too quickly. Buying online and picking up from a store really isn't that advanced of a concept.

Buying online and picking up from a store really isn't that advanced of a concept.

You're right. Service Merchandise build an empire around it, just by mail or phone instead of computer. Other stores did it, too. JCPenny comes to mind. Even some local and regional chains.

Amazon and others think they've invented something. But once again, it's just SV re-inventing something that worked last century.

And by the early 90s Sears had a century of experience as a catalog fulfillment company and had pretty much become synonymous with the concept.

That kind of experience breeds complacency. As noted elsewhere, they weren't prepared to offer delivery times that were competitive.

Not everywhere. In the UK that would be Argos or Littlewoods. I've only heard of Sears in passing on American TV shows.

And in America, nobody's ever heard of Argos or Littlewoods. So what's your point?

My point is that Sears is synonymous with the concept only in some countries. Amazon seems to be established in more countries. In absolute terms, perhaps Sears wasn't as huge as it seemed from your perspective.

>>And by the early 90s Sears had a century of experience as a catalog fulfillment company and had pretty much become synonymous with the concept.

Probably an impediment, instead of being an asset. A newcomer can see things differently: pick the right things and discard the wrong ones. Good luck with a 100 year old company.

Amazon introduced the ability to seamlessly and automatically blend counterfeit goods into their supply chain, from sellers that you never heard of before, and may never encounter again.~

But recall that Amazon started with books. The catalog for books is the size of the card catalog that used to be at your library. A row of cabinets, filled with rank and file of drawers, each filled with index cards. One could not ship out paper catalogs, listing every book, to every book-buying home. But delivering the catalog via the internet--and taking orders via web form rather than mail, fax, or phone--made that mail-order business viable. And starting from books, adding other items to the system was just scaling. If you can handle all the ISBN numbers in existence, adding every other consumer product isn't that much more.

Amazon made a system that allows customers to order every item from every product catalog, from the same interface accessible form every couch, and--most importantly--captured their market share early.

But now that omnibus e-commerce exists, competitors are going to chip away until their early-mover advantage is gone, and all they have left is their innovation since then. Aliexpress and Wal-Mart are going to hammer them from the price side, and individual stores that can actually keep the counterfeits, barely-suitable, and white-label garbage out of their catalog will hit them from the quality side.

Amazon's innovation was bigger catalogs, easier ordering. And their early patents are expiring now. They didn't build the other pieces they needed for a 120-year business while they had the protection--like searching and filtering; honest, scam-resistant ratings; and advertising and recommendations. So they have this huge catalog that presents as a giant wall of useless crap that might have the thing you actually want somewhere in it, and not necessarily at the best price. Unlike Sears, they still have enough money in the bank to turn it around before it's too late. Probably not the leadership, though.

Agree wholeheartedly with everything you said except:

> They didn't build the other pieces they needed for a 120-year business while they had the protection

I would argue they did with things like AWS.

Similarly (or more importantly, even) is they've now built out a proprietary fulfillment and last mile delivery infrastructure that runs parallel to USPS/UPS/etc.

Any new entrant is going to have to compete with Amazon on shipping cost/time. Yet Amazon can do it using their own distribution and sorting hubs, from which gig workers use their own cars to do the deliveries.

According to all the anecdotes at my disposal, the Amazon last-mile delivery is strictly inferior to the incumbents, due in no small part to scheduling and pathing algorithms that make no accommodations for the biological functions or psychological needs of the human employees.

Those gig workers will dry up immediately the instant a better job opens up, and the delivery infrastructure Amazon thought it had will turn out to be owned by someone else. If the robots aren't ready in time, they will fall on their face.

Based on my own experience with Amazon's own AMZL delivery service, it's a big advantage for their competitors who don't subject customers to this experience.

The only real positive side to this infrastructure are the Amazon Lockers that are paid for as part of the shipping service and actually at good locations most of the time. (While later movers like UPS and FedEx have stuck their lockers at SUPER ANNOYING locations).

It's really too bad the post office can't just setup something like this at the actual post-offices and be open for any carrier for a small fee. That'd solve a ton of last mile problems.

I don’t understand why Amazon hasn’t offered lockers to be installed at your home, for a fee. Maybe the cost would have to be too high, but there are savings in getting rid of redelivery costs and “it never arrived” reorders that Amazon eats.

> Amazon's innovation was bigger catalogs, easier ordering.

I don't know, I'd say Amazon's innovation was logistics. They don't need patents when they have a distribution network capable of delivering an order in most major population centers of the US in two days or less.

Amazon is not a SV company.

And Service Merchandise didn't invent it, either.

Once again, it's some 20th Century store re-inventing something which worked the previous century.

Walmart does this really well.

Not if you’re big enough to create the necessary market effects for something to flourish. If Sears had stuck with it and had the the foresight to develop its technical chops like Amazon did, they could have done much better.

In an earlier era, Sears was the one with the technical chops.

Let those who are currently on top take warning.

I think it's worse honestly because there is the pain of watching it actually work and forever not (really) ever knowing why your version failed.

In the late 90s there was Bolt.com, a social network very similar to Facebook and similar sites we have today.

It died in the early 00s. Within a couple years, MySpace and Facebook and others walked on stage and here we are.

My local grocery store had a drive-thru pickup back in the 90s. The strange part was you still had to pick your own items and check out conventionally. Then walk to your car and drive through the pickup area. They converted it to a cart return around the turn of the century.

If they simply had a way to order ahead they would have been two decades ahead of the current industry.

Our local grocery had that in the 1960s. As a toddler, I was fascinated by the mini-railway consisting of noisy steel rollers. It ran inside along the front wall behind the check-outs, did a u-turn thru a small hole, then outside along the front wall. A worker on the inside packed your groceries in brown paper bags and placed them on the rails. Another worker outside would load the bags from the rails to your car trunk when you arrived. Wow, that neuron hasn't fired in a long while.

There use to retail chain called BEST where the whole store area was a "showroom" and the products were on display outside of their packaging. You were encourage to touch and interact with the product. There was no stock on the showroom floor.

Once you made a decision you would go to the front to place an order, then go to another corner of the store where your item would come out on a conveyor belt.

https://en.wikipedia.org/wiki/Best_Products

Also, the people who owned BEST were really into art and had some pretty groovy looking stores.

http://www.siteenvirodesign.com/content/best-products

We had a BEST for a while. It’s an ice rink now. IKEA has a very similar experience.

Sounds very much like Service Merchandise https://en.wikipedia.org/wiki/Service_Merchandise

Growing up, my local grocery store had a similar service. A friendly clerk helped my mom load up the car!

Once, I believe it was in the late 90's, my wife showed me the cover of a business mag. It showed the CEO of Sears, and also a young guy with a messenger bag and a Misfits pin. "Sears", with an arrow pointing to the CEO. "Sears.com" with an arrow pointing to the youngster.

The thing is, she knew that youngster, and he really did work at Sears, for their webstore. He wasn't the only guy, but it was apparently pretty close. Other than getting on the cover of that magazine, my understanding is he got rather little access to top management, and he certainly didn't get to set strategy on things like pricing and shipping. Sears, like a lot of other incumbents, could neither understand the New Thing, nor turn over enough control to the people who did (in part because the people they hired were too young and inexperienced in retail to trust with t hat), and that is why they failed, when as a catalog company they should have been well positioned for the comeback of ordering things delivered to your home.

To be fair, in '98 there weren't many people with big corporate web store experience who were also experienced enough in retail to trust with a big corporate retail operation.

Truth. I think that might be a reason why none of the retail incumbents, not even the ones with a by-mail background, did well. If you were an upstart, by-mail-only internet company, you didn't need to know how to run a bricks-and-mortar retail chain (of large size).

It is probably relevant to consider Amazon's (limited) forays into bricks-and-mortar establishments. They have had about as much impact as the online versions of the legacy retailers.

I think amazon got to play by different rules though, it would be a very different thing for an established company like Sears to reinvest all of its profits into growing its digital platform in the 90s, 00s, or even now. There is no way investors would have stayed on for that ride.

Exactly this, the CEO of a publicly traded company would have to answer to the board of directors and investors. That would add resistance to spending lots of money on something unproven. Publicly traded tech companies get much more freedom in this regard. Plus just the amount of institutional cruft (technology, policy, procedure, personnel) in a large/old company like Sears.

You're correct, although it should be said in view of recent events, that the path they took didn't play all that well with investors either. But you're right, most investors aren't interested in the 20-year timeframe.

I remember that what became NewEgg opened a brick and mortar store for (mostly) software and such (some hardware) in the suburb of Seattle that I lived in at the time, then a year or two later shifted entirely to online. They pivoted //hard// and made it work.

I don't think Sears could have done quite that, but keeping the catalog and 'order to the store for free (long time) shipping' / 'delivery to home with paid shipping' would have been a much better move and SHOULD have been within their grasp to understand and execute on. All the more so if a customer could look at clothing styles and options and order slight variants or harder to get sizes from the catalog.

Tiger Direct did the same. They had a brick & mortar in the Western Chicago Suburbs - Naperville or Aurora, I think. Never stepped foot in there, despite being a easy weekend drive from them. Everything I ever bought from them was online.

> Once, I believe it was in the late 90's, my wife showed me the cover of a business mag. It showed the CEO of Sears, and also a young guy with a messenger bag and a Misfits pin. "Sears", with an arrow pointing to the CEO. "Sears.com" with an arrow pointing to the youngster.

It was from Fortune in November 1999. Here's an image of the cover:

https://twitter.com/opinion_joe/status/998689983757209607

Better quality: https://backissues.com/cgi-bin/backissues.cgi?full/FU1999110...

Thanks! Your google-fu is better than mine, I admit it.

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

Neil Saunders wrote a good Twitter thread last week about how mid-scale US department stores don't execute the basics of retail very well: https://twitter.com/NeilRetail/status/1079785924966445058

Others have pointed out that Target seems to do a much better job with organization, presentation, and flow. Not coincidentally, it seems to be performing much better than legacy department stores that historically targeted the same class of shopper, like JCPenney and Sears.

Brick and mortar isn't as dead as commentators sometimes present it, but the increased competition is certainly weeding out dead wood that managed to persist for decades based on natural local monopolies and oligopolies.

Good thread, found it really interesting!

I am processing some research on DICK's Sporting Goods, 750 stores and 90% are their core brand. I knew the reality was something along these lines but just didn't expect the % to be so small: "The Company's eCommerce sales penetration to total net sales has increased from 2.8% in fiscal 2010 to 10.3% in fiscal 2015."[1]

It's certainly growing every year for them, easy to see since it's a public company, but not at a tremendous rate like my news bubble or profession would have me believe. It furthers your point that brick & mortar are certainly not dead, or even dying, since many people still shop in-store.

Of note, a good portion of their 10k was devoted to omni-channel experience, which is the thinking that customers are customers and not defined by online or offline alone--they use both. Omni-channel strategies seem pretty basic at this point but also well worth their investment.

[1] https://www.sec.gov/Archives/edgar/data/1089063/000108906316...

Sport gear is very hands-on, so it makes sense to go into the store to choose your next running shoe / tennis racket / hunting rifle... instead of buying the wrong one online and having to return it.

Absolutely. And since they stock different brands, it's even more important to get the sizing right. I remember reading shoes and apparel made up a high portion of their gross sales.

In general, my experience is that the higher the price, the longer and more intense the buying cycle is. It's not ground-breaking to think that but I also think it will indicate the last retail stores to bend at the will of online demand: cars, boats, engagement rings, etc.

Target is a step below JCPenny or Sears, IMO. You could get decent dress cloths at either of the former, but the best that Target carries is still pretty bad. I don't think you can buy a suit at Target at all.

Pennys and Sears also used to have salespeople in the clothing department who were actually knowledgeable and able to help with sizing, styles, etc. but that ended sometime in the 1980s I think.

That said, the shopping experience, finding stuff, getting in and out, etc is definitely better at Target, for what they do carry.

Re: flow, I wonder how much Sears and Pennys were hamstrung by the layout of their locations. Target, with their big loop and registers up front, has a "visit the whole store" flow that encourages you to keep shopping (and get a cart) even when you've gotten what you came for.

Classic Sears and Pennys both had multiple entrances, sometimes on multiple floors, and registers scattered around the retail space. Once you get what you came for you look for the closest line, check out, and you're done; there's no opportunity for a "grab a DVD on the way out" up-sell.

Sears is a macro-example of the phrase, "The market can remain irrational longer than you can remain solvent." Seems like this company has been walking dead for years.

When the October news hit that Sears was going out of business, my wife and I used up all our Sears points (kind of like airline miles) to get tons of free food from Kmart. Then Sears kept just giving her points so we kept getting free stuff. How on earth did Sears stay in the game so long, and what game were they even playing? Sometimes I wonder if we inadvertently triggered some backdoor left by an employee to get as much free stuff as possible. Part of me assumes the bonanza will now intensify.

I had a friend who worked at Kmart during the Sears transition and stayed until it closed a few years ago (or so). He worked there for maybe 12 years total, and maybe 7 of that as a manager.

The first week after he started there, he started to wonder how they could stay in business. He said most of his time (in the 12 years) was spent walking around, cleaning, organizing or just watching TV just because there wasn't anything else to do, and no one coming in.

For years, it was a ghosttown in there. I would go after work (5-6pm), and still not see a single other customer. I know it was a smaller Kmart, but they still had some new items show up, and always had some employees around. Must have made enough to cover most of it's expenses, or been too small for Sears to notice.

/just looked it up. That Kmart closed in Jan of 2017.

My local K-Mart was never packed, but it was never empty either. And there was always a line at the registers, mostly because they had the slowest checkout system on planet Earth. Some parts of the store looked like a Mad Max set like the tools area, but other parts managed to alright like the clothing section.

It was still my backup shopping choice if Target didn't have something I needed.

Even the Kmarts in New York City (where lines at Target are routinely insane) were like this.

I did 5 years (16-21) at my Kmart and it was exactly the same. No customers most of the time and when we did we never had what they wanted.

I spent most of my time watching TV in electronics, sometimes even took naps in the back. That company was destined for doom.

How much of Sears's demise was due to Walmart? It's not like retail completely died.

The home improvement chains hurt them too, once they started selling tools and appliances.

We bought everything at Sears in the 80's. Electronics (including computers), appliances, toys, clothes, tools, lawn and garden...

Was Sears too 'friendly' with their suppliers? When I worked at Sears at the end of the 1990's (the store was a ghost town then), many of the long-time employees were making pretty decent money. Way more than people at Best Buy, Target or Walmart made. Plus actual benefits. The must have had huge legacy costs, especially at the higher levels.

It's a good example to those that claim companies should pay employees liberally. Unless you're in a niche that people are willing to pay a margin for or serve upscale customers who also don't mind paying margins (Costco, Whole Foods, Nordstroms, Apple, etc), then you're going to lose business to competitors offering lower prices.

In this situation, the only way to improve the well being of those whose labor isn't as valuable is to restrict their supply, either by educating them to give them other valuable skills or providing paid leaves so they can go on vacations and forcing employers to hire more people. All of this extra wealth for those at the bottom would, of course, have to come from the margins those at the top are earning.

Costco is an upscale place to shop? I’ve never seen them lumped together with Whole Foods or even Apple.

Edit: Wow I didn’t realize Costco’s profit margin was higher than Whole Foods, Wal Mart and almost a full percent above Kroger’s.

They are. You need to have a good amount of extra money to afford the membership and the cost of buying 6 months of toilet paper in advance. Those are cheap items that you will need, if you are not poor you probably don't even think about it. However when you are poor it doesn't matter if it is cheaper or not to buy in bulk because you don't have the cash to afford it. (you also are unlikely to have the storage space for all of that)

Costco serves the upper class.

Upper class? It's true that those living in poverty often don't have the means to buy in bulk or pay a Costco membership, but I don't think the designation of "upscale" describes the store either. Many working class and middle class people shop there.

The poorest people in the US are still upper class. Except for a few homeless who refuse all support services perhaps.

Your other comments contradict themselves.

Comparing the poor of a rich nation to everyone else is an apples to oranges comparison. The poop still struggle hard in the US.

This basically renders your point meaningless, since now literally all businesses in the US are servicing the upper class.

There's relative poverty in the US still. Currency still has relative purchasing power. Saying a person living below the US poverty line should be put in the same class (upper class) as Jeff Bezos seems disingenuous as best.

Upper class is a bad descriptor, and many working class people do shop there, but I think Costco does have a bit of an upscale connotation. A different one than whole foods or a natural food co-op, but I think it still has one. It's not the "normal" grocer.

I've known plenty of people on various levels of welfare support who would shop at costco/sam's club. They got their support once a month, making a big shopping trip perfectly in reach. The busiest Costco locations I've been to have been the lower income areas of town (Phoenix area).

This was the reason I asked. I’ve known of people using food stamps there.

Membership at Costco is like 60 dollars a year. Not saying it's doable for everyone but its hardly something 'you need to have a good amount of extra money' to afford.

You need to be buying enough to make it work out. A single person often doesn't benefit from Costco unless they're also a small business owner.

You can also get the $120 membership that gives you a percentage back. If you shop there regularly the membership becomes effectively free. But this doesn't help someone living paycheck to paycheck. Where the hell are they going to find an extra $120?

And you can usually get a second card « for someone else that lives in the same household ».

You can also tag along with someone else that has a membership if they’re willing to offer you their time.

If you look at the locations of Costcos in any metropolitan area, they will not be near the poorer areas. Walmart is more frequently located near poorer areas, and what I was getting at, was that Walmart can't just up its pay to match Costco because many people that shop at Walmart don't have any extra money, whereas Costco can afford to raise prices to help pay for better wages.

> Membership at Costco is like 60 dollars a year. Not saying it's doable for everyone but its hardly something 'you need to have a good amount of extra money' to afford

If you are poor to the point of relying on public assistance to meet basic needs, an extra $60 up front even if it will pay off over a year means foregoing other essential expenses now.

But the bigger cost in many parts of the country is the space needed for inventory to maximize the benefit of bulk purchasing. Sure it works well for my family, but we live in a decent sized suburban home with an second refrigerator, and a storage closet converted for additional pantry space.

Why do you think I was talking about people who are poor to the point that they are relying on public assistance? Did you gloss over the part where I said 'not saying it is doable for everyone'? You even quoted it. This thread was debating whether or not Costco is an 'upscale' place that only the well to do can afford, not whether or not Costco is an option for people on public assistance.

Don't know about "upper" class, but definitely middle class. A lot of things at Costco (at least where I live) are only available in organic formats, for example, which jack up the price for no real benefit (imo). The working poor don't usually have the flexibility to do these kinds of things.

Do not forget about ALDI - it is cheaper than Costco, does not require buying in bulk, but the quality is stable and generally well worth the money. ALDI is the place to go for the working class.

Costco does sell in bulk but it's not a Family Dollar. It's for the middle class to save some on their name brand groceries because they can afford to pay more at the register to go a little longer between trips to the store. It's not really aimed at people that can barely afford to shop at the discount Aldi every few days because they can't pool enough money together for a biweekly Costco trip.

Their margins are high like the others because many households renew memberships each year but do not make much use of them. I also think their membership does skew more affluent than many other retailers.

Operating costs for a store are also significantly less than a retailer like Walmart that has many, many more SKUs to stock.

That the key. Plus their stores are warehouses, so maintaining the store is pretty much keeping product on shelves and keeping the floor clean.

Wouldn’t an unused membership be worse (for Costco) than a used membership? Perhaps barring some rare edge cases like customers who would only buy loss leaders, or stores that are congested with shoppers.

Costco actually sells most products at or near cost. Most of their profit is in memberships.

https://www.fool.com/investing/2017/05/05/how-costco-wholesa...

Interesting point, I wouldn't have guess that. Although, it sounds like they would still rather their members buy products, based on this sentence:

> If you examine the company's sales, it brought in $56.59 billion in net sales with a merchandise cost of $50.21 billion and sales expenses of $5.92 billion.

I don't think that sales expenses would vary much depending on how many members were buying products.

This was years ago so I don’t have a reference. But one of my business professors in college assigned a case study that contained the memorable (to me) stat that the average Costco shopper had a higher net worth than the average Nordstrom shopper. Something to do with small business owners vs people going into debt to look more affluent than they really are...

Net worth, versus annual income.

Shopping at Costco is often a wise financial decision, and hence people who shop at Costco tend to be the type of people who make wise financial decisions, and the net result of making wise financial decisions is a higher net worth.

And they pay their employees well.

Costco's average customer is definitely higher income than the average American, although I've seen different attempts to quantify this. The first result from a Google search gives me this: https://www.fool.com/investing/2016/06/17/who-is-costcos-fav...

A couple of factors act as a "filter" that makes Costco less worthwhile for lower income shoppers:

- Buying in bulk requires a bunch of cash up front, which not everyone has.

- Buying in bulk normally works best for families, and individuals with families have higher average incomes than those that don't.

- Costco stocks almost exclusively mid- to high-quality food and products. Shoppers may be able to have a lower grocery bill by buying lower-quality store-brand products elsewhere.

There are obviously individual exceptions, but these factors drive up the average income of a Costco shopper.

In Chicago a Costco membership is worth it just for the gas. It's usually at least 50 cents per gallon less expensive than nearby stations. I have no idea how they do that.

Also, for new parents: you can easily save the cost of the membership on diapers and wipes for the year or so your child wears them.

They always have a car parked in front or by the customer service center to advertise their auto purchase program. It has almost always been a Lexus, but for the past few months the one near me is a Maserati. I think this may be their signal on who their ideal customer is. Yet my parents used it to buy a Subaru and it was a good deal.

Costco makes ~75% of their profit from memberships, gas is like their iconic $5 rotisserie chicken - sell it at cost or a small loss as a incentive to buy and maintain membership. Gas prices are posted outside so it's a particularity public ad for costco membership and as such they have a strong incentive to push the price as low as feasible.

Costco loves the concept of price anchoring. That's why the diamond rings and tvs are right near the front, and their liquor isle has $1,000 bottles.

The concept is that when you decide against buying the $1,000 thing, the $50 thing seems a good comprise. If all you had were $10 things, the $50 thing would seem to be 'too much'.

People on food stamps can buy in bulk since they get a bulk distribution once a month but the $50 membership is likely a deal breaker for them.

> A couple of factors act as a "filter" that makes Costco less worthwhile for lower income shoppers:

You missed a big one in many areas: buying in bulk requires facilities for storing inventory.

With sufficiently stable social circles (also not available to everyone, but at least not an identical requirement) you could replace storage with distribution.

Sure, but the poor are less likely to have stable social circles for shared purchases and distribution as well as less able to afford storage.

Certainly. I'd meant to imply as much.

Thanks for the fool.com article it was a very interesting read.

The membership fee keeps away many poor and lower-income shoppers. They just aren't going to pay to shop somewhere. They go to wal-mart, aldis, dollar stores, etc.

Costco is Sam’s Club, without the tattoos.

Unlike other groceries, Costco isn't that reliant on low-margin, zero-margin, or loss-leader groceries (e.g. produce). They keep their costs down by having a limited selection and large, sparsely located warehouses in relatively inexpensive areas rather than traditional retail locations. Selling larger sizes and quantities of product helps to more quickly cancel out their fixed costs. They also sell much higher margin products alongside their groceries, such as electronics and appliances.

Another option is to force an increase in minimum wage which is what most people in those positions make. Not every company can afford to keep the same amount of staff on hand at that price so some people would be let go but it makes the remainder of people much more valuable.

Paying employees more is supposed to work because it results in employees who do their job better. It seems Sears just increased the pay without increasing the expectations. I avoid Sears because when I go, despite there being no customers, the place is a mess and I can't find anyone to help me.

>Paying employees more is supposed to work because it results in employees who do their job better.

I'm sure above certain threshold, which is probably low, raising wages doesn't make employees do their job any better.

In other words, unless you pay your workers literally peanuts, they will do the same job more or less.

You meant figurative peanuts right? That is what a lot of people get paid in retail.

So all executive salaries should be capped at, say, a low six-figure amount, and bonuses should be eliminated? Interesting proposal.

You have to pay the market rate for the people you want. The point is that going above that rate probably won’t get anything more out of them other than maybe retention.

So, more productive / friendly workers don't command a higher wage?

I think part of the point is that you pay more money to attract different people who will perform better, or to encourage people to stay at the job longer (and thus get better at it).

> I'm sure above certain threshold, which is probably low, raising wages doesn't make employees do their job any better.

This is a known study

> In other words, unless you pay your workers literally peanuts, they will do the same job more or less.

Welp, nope, this deviates from the study; The "drive" study suggests that wages need to satisfy their needs, give them cushion, be at or above their peers.

For the most part, "happiness" in the U.S.A. starts at 50% more than the average salary ($50k).

Sounds like the government

> It's a good example to those that claim companies should pay employees liberally.

Is it? Paying employees well isn't what killed Sears. Sears has been a ghost town for years, and anyone who's been in one in the past 20 years can probably tell you why. The customer experience simply sucks. Help is hard to find, checkout is slow, their warranties are garbage and a pain to exercise, and their once-great store brands have been either penny-pinched into mediocrity or sold off.

I should have wrote that it's just one factor, but at the end of the day, people opted for lower priced goods rather than the service that Sears offered, which I assume was partly due to the decent compensation they provided.

Another example of a low wage industry where paying employees more doesn't work in the grand scheme are hotels. People like to stay in newer, renovated, upscale hotels. Well if one hotel pays more than it has to, then it's owners save less capital with which they can purchase other land and build a new hotel on, or to renovate an existing one. So the hotel owners that pay the employees as little as possible and work them as much as possible end up with more money to invest in new builds or renovations, and customers end up going to those hotels, while the hotel that paid its employees well will lose business.

Unfortunately, good customer service only goes so far, especially when your clientele can barely afford it and they readily chose to forego it to save money.

> but at the end of the day, people opted for lower priced goods rather than the service that Sears offered, which I assume was partly due to the decent compensation they provided.

Huh? The parent commenter was just describing how poor the service was at Sears stores.

I was referring to its reputation 30+ years ago.

Counter-example for basically everything you said: Trader Joe's.

Sears used to be like Trader Joe's: customer service was great, the best products were the house brands, and if you weren't satisfied, you walked back in and got a new one or a refund.

Then Sears' new management went off in pursuit of higher profits and killed everything.

I agree that Sears' management has been terrible, but also think that Sears' customers stopped being able to pay the premium for their American made Craftsman tools and knowledgeable employees.

Trader Joes are usually located in areas that have higher income and more young people. They do offer good customer service, but I also don't think Trader Joes could cater to as many people as Sears', and Sears stores and inventory seem much more costly to operate.

>checkout is slow

For me, this is it in a nutshell. I worked next door (as in a 30 foot walk) from a Sears and popped in to quickly grab a couple things in a 30 minute gap between meetings. In 10 minutes, I had what I wanted, and got in line to checkout. I was the 6th person in line...and eventually put my stuff down and walked out because I still hadn't managed to check out 20 minutes later. There was only one employee handling checkout, and that employee was moving at a slower-than-glacial pace. Even though several other employees were milling around the various departments, no one came over to help.

There are a lot of reasons Sears failed, but for me, making the most painful part of the process the part WHERE I GIVE THEM MONEY, was the last straw.

I am extremely wary of n=1 reasoning. It ends us being confirmation bias. We look at Sears, note that they pay more than Walmart, and say that paying employees more either has no effect, or is harmful.

But are we also looking at the thousands of businesses that pay their employees terrible wages, but go out of business?

Businesses are complex systems that defy the search for simple explanations. That won't stop humans from trying, though. We all love the idea that there is some simple Eureka! idea that explains everything.

In this specific case you're talking about wages as if all other things are equal. All other things being equal, if we pay employees more, we lose business to lower-cost competitors that pay employees less.

This is like saying that if all other things are equal, a restaurant that pays more for its ingredients will lose business to competitors that pay less.

Of course, as managers, our entire reason for existence is to make sure that all other things are not equal. If we pay more for ingredients, we have to build our business around turning those more expensive ingredients into a better customer experience and perception of value.

And the same goes for paying more in wages. It's our business as managers to turn that into value. If we can't, are the wages the problem? Or is our mismanagement the problem?

Looking at the comments about shopping at Sears, I am not seeing a lot of "Everything about Sears was great except things cost a few cents more." I'm seeing anecdote after anecdote about how poorly it was managed.

Under the circumstances, if I wanted to cut wages at Sears, I would have started with their managers. If they're going to manage the thing into the ground, why pay them more than you'd pay an intern in an MBA program?

If a restaurant is located in an area that has no customers interested in better ingredients or food, then it will lose business to competitors. And Sears' customer experience has been terrible for a couple decades, but from all accounts I've heard it was great in its heyday. What changed, and this is my conjecture of course, is the introduction lower cost options such as Walmart, Home Depot, Amazon, etc, that revealed that Sears' clientele were not willing to pay a premium for their products in exchange for whatever extra Sears was offering (in this case I'm assuming better staff at the stores via Sears offering better pay and benefits).

> Sears' customer service has been terrible for a couple decades, but [...] was great in its heyday.

Wouldn't "worse customer service" be the change that allowed other retailers to eat Sears' lunch, then? You say Sears' clientele were not willing to pay a premium for whatever extra Sears was offering, but by your own words they haven't actually offered anything premium for a long time.

More expensive and better is a viable value prop; more expensive and worse is not.

Yes, but I think it takes a while to switch a company's atmosphere, and they also have or had a ton of defined benefit pension liabilities on the books that other retailers didn't.

Sears catered to the giant American middle class, and while I'm sure that mismanagement was a huge part of its demise, I also think the declining spending power of the American middle class also contributed.

> This is like saying that if all other things are equal, a restaurant that pays more for its ingredients will lose business to competitors that pay less.

Well, isn’t that one also true? There are limits and exceptions, obviously, but yeah, I’m pretty sure there is a strong correlation between the cost (cheapness) of ingredients and total sales.

Actually, there is not a simple correlation between just one of your costs and total sales. In retail, for example, location cannot be ignored. Likewise, there is an awful lot of work that has to go into being the low-cost leader.

Amazon and WalMart are good examples of this. They don't just cut one cost and wait for the money to flow in. They build their entire business around leveraging low-cost, in ways that are extraordinarily difficult to copy.

It's not as simple as, "Pay less wages, cut prices by a few cents, but keep doing everything else the same," any more than running a fast food restaurant is about buying cheaper ingredients and "passing the savings along to diners."

This reminds me about a recent Freakonomics podcast about Trader Joe's. It starts off by asking, what would you think about a grocery store with no name brands, much fewer options, no sales on items, not loyalty program, no automated checkout, no large social media presence, no large advertising budget, etc? A lot of it sounds bad, but Trader Joe's is really successful.

I thought you were referring to Aldi. That model seems to be working well for grocery stores.

> Unless you're in a niche that people are willing to pay a margin for or serve upscale customers who also don't mind paying margins (Costco, Whole Foods, Nordstroms, Apple, etc)

Is it fair to lump Costco in with these other companies as an example of places where consumers don't mind paying higher margins?

From a quick google search on gross profit margins:

- Costco: 13%

- Nordstrom: 38%

- Apple: 38%

- Costco: 33%

Costco's is also likely skewed due to their house brand where they likely make a much higher margin than the name brands

I lumped Costco in there just because its known for paying above average wages. I don't see these 4 stores outside of affluent, or at least upper middle class areas. I would say even Trader Joes can be lumped into there.

But the point is that if Walmart or Sams club wanted to raise their wages to match Costco, it would hurt their business because their customers can't afford it.

If you pay a premium for labor, you need to deliver operational excellence.

I worked for a company in high school whose philosophy was to pay 150% of the local average for retail/foodservice work. They did this because they worked you 2-3x harder, and their operational framework was able to turn that into money.

Many places are designed to be on some scale of mediocrity because it's hard to the excellent. I ran into a Walmart cashier who couldn't identify broccoli the other day. That's evidence that a warm body that doesn't walk off with the till is what they hire for.

Sears also just wasn't able to get how to move its catalog online. My parents purchased a house that was mostly built with Sears appliances and furniture (cabinets, counters, etc). Ordering replacement parts from Sears was a chore; you were constantly moved around to tons of different domains, some of which weren't even made human readable; their inventory system was terrible, making it impossible to find the parts based on absolutely any serial or identifier included on the appliance itself.

Their warehouse and delivery was atrocious, first sending us the wrong stove top glass multiple times, then finally realizing they didn't have our model in stock and wouldn't for months. Months later, they sent us the top finally, but 3 of them. And then tried to ask us to pay to send the 2 they accidentally sent back.

Sears either never took the time to figure out how to use online or weren't interested. For a very long time, due to custom printing, you could get semi-permanent Sears URLs to rather vulgar images on shirts, pillows, blankets, etc.

They just weren't ready for online and didn't take the time to learn it. Once they finally got a site up and running, it was just too late.

Sears is arguably a good example of how execution (and culture) often trump strategy. They were online. They invested in Prodigy. But their heart never really seemed to be in it and they never really changed the way they operated based on online.

I would spin culture the other way too. Sears was a more premium company. They had commission salesmen working the floors. (I think it was as recently as like 2010ish, I walked in to one and looked too long at something was was swarmed) You didn't go there for the "lowest price" you went there for good stuff and when you bought something big they helped you figure it out, they'd show you a dozen fridges, maybe with features you'd never seen before, and by the end of the day try to talk you in to a stove and dishwasher to go with the one you landed on and then have someone bring it over, install it and take your old stuff away. They had house brands: Craftsman, Diehard, Kenmore that were legit and made legit stuff; it wasn't the highest end stuff but it wasn't just the cheapest stuff they could label. I don't think it was possible for them to compete for low margins like Walmart or Amazon, it just wasn't "Sears." Prodigy was expensive, the few things you could order there had extra costs associated with it, I don't fully remember but I think you had to actually pay a premium for the experience to order it on prodigy and then you paid shipping costs and everything. It's not simply just buying and selling stuff online and it shows up, price matters and people buy big stuff differently than they did 40 years ago, they know way more about it before they go to the store now because of the internet.

I'm sure there will be plenty of books about it all when it's said and done and I'm sure there is a list of mistakes that is unimaginably long. I doubt Sears could have been saved though, it wouldn't have been "Sears" any more.

It is odd, at least to me, Sears is this nostalgia thing. Looking at the catalog as a child, playing with Prodigy way way back when. I've read maybe a dozen articles on the place here on HN over the last decade. I haven't been in one in nearly as long. I think I've known they were totally doomed for as long but in some part of my brain it was impossible for it to unfold exactly as it has. It's just been a train wreck in ultra-slow-motion. They seemed to have had so many resources they could have used to try things, they just couldn't actually try them.

Reading this, it makes it seem that Sears died because the middle class died. Why did people ditch this middle-of-the-road experience for the cheaper one? Because they were forced to.

People ditched the middle-of-the-road experience because the cheaper experience wasn't an option. Would I buy things for more money if there were no Walmart? Sure. But, for many things, I'll buy at Walmart given the option. Even middle class people like to save money and the value add from more expensive shops often isn't worth the price.

People also buy more of things. Before, you saved up $800 for a 35” console tv.

Today, you buy a $199 tv for every bedroom, living room, man cave, etc in the house

We have way, way more possessions than our parents, and especially grandparents did.

>For a very long time, due to custom printing, you could get semi-permanent Sears URLs to rather vulgar images on shirts, pillows, blankets, etc.

I'm not sure I understand that, could you please elaborate? Are you saying that they provided custom printing, then some users printed vulgar images, and could pass on URLs for others to print another batch?

Exactly. You could upload an image for custom printing, with no sanity check as to what the image was, and it would be available for others to access as well, resulting in a semi-permanent link to hentai, porn, and extreme profanity. I imagine the justification behind it was that in order to do the custom print at the lower price, Sears had to buy a larger order, but I have no idea.

Like it would show up in the search results for other users? Or would it be a just a url you could send to people?

Executives see a million trends come and go. Thay pay lip service so they don't sound outdated, but they have too many friends that drank the kool-aid and went down in flames on fads they came and went.

And then just one more in the pile with this "online" thing. And like all the others, it came and went.... oh wait... it came and stayed? It came and grew!? It came and destroyed !?? Well I guess you can't call them all.

I would not focus on one competitor. Sears sank themselves. They had everything, more so than JC Penny, but they were also heavily invested in mall locations which as the people spread out the mall orientation hamstrung them. Wal-Mart, Target, Best Buy, and more, were in strip malls everywhere and everywhere usually meant closer to you.

Sears could have put some of that aside with a better and stronger online presence but unless they decided to wholly shift to that medium they had to get out of the big monolithic type malls and into the more in number strip malls.

One of Sears remaining valuable assets, though, is the real estate left over from its standalone stores. That's one of the bones that the creditors are salivating over.

No, this was true when Sears was viable retailer. They owned very valuable properties in malls. But the process of destroying the retail portion of the company to extract value from the real estate actually devalued the property. Sears was the anchor that made a lot of that property valuable in the first place.

Stores don't own locations in malls. The mall owners lease that space to stores.

Sears owns a huge amount of the property -- remember they've been at this for over 100 years.

What is it that makes the real estate valuable though? A mall with a big hole in it doesn't seem like a good investment. If Sears couldn't make a go of it it's hard to see how anybody else could.

Maybe the fallout shelters?

Virtually every Sears standalone store - at least up thru the 1980s, was also a fallout shelter (with air raid siren and everything).

How is this a business? I’m not tuned in to the preppier community but from what I gather they would not be huge fans of rushing to a centralized location in an emergency. Also they’re a tiny market.

A mall with a big hole in it doesn't seem like a good investment.

As specified in the comment, not mall locations. Those were rented from mall owners. But Sears had/had many many standalone stores.

Many of those stores were built in urban neighborhoods at a time when city neighborhoods were thriving. Now those properties are gaining value again as more people move into cities.

Also, the Sears Auto Care locations are supposed to be doing well financially, and tend to be located in desirable locations.

I guess I've been living in the suburbs too long. Your comment reminded me of the perfect example, the store where my dad worked - a block away from the Minnesota State Capitol building.

many of the long-time employees were making pretty decent money. Way more than people at Best Buy, Target or Walmart made. Plus actual benefits. The must have had huge legacy costs, especially at the higher levels.

There was an analyst on Bloomberg Radio last week or the week before who said the big reasons for Sears' demise were pension obligations, and store managers who didn't know how to manage stores or people.

I've always heard it explained as a problem of margins and inventory. Sears would turn over their inventory 4x a year with a 30% margin. Walmart would turn it over 8x a year with a 15% margin. The "discount retail" approach worked really well because customers saw the lower prices. Walmart had a world class logistics organization, and made smarter decisions about what products to stock.

I'm not sure where I read this but it may have been Clayton Christensen, or Shark Tank ^_^. In the context of disruption, Sears was making the right decision in chasing the higher margins.

It's all about real estate and moving tax writeoffs around.

Big box is all about "financial innovations" that juice up financial statements.

Sears owned everything and had to carry most of the costs. Big box retailers like WalMart own as as little as possible, there are a thousand LLCs, trusts, etc that hold the big fixed assets like stores, etc. None of the big retailers own much of anything.

Doing this allows them to operationalize most of their costs. Instead of depreciating a building over 30 years, they write-off all of the value of leasing the building from some other entity. (ie. Store #5622, LLC) It's also a big part of why strip malls have a short shelf life. A dead strip mall with a Tae Kwon Do studio is a depreciated asset that exists to lose money for someone to write off a profitable one.

It works well as long as they hit the growth targets. When these operators miss the mark, even for a short time, you end up with a RiteAid or Linens n Things scenario where the numbers don't add up, and everything goes "poof".

That smells like Hollywood accounting to me. Or at least abuse of tax law that locks away a potential asset for someone else in order to be able to get out of paying a tax.

Admittedly, I'm still working on wrapping my head around the entire accounting thing, but in general, any material you acquire should be acquired with intent to do something with it. Unless this is some sort of economic "fallowing" technique. But I'm still not sure I'd buy any logic that tried to paint that behavior as anything other than glorified "domain squatting" on a community.

Interesting food for thought though. Good post.

>Was Sears too 'friendly' with their suppliers?

Funny enough, I've heard anecdotal evidence that the complete opposite was true. This comes from work I've done with a company that engineers, tests, and certifies tools under a dozen different brand names, one of which was Craftsman back when Sears owned that name outright. Whether it was official policy or not, Sears' practice was to rotate their buyers every ~3 years specifically to address the issue of buyers getting too chummy with the suppliers in their assigned sector. Unfortunately, this led to the issue of buyers being unable to develop subject-matter expertise in any one area and a broader problem where any compwtencies that were developed were often useless in their new assignment. According to those I've talked to who were around in the 80's and 90's when Sears' was starting to get pressured by other specialized Big Box retailers, whoever rotated into the position would have 0 experience with power tools or outdoor power equipment as they had spent their previous rotation buying anything from linens for the home goods group to clothing, or even flowers and plants for the gardenjng department.

The final product that wound up in consumer's hands was typically of competitive quality (hence the continued reputation of the Craftsman brand even today among the older generations) but the speed with which Sears' could expect new products to be developed and the costs involved was greatly hampered. This eventually led to Sears' losing the competitive edge in providing superior house-brand goods for the same price as the competition. Sears' had the market share and clout to get suppliers like the one I've worked with to justify the lower margins that come with designing/making a higher quality product to sell for the sams price. Once the whole buying process became incredibly time intensive due to a lack of expertise on the buying end the margins once spent on increased quality were instead swallowed up by plain old inefficiency. The end result was Sears buying a similar quality of product to what these suppliers were offering to the competition but without a cost advantage. Consumers noted the fact that a Craftsman chainsaw was no longer superior to the "X" brand this supplier provided to a store like Home Depot, except the Home Depot one was $15 less, thus began the death spiral ending in today's news.

My parents were young, and broke, and opened a Sears "charge card" to buy their wedding rings. "Craftsman, so it'll last forever!"

I mean, intellectually, I get why Sears is going away, but it still kinda tugs at the ol' heartstrings a little, you know?

My grandparents shopped at Montgomery Wards. My Parents shopped at Sears. Both forgot how to make money and are gone. I wouldn't be surprised to see Amazon gone before Wal-Mart, but I don't expect either to be around in 200 years (note that medical science currently offers me little hope of living beyond either).

This makes me wonder... what happens if you open a Sears card (yesterday) and max it out with all kinds of fun stuff and then Sears goes out of business? Does someone come after you for money?

Your debt is an asset, it'll just be sold to someone else.

Debt gets bought and sold all the time, you don't typically notice because you don't have to change who you're paying directly.

The trustee in bankruptcy could sell that debt to a collection agency.

Yes, debt collection is big business and someone will happily buy your balance for the privilege of getting you to pay it to them.

Sears doesn't actually do the financing for their credit card, it's a Citibank product.

While the others who responded to you are correct, there is a chance that they wouldn't be able to prove that you owed the debt properly somehow.

Of course this is a pretty dumb risk to take, even if you were able to resell the valuable items you bought like TVs, tools, and jewelry

My dad worked a second job at Sears from when I was a kid to the day he retired. Our house was full of Kenmore and Craftsman.

The headline has changed, presumably because the story has changed, so we've updated the title above. Originally it was "Sears plans to shutter after 126 years in business".

Media manipulation is likely at hand.

Or there was a last minute reprieve after the article was posted.

Not everything is malicious, friend.

The URL is old headline - strange not to post a new story with some sort of addendum on the old one. I’ve added spaces below to prevent the URL shortening.

https: //www.cnbc.com /2019/01/06/ sears-rejects-eddie-lamperts-bid-to-save-company-will-liquidate-. html

Sears was my go-to place for tools for years. Then, at some stage, the quality noticeably changed and it started to feel like a cheap knock-off, like what happened to Stanley Tools ages ago.

But I did very much appreciate their return-tool policy. I used that a few times. It was a great customer loyalty tactic.

At some point, cheaper Chinese tools became good enough. When I was a kid I remember my dad would curse cheap imported wrenches and tools. Now, he buys 75% of his stuff at Harbor Freight.

Sears ended up going down in quality while trying to keep their brand names and higher prices. Surprising it didn't work out.

At least at Harbor Freight you know what you're getting and it's priced accordingly. Craftsman tools were expensive, at one time deservedly so but by the end the were just riding on the name to put a high price on cheap imported tools.

I'm in the same boat for non-electrical tools. It's hard to buy expensive tools, particularly sockets, that I'll probably misplace or forget somewhere before they actually break.

Stanley now owns the Craftsman label (along with Porter Cable, Irwin, DeWalt, and others). Recent reports state that it will now be marketing Craftsman tools at Lowe's. When I was building up my tool kit, Craftsman hand tools were all that I'd buy. Other than some sockets, I haven't bought any more tools in years since the one's I own are working as well as the day I bought them.

That's pretty reassuring, if only because that means that the "Srap Tasmaner" reference in Seveneves won't become completely anachronistic.

Craftsman tools has its own story, but over the years they started creating lower quality tool lines and eroded the brand. It used to be a major go-to line of tools especially for entry-level professional mechanics (as I used to be) as they were very good quality US-made tools with a great warranty at a fraction of the price of Snap-on or the like.

Home depot eroded at this too, as Husky developed similar return a tool policies.

I think this is now incorrect: https://www.cnn.com/2019/01/08/business/sears-future-bankrup...

yup: https://news.ycombinator.com/item?id=18858494

I wish I could upvote this more than once. Not sure if changing the link would be appropriate, maybe a mod could put a sticky at the top of the thread?

Edit: No need to change the link, the article has been updated to reflect the changing situation. Can a mod please change the title to match? :)

The huge Sears campus anchored a community on the west side of Chicago for nearly 70 years, and then they built an HQ2 with a fancy downtown tower (the world's tallest building) in the early 1970s. Having two campuses really cost them a lot of mojo, and by the early 1990s they reconsolidated into a new campus in the far-flung exurbs. It didn't save them and shall now be their final resting place.

It's a good thing other large companies have learned from this and will not be repeating their mistake.

It seems like a really weak correlation to say that location, quantity, or style of office campuses has anything to do with company success.

Evolution and Death

"The most important component of evolution is death. Or, said another way, it’s easier to create a new organism than to change an existing one. Most organisms are highly resistant to change, but when they die it becomes possible for new and improved organisms to take their place.

This rule applies to social structures such as corporations as well as biological organisms: very few companies are capable of making significant changes in their culture or business model, so it is good for companies eventually to go out of business, thereby opening space for better companies in the future."

— John Ousterhout, Stanford professor

This is really a shame. They made missteps in the mid-late 90's, but might have remained viable had they not had a CEO these past years that was engaged in a process of self-dealing to his other personal financial interests at the expense of Sears [0][1][2]

[0]https://prospect.org/article/how-sears-was-gutted-its-own-ce...

[1]https://www.businessinsider.com/sears-ceo-will-pay-40-millio...

[2]https://www.usatoday.com/story/money/2018/04/24/sears-holdin...

— John Ousterhout, Stanford professor

I last went to Sears a couple years ago for some vacuum cleaner bags. I hadn't been to Sears in years, but something was telling me that Sears was the place to go for vacuum cleaner bags. The vacuum cleaner salesman looked like he belonged in the waiting room in Beetlejuice, but he was very helpful, and he sold me an 8 pack of vacuum cleaner bags. He knew what type of vaccuum cleaner bag I needed before I had a chance to describe to him my vacuum cleaner. In 2 years I'll need another 8 pack of vacuum cleaner bags, and with Sears out of the picture, I don't know what to do.

Well that sucks.

[hahaha! get it? "sucks"? like vacuum sucks? hahaha]

[ahem]

I so knew I was getting downvoted for that...

You might want to change your vacuum bags more often!

I'm certain if you search online you will be able to find bags for your vacuum.

This is sad for such a well-known brand. I have such fond memories of their Wishbook catalog that came out around the holidays every year. I would flip to the toys section and dream. My grandparents even had a years old Wishbook in our toy box at their house that me and my cousins would look at every time we went over there, Christmas or not.

But everything dies. It must. It has to in order to clear the way for something else that will advance the species. That's one of the many reasons why "Too Big To Fail" is such a bad idea. Sure, letting all the banks fail at once was probably not the best course of action. But we needed to take a good look at how to structure them so that their inevitable death wouldn't take out the whole system.

Sears dying, thankfully, won't do that at least. And if anybody has a mid-1970's Wishbook they want to part with, hit me up.

I go back a bit earlier, remembering the Christmas catalogs in the 60s and the huge number of pages of toys. I still remember drooling over a James Bond Goldfinger kit with the Aston-Martin with ejection seat and rotating license plates and the laser table intended to cut Bond in half. My parents didn't get it for me, knowing I'd probably be bored with it in a few weeks.

So, it is true we boomers didn't always get everything we wanted.

There was also the women's lingerie and undergarment section of the catalog, which was as close to porn as you could easily get for a boy in the 1970s.

Meanwhile, in an alternate universe...Sears saw the coming of the Internet, put revived their dormant catalog business and put it on the web gaining a first to market mover advantage over nascent on-line bookstore Amazon. Fast-forward to alternate 2019 and Sears is one of the largest internet companies on the planet after a painful early 2000s where they shed 70% of their brick and mortar retail presence in favor of a distribution center model to service their still growing on-line retail operations....

Sears Airlines, once just a rapid cargo mover for the company starting offering bottom rate global flights for passengers...which gives them another venue to push their catalog...in flight sales.

Sears Shows, ready to launch in Q3 2019 is expected to be the second largest on-line Television and Movie delivery network on the planet with many shows featuring Sears exclusive brands in them.

Sears Craftman brand, already the largest 3d Printer manufacturer, starts offering educational discounts to middle and high school students.

SearsNet, once a staple of 80s and early 90s era stores, revived like the catalog and rebranded from the Prodigy online service, starts to finally offer a new service called "Computers in a Cloud" where consumers can rent computers over the internet and run arbitrary programs on them. This is leveraging spare capacity in Sears' service oriented computing investments, often housed in old Sears warehouses and properties that were no longer useful as retail spaces, but could be reconfigured as compute hosting centers.

Highly anticipated, next year's unveiling of the Sears Car, built using Craftsman tools and easy to drive. It promises to combine the latest in electrical vehicle technology with the comfort of corinthian leather.

BREAKING

The bankrupcy judge says if ESL can deposit 120 million by tomorrow, then it can compete in the auction against other liquidators, and keep the company open.

https://www.cnbc.com/2019/01/08/chairman-eddie-lampert-to-ge...

I wonder if this will impact the small Sears Home Town stores. These are great and I'd hate to lose them.

   http://www.searshometownstores.com/

Those aren’t impacted. A separate company.

https://www.eastidahonews.com/2019/01/biz-buzz-amid-sears-ba...

Many such businesses have sunk into oblivion in the past century. They were started by hungry go-getters; their well-oiled machinery was handed to much-less hungry people who made poor choices in the face of heavier competition.

The story of Sears vs. Ward ("By the end of the 1930s, Montgomery Ward had become the country's largest retailer") is full of insights. (I was surprised to learn today that 'Wards' is still an online retailer. https://www.wards.com/ )

Got this hilarious text when accessing it from Tunisia :

Montgomery Ward

Montgomery Ward is based in the State of Wisconsin in the United States of America and operates solely in the United States. We do not market, sell, or deliver products outside the United States. This Website is for use only by persons located in the United States.

Montgomery Ward makes no claims that the Website or any of its content is accessible or appropriate outside of the United States. Access to the Website may not be legal by certain persons or in certain countries.

If you have any questions, please contact Customer Service at 1-888-777-6333.

While I've read the various arguments over the last year or so about how Sears really wasn't terribly mismanaged by Eddie Lambert, the dingus who bought it and K-Mart in the mid-2000s, I continue to believe that he bears a huge share of responsibility for the company's collapse.

Yes, brick-and-mortar retail is in trouble. Yes, all department stores are in various stages of decline. But Sears fell very hard and very fast, and made uniquely terrible decisions like "we don't need to invest in infrastructure and upkeep because we have a great loyalty program" and "our various departments will do better if we make them fight one another for ever-decreasing resources" and "hey, we'll make some quick short-term profit if we sell off our world-famous captive brands like Kenmore, Craftsman, and Diehard that have literally brought people into our stores for decades."

Sears should really be in at least as good shape as competitors like Dillard's, Nordstrom's, Best Buy, or even Macy's -- the latter of which is arguably not in good shape, but for all their faults, they haven't been doing the corporate equivalent of bashing themselves in the face with a big rock for ten years.

Kenmore appliances and Craftsman tools. Maybe the appliance quality suffered recently. I don't know because our 30 year old washer and dryer still work. Appliances were also built to be repaired, and there was a full catalog of parts you could order through Sears. Craftsman tools were near-professional quality. I'm sure lots of "pros" actually had some in their toolboxes.

I see the Craftsman brand has been controlled by Stanley Black & Decker for almost 2 years https://en.wikipedia.org/wiki/Craftsman_(tools)

Kenmore is controlled by a subsidiary of Sears...wonder what will happen. https://en.wikipedia.org/wiki/Kenmore_(brand)

When the local Sears was about to close up shop, the kids they hired to help with the closing were playing Marco Polo over the store intercom. Eventually the person in charge came over the intercom and told them to cut it out. Was the only thing I enjoyed while in that store at the time.

Brick and Mortar retail has to adapt and change with the technology and the times. Sears COULD have integrated retail with online shopping IF they remembered to focus on what ONLINE couldn't deliver. Brick and Mortar retail isn't going away for those who understand it's real value. It has to focus on what the online business can't do... customization of products, personal service and relationship building. If their salespeople became consultants and the products they sold were better suited for customization, they would have built a LOYAL customer base that needed their expertise.

I had some involvement with sears holding back in 2006-2008, and I remember thinking why were they selling all these clothes? Who the F buys clothes at sears?? It’s going to die of irrelevance. Cut it down to the Kenmore / craftsman brands that actually are unmatched by anything at target, Walmart, or Amazon, and build an awesome services biz supporting.

My biggest surprise is they managed to survive this long. At some point I realized it was a money grab by the CEO, lose money today, get valuable real estate for years to come.

I heard on a podcast this morning an ad stating 'Buy Craftsman tools at Lowes' and was like "Wow. Just wow." and yesterday I saw where Macy's is closing a store here in Indy and K-mart is also continuing to close stores.

I remember when malls had pet stores and arcades and Service Merchandise (oh man, entering stuff you wanted to buy into those terminals haha) now you buy everything from Walmart and from the comfort of your couch on Amazon.

The article has been updated and the current title is 'Court allows Chairman Eddie Lampert another chance to buy Sears, pushing off decision to shut stores'.

I thought Sears went out of business like 5+ years ago

Even without the physical locations, the Sears brand will likely persist through the Kenmore brand and Sears home services.

What is the point of Kenmore now? They were never their own product, just a re-badged Amana, Whirlpool, or GE (variously) appliances.

I truly don't understand what's in this for Lampert. Why does he keep trying to resuscitate the company he hastened to its deathbed?

How does him offering $4.4B benefit him personally? That seems like pride/hubris/denial to think he could ever recoup that money or pull Sears out of the condition he put it in.

The scuttlebutt is that as the primary creditor, he's likely to get the lions share of Sears' real estate portfolio when the company defaults.

https://www.wsj.com/articles/lampert-to-bid-for-sears-real-e...

Another Kodak moment!

But seriously, whilst it's fair to critique the amount that CEO's are paid, when the alternative might be complete failure the cost is justified. Sears is a failure of the C levels and ultimately a failure of the board. Remember that next time we all balk at the $xx million paycheck of a F500.

When Sears, the Facebook of its era, launched its IPO in 1906 the catalog was the Internet of the day https://www.chicagotribune.com/ct-per-flash-sears-ipo-0513-2...

I worked for a part of Emerson Electric that made Craftman tools for Sears. They were made in the USA and then in 1995 Sears cut the budget and gave the contract to some other company. I was downsized as a result.

They got Rigid tools at Home Depot that EE makes now. Should be just as good as the old Craftsman series.

Sears was intionally gutted, flipped to make a few people money. This is not news. http://www.businessinsider.com/how-eddie-lampert-set-sears-u...

Still would go there occasionally for clothes. Brick and mortar has been mostly replaced for me except for groceries (I'm aware there are services but I'm in a pretty rural area right now) and clothing where I still appreciate the benefit of trying them on before buying.

In the early 2000s, my business classes were breaking down the inefficiencies of large scale brick and mortar businesses and forecasting their digital takeover.

The big surprise for me was how long so many of them have held on. It seems to be a slow die off rather than a mass extinction.

Sears is a company with a CEO and board that do not care. Their skin is fine if company goes bust.

In concept yes, but I dont think this deal will work out for the CEO’s hedge fund

He tried to take an activist position to create a market for the bonds he bought, and it failed.

Everything related to a nostalgic middle america mall space that also employed people is just irrelevant.

Not dead yet: https://www.cnn.com/2019/01/08/business/sears-future-bankrup...

I wonder what will happen to all those "lifetime" tool warranties once Sears closes?

They sold off craftsman a few years ago; the warranties are still honored by new retailers, including Ace Hardware, Lowes, Blains, and Atwoods.

my house was built in 1924 - one of my older neighbors said that very good chance it was a "Sears Kit Home" ..looking up "Sears Kit Home circa 1924" on google image search provides some pretty spot on plans.

I think sears was the original amazon :)

Every time I think of sears I think of this story https://www.youtube.com/watch?v=sHIktR-3Ci4 where they stole someone's wrench design

Sears, K-Mart & Toys R US have all faced the same fate!

Layoff data for these retailers here, if someone's interested in it.

https://6figr.com/layoff/Sears

I wonder what's going to happen to the Guam Kmart? It's insane how busy it is.

I'm sad. Sears brought the Atari micro computers into the Heartland of America and spurred my imagination. They were a bit pricey, but all computers were. I remember almost $300 for 32K of extra memory.

The Sears that did that died a long time ago; it was buried when Kmart bought them in 2004.

I think the reasons are basically the same as why companies like Kodak and Polaroid could not capitalize on digital photography. covered in the book "the innovator's dilemma"

Where is the SEC investigation into the CEO’s looting and plundering of the company? Why have they allowed the CEO to also be the company’s biggest creditor? Too busy with Elon’s tweets?

> Where is the SEC investigation into the CEO’s looting and plundering of the company?

Is that even a violation of anything within the SECs purview, if all the reporting is in order so that the stockholders have the information about what is going on?

If it’s done to manipulate stock price, yes.

Huh ... 126 years. I wonder if our children will ever see Facebook, Samsung, Amazon, Wal-Mart or Google fold one day.

Sears is/was the Amazon of the 1920/20s. All things must pass eventually.

I don’t get the nostalgia for this business. It’s just another middleman for stuff made in China. Liquidate it and stop with the stories about this guy’s hedge fund.

The fish rots from the head.

Someone needs to analyze Sears' management behavior for the last few decades.

I am pretty sure some interesting patterns of ignorance and incompetence will emerge.

Sometimes it is ok to acknowledge a great run instead of trying to figure out how to stop the disruption. I am not sure why a company has to exist forever.

Sad day for me. Honestly, I'm more scared of the negative economic impact of Amazon than Google. I am big fan of brick and mortar businesses.

Regarding Sears vs Amazon. Clayton Christensen wrote an entire book, now a classic, on why the incumbent is not the leader in the next go around.

I hope business schools teach about the failures made by Sears executives. Especially about not adapting to change and investing in technology.

I'd love to see the trend lines for Sears that compares performance with the percent of employee owned stock vs outside capital.

for german speakers: the best told and most comprehensive story about the rise and fall of sears: https://www.republik.ch/2018/12/25/sears-eine-kapitalistisch...

disclaimer: I work for Republik.

Is anyone reading the updated article?

> Court allows Chairman Eddie Lampert another chance to buy Sears, pushing off decision to shut stores

I will miss the $2 credit for every Uber ride :/. I think I got $400 in free stuff from Sears/Kmart last year.

Sears was always a crummy store since I can remember. This shutdown has been a long time coming.

CEO Lampart is a huge fan of Ayn Rand and promised to turn the company around using her philosophy. So I suppose we now finally have one large scale case study.

So, can we finally get rid of that Kmart on Lake Street and retake Nicollet?

Minneapolis dwellers know.

This headline is a bit like 'Man plans to crash after falling 126 stories'

My two cents...

As I like to group things in threes, my explanation for Amazon's success is that they had better leadership principles, better execution ability, and a better theory about the future (all business strategies make an implicit or explicit claim about what the future will look like) than any direct or indirect competitor. Could at least some competitor have been better than them at one of those? Perhaps. I don't think any competitor matched them along all three of those dimensions.

Amazon's '97 letter to shareholders gives you a taste as to their theory of the future. Everyone already knows about their ability to execute. Most already know their leadership principles. From an anthropological perspective, I find it relatively insightful to revist them from time to time. Here they are:

(1) Customer obsession. (2) Ownership. (3) Invent and simplify. (4) Leaders are right, a lot. (5) Learn and be curious. (6) Hire and develop the best. (7) Insist on the highest standards. (8) Think big. (9) Bias for action. (10) Frugality. (11) Earn trust. (12) Dive deep. (13) Have backbone; disagree and commit. (14) Deliver results.

-------

To speculate even further... suppose someone were to ask me, "Distill the insights Bezos & Co. made into a single element so that I can understand what Amazon is. What is that one thing or what is Amazon really all about?" What would I say?

Benedict Evans would talk about a machine that makes more of itself.

Scott Galloway would talk about storytelling and its relation to cheap capital.

Ben Thompson would talk about an entity with multiple moats that takes a cut of all economic activity (or maybe just describe some version of an aggregator).

Many others would talk about the virtuous cycle of lower prices --> more customers --> etc.

I would say:

"Warren Buffet had a breakthrough insight - the competitive moat - in the 60's that ended up dominating business thinking up to the present (and will continue to be important/fundamental into the future). Bezos & Co. made an insight of similar importance. Namely, the actual value of an asset truly does outstrip your present understanding of its value, and outstrips your present understanding in a very significant way.

No breakthrough insight is sui generis, as it is constructed using already existing conceptual elements. Buffet's moat was there in the financial statements, and already intuited in a vague way by successful investors and managers before the 60's. The same can be said about Bezos & Co. It's a truism of managerial economics that the point of business is to move under-valued assets into higher-valued uses. Amazon both took this to heart (they internalized it) and they recognized that the true extent to which an assets value outstrips your present perception of said assets value, was an order of magnitude greater than anyone thought before."

I honestly thought they were gone already.

I wondered whatever happened to Sears.

All companies will eventually end, but it's crazy how big Sears was and how far they fell in a short time. At one point they were selling mail-order DIY houses!

Congratulations on driving a company into the ground! Have a golden parachute!

https://www.cbsnews.com/news/sears-bankruptcy-court-oks-25-m...

I get the tone of your post

But have you considered that prosperity preaching is the bigger issue here? The idea that “success” = wealth or that they are correlated in any circumstance aside from coincidence, and that other combinations are part of a therefore broken system

The reason I bring it up is because its a set of rules exclusive to lower socioeconomic groups, as opposed to a more effective set of rules

What exactly are you arguing?

Well, for the most part prosperity comes from work. After 40 hours a week of work, each extra 10% of time worked leads to something like 40% extra income. Those that do reach into upper management positions with larger corporations tend to have spent 15 years of 60-hour work weeks.

I'm not saying that this is always the case, or that those are even the best priorities to have. But effort, success and wealth are definitely correlated. There are far more upper-middle to upper class people that put in their time, energy and effort. And far more than the occasional ass that never really worked a day in their life.

Here are some rules to follow...

* Don't have kids before marriage * Don't marry anyone you can't get along with * Stay together when you have kids * Prioritize your family's needs above your own wants

Married/involved parents (plural) are the single biggest correlation factor to financial success.

Edit: I say this as someone in their 40's who has never fathered a child, but been a step-parent and a couple of failed marriages. In the end, a huge portion of the population has irresponsible, even narcissistic, parents.

Prosperity often comes from family/connections, and hard work definitely doesn’t guarantee prosperity.

Neither do family/connections. You also have to work hard.

Yes, but the upper class - which is who this story was guided by - exist because their rate of return exceeded their rate of labor.

The only other commonality is that they distributed risk so that they dont have meanginful losses of money.

The way this is done has nothing to do with prosperity in business, it is always value extraction, not a donation towards the nation’s jobs report. Understanding the set of rules they play by will make a lot of things make sense without the perjorative terms for the participants.

Most people will not be able to break into the upper class. That said, there are things you can definitely do to improve your children's chances of doing so.

I'll never, ever be able to comprehend this. It sickens me to the core.

They really need a clause that’s something like “not to exceed 5% of revenue/market cap/net worth/something else”

You burn it into the ground and you get 5% of nothing.

They don't need to because if the creditors really wanted to limit retention bonuses then they would. They see it as an investment that they will get a return on by having key people around to run down the business in an organized way and maximize the value of assets. The bonuses are the only incentive to keep key people around on a sinking ship that needs needs guidance. If it weren't for that anyone remotely good would be among the first out the door so they could get a better job.

So the whole mechanism to these bonuses is for the banks/investors to keep the executives around long enough to not lose the institutional knowledge and to keep the company heading in a general direction during the bankruptcy chartering.

That is only valid when the plan of bankruptcy was to avoid liquidation. This buyout became a veiled liquidation in the late 00s early 10s[1]. They need to prop up Sears and K-Mart stores long enough to pay leases to support Seritage Growth Properties property conversions to be prepared to bring in new tenants[2][3]. I guess you need to pay those out to fool a bankruptcy court into selling you the assets in for less than they are worth to liquidators. Which you can then continue to liquidate in secret under the guise of improving efficiency.

Its nice to see bankruptcy courts wising up to these schemes, but I'm not sure this isn't something lawmakers or regulators need to adjust to avoid more of.

[1] https://www.chicagotribune.com/business/ct-biz-sears-lampert...

From the linked article: "In 2015, Sears sold 235 stores, along with its stake in joint ventures involving 31 more properties, to real estate investment trust spinoff Seritage Growth Properties. Lampert is both a stakeholder in Seritage and its chairman."

[2] https://www.fool.com/investing/2018/08/01/heres-why-seritage... [3] https://www.fool.com/investing/2018/11/06/with-sears-on-the-...

That's not a golden parachute though. Those are retention bonuses being paid to management so that they don't lose their entire staff before they are able to liquidate remaining assets and close properly.

Going out of business is a process. It is not some sort of overnight ordeal. Especially not for an organization as large as Sears.

That makes zero sense. How does management getting all that money keep their staff around? They'd use that money to pay the staff if that were true.

They need management/skilled workers to stay so they offer bonuses contingent on them staying on-board for some specified amount of time. You need people who know how to offload remaining inventory and other assets to clear the books. According to the article, this money is meant to be divided between ~300 corporate employees.

$25M is chump change at the scale of Sears, with 89,000 employees. It's only $280 per employee which is not nearly enough money to keep everyone working.

Imagine the company is closing stores in a month and all the executives and management stop going to work tomorrow. Who is closing the stores? Who is handling exiting the staff properly? You don't want police coming and putting chains around your store and staff just having nothing but chaos for a month. You'll end up people not showing up to work. The stores might be open or not. You might end up with looting.

You want an orderly exit, and they're incentivizing the management to help achieve this.

Investors and employees could attempt to sue individual executives for mismanagement of a business, but if you want the government to punish business executives for failing at business you're in the wrong economic system.

unfortunately most staff are incentivized enough by a continued salary. the managers could just flee and the lowly laborers would have no idea how to do what needs to be done.

Matt Levine (of Bloomberg) would tell you to see it more as a golden incentive to stop being the CEO, if that makes you feel better

That doesn’t apply in this case as the entire company is shutting down.

“Please go away money” isn’t needed when the whole company is going away.

Whaat? How could this be? Did anyone see this coming? Nuts. Guess I'll have to shop at Service Merchandise from now on.

Serious note: Sad to see it go, but it failed to adapt.

That's not a good thing, e-commerce only pushes garbage quality with top tier marketing goods.

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