How Small-Business Owners Can Avoid Sears's Fatal Mistake

Sears had the chance to beat Amazon at its own game. Instead, it closed stores and retrenched.
How Small-Business Owners Can Avoid Sears's Fatal Mistake
Image credit: Sears Brands
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When a company announces to its investors that there is "substantial doubt" about its ability to continue trading, it is clear that there are troubling times ahead. When this happens to a company that previously held the accolade of "America’s largest retailer," though it is surprising, it can act as a huge learning opportunity for other companies. Sears Holdings has done just that: In the last 10 years, it has closed 2,000 stores and fired over 200,000 employees, and is currently $4.2 billion in debt, announcing Tuesday that it is unsure it will be able to raise the funds to cover the debt.

Sears built its business dominating catalog sales, fulfilling the pre-smartphone on-demand demands of its clientele. This revolution in direct-to-consumer sales created loyal customers, a nationwide network of stores and decades of profit. Times became more challenging for Sears following the rise in popularity of Walmart, which offered similar goods for cheaper prices, and Amazon, which led the charge on ecommerce, and has spent billions of dollars on capitalizing on fast delivery.

Jeremy Bodenhamer, CEO of logistics company ShipHawk, theorized two years ago in an article in VentureBeat that Sears was "in the perfect position to crush Amazon," by tweaking its focus away from cost-cutting and investing in infrastructure. Bodenhamer speculated that if Sears utilized its brick-and-mortar stores as warehouses for final delivery, it would be able to not only beat Amazon Prime at speed but also convenience. Unfortunately, Sears did the opposite, and while one of its main competitors was trying to get closer to customers by building local warehouses, Sears closed its physical locations. Though intending to saving money in the long-term, Sears ended up distancing itself from customers and losing ground to a competitor in its key growth strategy.

So, what can smaller businesses learn from this situation?

Companies should constantly assess the potential of their assets and be aware of competitors' growth strategies to ensure that they are aware of potential shifts in the market, and in customer expectation. The current shift in customer expectation towards the speed of delivery crosses over from ecommerce and into other fields. Within marketing, Fiverr has become famous for swift design work, Bubble makes app development quick and easy, and Uber has brought the taxi ordering time down to seconds. By working out how to get closer to the end user, and positioning the company in the best way to delight consumers, a business will ensure it remains relevant and stays on top of market trends.

Businesses must be mindful of ways they can add value to their clients. In Amazon's case, it has done this by honing in on the challenge faced by online retailers -- the supply chain. It then adds value by shortening wait times and then diversifies this value by opening up its newly created channel to external partners. Bodenhamer told me how he saw other companies like Sears could have taken advantage of its asset within the supply chain vertical: "The world-class supply chains operated by legacy retailers are a major advantage. By making these available to their sellers, they can offer low-cost distribution that helps sellers compete without the threats posed by Amazon and their ultimate goal of circumventing the seller in order to single source. Empowering sellers is a powerful value."

This spills over across industries and company sizes -- evaluating how different assets can be diversified, examining where advantages can be gained through better positioning and a constant drive for innovation, plays a huge role in keeping a company ahead of the curve. With the exponential growth of technology, the ability to quickly adapt and accommodate for the changing customer expectation will only become more important in 2017. 

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