In the September 24th edition of the Robin Report, retail sector analyst Robin Lewis paints a bleak picture for the future of Sears Holdings Corp (NASDAQ:SHLD). In his article, Lewis by implication counts himself among the “experts” he points to that are predicting bankruptcy for Sears in 2016.
That said, Lewis also highlights the many truly groundbreaking and forward-looking innovations that Sears brought to the retail industry over more than nine highly successful decades.
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Sears was a retail groundbreaker in many ways
For starters, Lewis points out that the famous Sears Holdings Corp (NASDAQ:SHLD) catalog was in essence the same business model as Amazon.com, Inc. (NASDAQ:AMZN) today — deliver everything a customer could possibly need to their doorstep. He elaborates below:
“In the late 1800s, before the Internet was even imagined, the famous Sears catalog gave customers the same advantage that innovative e-commerce sites have over brick-and-mortar retailers today. Essentially, Sears was distributing its entire store into the living rooms of America’s middle class, whose shopping options at the time were slim, as 60% of the US population lived in rural areas. The catalog contained everything those families would ever need, from cradle to grave, at affordable prices. One could say Sears was Amazon before Amazon.”
Lewis also highlights that in the 1940s and 50s “Sears followed its consumers into their new neighborhoods as both developer and anchor for the very first shopping centers in the country.” He also notes that Sears expanded its footprint with mall development across the United States in the late 1960s and 1970s.
Establishing private brands and controlling the value chain
Of interest, management made sure many products in the store were exclusive, and many were even produced by Sears Holdings Corp (NASDAQ:SHLD). Lewis notes: “Sears was on the leading edge of vertical integration and total control over its value chain, a strategy we suggest is crucial just for survival today.”
The retail giant greatly expanded its R&D lab in the 1960s, introduced a market-research department and process, and significantly advanced methods of advertising. Management firmly believed that constant consumer research and thoughtful product development and testing were the only sure paths to success.
For almost three decades, a “constant stream of brands and products were rolled out through the largest distribution machine in the world.” There were literally dozens of popular private and exclusive Sears brands including the first steel-belted radial tire, Craftsman tools, DieHard batteries, Kenmore appliances, Toughskins jeans, as well as the NFL and Winnie-the-Pooh exclusive licenses.
Sears Holdings Corp (NASDAQ:SHLD)’s unique merchandising structure and top-to-bottom process is what made these exclusive brands possible. Sears owned of many of its suppliers, and was the primary buyer from others, giving the firm a vertical integration enabling a robust design process that produced a continuous stream of exclusive products and brands. This private branding strategy took decades to develop, but as Lewis notes, it “provided the foundation of Sears’s value proposition and gave it an enormous advantage over competitors.”