Sears Is Dead — Long Live Sears!; The Bankruptcy of Sears Shows the Vibrancy of Capitalism

IBD ^ | 10/15/2018

[SeekAndFind]

Sears, RIP: Bowing to the inevitable, Sears' owners on Monday filed for Chapter 11 bankruptcy. Yes, it's a sad day for the 126-year-old company. But it's not a tragic story, for it underscores the underlying vibrancy, innovation and creativity of American capitalism.

Monday's filing came as Sears faced a deadline for payment of $134 million on its debt. It didn't have the money, so it filed for protection from its creditors. Eddie Lampert — the largest shareholder in the company, with nearly half its shares — stepped down as CEO.

By the end of this year, Sears will be a much-diminished company. From more than 4,000 stores as recently as 2011, it now has about 700. It will close 142 more stores by year's end, leaving it a remnant of its former self. Already shorn of its Craftsman tools brand and looking for a buyer for its Kenmore appliances unit, there's little left now but a famous name with few assets other than semi-empty stores and real estate.

We won't go into the rest of the gory details of its finances, other than to say the picture isn't pretty.

Yet, even as we lament its decline, we should remember that Sears itself was once a great retail disruptor, just as the companies that have killed its business today are disruptors themselves. Sears was Amazon before Amazon was Amazon.

Sears, Builder And Destroyer Sears started in 1886 as a mail-order watch company, but soon branched out into other goods. By the early 20th century, Sears catalogs were common in American households.

But Sears' success came at a price. Thousands of small, independent local retailers couldn't compete with Sears' low prices and national reach. Many thousands went out of business.

[ProtectOurFreedom]

Capitalism...is by nature a form or method of economic change and not only never is but never can be stationary. ...The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.

...The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.

...Capitalism requires the perennial gale of Creative Destruction.

  Schumpeter, Joseph A. 1942. Capitalism, Socialism and Democracy. London: Routledge. pp. 82–83.

When will Amazon begin selling house kits?

[ProtectOurFreedom]

In 1973, I graduated from college as a mechanical engineer and started a Field Service Engineering job that lasted for five years. I had to equip myself with a complete tool set and naturally went to Sears to buy Craftsman tools. At the time, they were without equal.

I applied for a credit card at Sears because I would be purchasing the tools at various stores in the west and as the need for a particular tool arose.

Sears turned me down! I still remember swearing to myself in August 1973 that I would NEVER have a Sears credit card. As I became successful in my career, they began begging me to take their credit card. I always got devilish joy in saying “FU, Sears! Never means never.”

[frnewsjunkie]

Whoever has been managing/running/making the decisions for Sears... has been making one bad mistake after another. I could tell some years ago, it was not going to turn out well. Sears has the Kenmore name... Sears has the tools... and they let it all slip through their fingers!

My husband sold heating and air for Sears for some years. One year the summer was so hot, all he had to do was show up and the customer was ready to sign.. just get the AC in. Sears did not have the equipment... it was a hard summer to live through... all those sales.. cancelled about as soon as the orders were written.. and the commission that year would have bought a new car... vanished with the cancellations.
The last few years, they have one check out station running, per store floor, and all their floor help are from another country. They let a good thing, go under... and it could have been prevented! Hate to see it go!

[ProtectOurFreedom]

How about hiring a CEO that knows how to exist in the internet age?

They and many others have tried to transition to web commerce and failed. Even the Walmart web presence is awful. That horse left the barn long ago and isn't coming back.

[AceMineral]

No mention of bathing and toilet facilities.

[ridesthemiles]

IF you could work a moonlighting job at Montgomery Ward’s in the past——go talk to your local Lowe’s store.

They have many part time openings & with a good background in those kinds of products, you might be very welcome. Everyone I know who has worked for them says they are a great employer.

The local ACE hardware-—35 miles from me, is staffed mostly with older, EXPERIENCED people. Retired painters—construction people, etc. They rarely give bad advice. That store also has a section for equipment rentals, where they can clearly demonstrate to you how to use a piece of equipment you might need to rent.

[ridesthemiles]

1) He is an incompetent businessman who has been forced to declare bankruptcy more than once.””’

IIRC,
Trump NEVER declared a total & overall personal bankruptcy. He did shut down his casinos in Atlantic City & declare bankruptcy there. The main reason? The Indians in all the states were allowed to open their OWN CASINOS on any acreage they could call their native land. Sprinkling all those casinos hurt Atlantic City & Las Vegas.

Trump had just done a very expensive remodel on his Atlantic City holdings, IIRC, and he bailed out before it became a black hole.

2) He can’t relate to normal people because he’s never suffered a set back in his life.

Depending on your definition of a setback, that also isn’t true, IMO. He had very public divorces. He lost his brother, who I think he cared very much about. He has had other business interests that didn’t pan out as well as he wanted them to.

His biggest mistake IMO? Involving himself to any degree with Omarosa.

I leave all of you to your own thoughts about her. I cannot stand her.

[Responsibility2nd]

You got that right.

There’s a good local Ace Hardware store just 10 miles from me. I’d much rather go there than the Lowes or Home Depot 40 miles away.

[ridesthemiles]

Many of those Sears home buildings are still standing & some are considered historical units.

[HotKat]

I may be wrong about this. I was driving, listening to Neil Cavutto:

Is it true that we as taxpayers will be footing the bill for Sears unfunded pensions? If this is correct, I’m really irritated.

I grew up wishing for stuff in the Sears catalogue. We used to play a game turning the pages, pointing at things on each page, saying “it’s mine. “

[TheTimeOfMan]

The bankruptcy of Sears shows - the stupidity and incompetence of most C level execs...

[cymbeline]

“Eddie Lambert the CEO is a hedge fund guy who has been paying in (This is an example, not exact numbers.) 60 cents on the dollar in cash and debt and taking out $1.00 in real estate sales, selling brands etc.”

Sounds bad but could we say the basic problem is that customers have found other places to do their shopping?

[dfwgator]

Adapt or die.

[dhs12345]

We had had Allstate for 20 years and then they arbitrarily raise our rates. When I asked, the agent told us that it was a general thing and not specific to us. Then a year later another major increase for no reason at all.

Within two years, our rates increased 20%! So, my last questions for my agent were “is there any loyalty to long time customers and would they be willing to match a rate that I got from State Farm?” He bluntly said “no and no.” So we moved to State Farm.

That was the last time we used Allstate for car insurance. Then they started doing the same thing with my life insurance policy. Again, their response was pretty much “go pound sand.”

Bottom line: there is no loyalty for reliable, long term customers. Probably a general trend with all insurance but they started early; way early! 30 years early!

BTW, loyalty goes both ways and we will never use them again.

[PittsburghAfterDark]

Consumers may have found other places to do shopping, which they did, but Toys R Us detractors said the same thing. Meanwhile the private equity firm that took on Toys R Us saddled it with billions in debt the ompany didn’t have before hand until it collapsed.

However the intellectual property and of Toys R Us is still valued near a billion dollars, the same can’t be said of Sears.

The demise of Sears was as much planned and moved along from the inside as it was subject to market forces.

[jalisco555]

My wife was recently in a pretty nasty accident. Thankfully no one was hurt but her car sustained almost $9,000 worth of damage. The other driver was uninsured (the accident was 100% his fault) but Allstate paid the entire claim less the $900 deductible with no problem. The guy at the body shop told me that the only insurance company they ever have problems with is State Farm. YMMV I suppose.

[Vaduz]

Walmart puts another notch on gun.

[BlueMondaySkipper]

“When will Amazon begin selling house kits?”

They already are.

https://www.amazon.com/s/ref=nb_sb_noss_2?url=search-alias%3Daps&field-keywords=House+kit

[dhs12345]

Depends on which state. But I had a similar situation and my insurance paid the whole thing minus the deductible. And I was reimbursed my deductible after a time because the person was charged and convicted of driving without insurance and a license by the city and had to pay me restitution. I don’t think that the insurance company was ever reimbursed for their loss.

Question: did Allstate raise your rates after? State Farm didn’t. But they did start raising our rates around 5 years later. Again, for no reason given and so we moved on to another company.

Also, in my experience, Allstate is not at all competitive with any other insurance companies. They refuse to be competitive. I think that they are counting on customer loyalty and the old “crank the burner up slowly so that the frog doesn’t notice” strategy. People are completely unaware of the fact that they are being taken advantage of.

A recommendation to you: shop around. You might save a ton of money. We did. Around $1000 per year for the same coverage. We did a very thorough comparison.

The insurance company strategy: first of all, there is no brand loyalty. Second, they will offer a very good rate to get you in and then after a couple of years, crank the rates up; just below the threshold of pain.

[The Great RJ]

Businesses have life cycles and very mature businesses either have to reinvent themselves or face inevitable decline. Imagine if Sears had reinvented itself as an online mega retailer back when Amazon was just selling books. The take over of KMart was the beginning of the end. Too bad Sears didn’t capitalize on their take over of Landsend and expand that product line to the nascent online retail market.