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3 things every business owner can learn from Sears' fall

The Motley Fool logo The Motley Fool 10/16/2018 Daniel B. Kline

Video by CBS News

Watching Sears (SHLD) slowly fall from being the dominant retailer of its day to bankruptcy has been a cautionary tale for any business owner. The company has not failed for any one reason, but has instead fallen victim to hundreds, maybe thousands, of bad decisions both big and small.

The reality, though, is that the department store suffered from years of complacency. Its leaders -- most recently CEO Eddie Lampert -- simply did not make the changes the company needed to stay competitive, and it's very hard (if not impossible) to succeed by when you take limited steps to change course.

Sears' failure, however, offers an opportunity for other retailers and business owners to learn from its mistakes.

1. Always evolve

While it dropped its once-ubiquitous catalog and added a website, Sears did not evolve its stores over time. As retail moved to an omnichannel model, the company was slow to adapt -- and when it did, it resulted in the also-ran "Shop Your Way Program" that seemed dated at launch.

The same could be said of Sears' merchandise. It did not evolve to meet customers' needs and changing tastes. That led to stale stores that were not a draw for customers.

2. You can't cut your way to success

Every business must manage expenses carefully. Cutting unneeded costs should be done in order to free up cash for investments. That's a model Best Buy followed in its turnaround. The electronics retailer made significant cuts, but it did not do so just to save money. It used that cash to revamp its stores, move more heavily into service, and transform its supply chain operations.

Sears closed stores and made cuts mostly to lose less money. That's a strategy that delayed the inevitable but could not change the company's fate.

3. No company is unassailable

There was a time when Sears seemed like a bedrock of American society. The chain going bankrupt seemed as likely as an Amazon or Walmart bankruptcy feels now.

In reality, there's no such thing as a company that's too successful to fail. Shopping patterns and tastes change. How people shop has clearly changed, and there's no reason to think that won't happen again.

Every business owner -- even very successful ones -- needs to guard against complacency. A small crack grows bigger over time, and it's much easier to make repairs along the way than try to fix problems once they become major.

This did not have to happen

Sears' end was not inevitable. The company could have made changes that kept it a viable competitor. With visionary leaders, it could have been a continued success story building on the value of its well-known brands to remain a vital shopping institution.

Instead, Sears has gone bankrupt --  and its survival remains very much in question. That happened not because the market changed, but because the chain's management did very little to change its fate.

The retailer's failure did not happen because of a bad year or even a few. It happened due to an extended period of neglect and poor choices that piled on top of each other, making it harder and harder to correct the company's course.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.


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