Where did Sears go wrong ? A Supply Chain and Analytics perspective

I. Data, data everywhere…not a single byte put to use

As you may have read in the Fortune article (link at the end), Sears started as a catalog-only retailer decades before it opened its first store. It got rid of the catalog business in 1993 since it became extremely unprofitable (Sears was supposedly losing $1M/day).

By the time it pulled the plug, it had digitized a vast majority of customer information. It did not bother to retain all that treasure trove of data when it pulled the plug.  Here are a handful of ways that data could have given Sears an unparalleled advantage to compete with the likes of Amazon years later:

(1) Determining Technology infrastructure requirements to build Sears of the future: They had the best quality data available in early 90s, much of which was digitized. Obviously, Sears did not have the infrastructure to make best use of that data. Few organizations had. But it was an excellent opportunity to define the systems and analytical capabilities requirements, based on the data landscape available.

This would have been a continuous cycle, where you develop your analytics stack and systems based on data availability and iterate as the data landscape evolves. This would have given Sears a significant advantage in terms of an enterprise ready technology platform by the time disruptors arrived.

(2) Merchandising and Personalization: “What customers want” is a question that has always baffled Marketers. Sears had years and years of data on buying behavior of millions of customer. One of the reasons that Sears’ catalog business started struggling because the catalog ended up becoming a 1500+ page catalog (hence nicknamed “Big Book”). Sears could have used the data to relaunch the catalog business , sending customized catalogs based on historical demand, thereby generating more relevant demand data points.

(3) COGS reduction: This data, if leveraged using right analytical approaches, could have helped Sears reduce their cost of goods sold.

Inventory: It is not rocket science that if you get a better handle at predicting demand, you reduce your inventory. You also know where to place your inventory.

Transportation: Placing that inventory closer to the customer will not only increase customer satisfaction, it would have reduced Sears’ transportation cost in middle mile and last mile transportation.

Assets: The demand footprint could have been leveraged to do a Network study to redesign the footprint. Sears setup a network optimization team in 2010 which identified significant consolidation opportunity (in warehouse footprint) but it was already too late.

Warehousing: Reduced inventory and better visibility and accuracy of predicted demand leads to better (and optimal) capacity and labor planning. Predictable volumes also allow you to plan your warehouse layout and flows optimally.

II. Investing in re-skilling of talent

One of the drawbacks of the online portal was assortment. We have already discussed the potential opportunities leveraging catalog data could have opened but let us not go there again. From a labor pool re-skilling perspective, it was an opportunity for Sears to provide extensive training to its merchandisers. Merchandising is just one example- other areas like technology etc. were also good candidates.

There was also a culture of “catching-up” with technology and innovation back then and Sears had the same mindset. “Disruption” was being felt by manufacturing in US but retail assumed it was immune to it. So there was no rush or initiative to stay on top of technology and innovation. In my mind, If I have even a slight competitive advantage, in this case early entry into e-commerce with Sears.com, I will constantly innovate to make sure I increase the gap or at least maintain it.

III. Leveraging Physical infrastructure and Sears.com together

In late 2000s, which were still early e-commerce days, retail executives recalled calls from store managers who wanted to know if online returns they had to accept in store would “come off their targets”.

It was then that the brick and mortar retailers realized the true impact of e-commerce on their stores. They realized that they can actually have a “bricks and clicks” strategy and leverage their brick and mortar stores as a competitive advantage while trying to compete with likes of Amazon. Unfortunately, despite having an online presence early on, much earlier than likes of Target and Walmart, Sears.com completely missed this.

Link to Fortune article: Sears could have been Amazon





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