The reasons why Sears went bankrupt

SearsToday, Sears declares bankruptcy in the US. It is a very sad day for many of us who grew up circling items in the Sears Christmas catalog. But, it is a day we have seen coming for 20 years. I have a soft spot in my heart for them because my mom worked in the Sears men’s clothing section when I was a teenager. I thought it was a cool job. That’s where I got my suit for my High School graduation. My mom told me “every man needs a good suit.”

I also know of many great people who have worked at Sears over the years. From what I heard, they were extremely frustrated by the poor moves or lack of moves by senior leaders. Too little, too late.

Let’s explore the reasons why Sears died and what you can learn from them for your brand. This is the classic retailer who tried to be everything to everyone. Sears failed because they let Walmart steal their low-price positioning at retail, and then let Amazon steal their catalog shopping model.

Sears lacked a point of difference 

I tell brands all the time: “You have four choices: you can be better, different, cheaper or else not around for long.” I have never met anyone who chooses the fourth option of not around for long, but if you don’t choose one of the first three, then the fourth chooses you.

Like any department store, it is hard to be different. They are all just a collection of goods that someone else has made for them. For decades, Sears was successful in owning the “cheaper” option with their good value, at the lowest price. They likely kept that until the early 1980s.

First, the rapid expansion of Walmart and Costco put the first dagger into Sears by severely undercutting them on price. For comparable items, Sears was a 20-30% price premium.

Trying to be everything to anyone is the recipe for being nothing to everyone.

And then, as consumers moved to the big box stores and outlet malls, each of those individual retailers put another dagger into each and every department Sears owned.

  • Looking for a TV, go to Best Buy.
  • For a home renovation, go to Home Depot.
  • If you need any sporting goods, go to Dick’s.
  • And, for any clothing item, head to the nearest outlet mall.

To find the competitive space in which your brand can win, I introduce a Venn diagram of competitive situations. You will see three circles. The first circle comprises everything your consumer wants or needs. The second circle includes everything your brand does best, including consumer benefits, product features or proven claims. And, finally, the third circle lists what your competitor does best.competitive positioning

Find your brand positioning

Your brand’s winning zone (in green), is the space that matches up “What consumers want” with “What your brand does best.” This space provides you a distinct positioning you can own and defend from attack. Your brand must be able to satisfy the consumer needs better than any other competitor can.

Your brand will not survive by trying to compete in the losing zone (in red), which is the space that matches the consumer needs with “What your competitor does best.” When you play in this space, your competitor will beat you every time.

As markets mature, competitors copy each other. It has become harder to be better with a definitive product win. Many brands have to play in the risky zone (in grey), which is the space where you and your competitor both meet the consumer’s needs in a relative tie.

Using this logic, Sears offered moderate value goods, at a higher price than their competitors. There was no reason to go to Sears. They were in the dumb zone (in blue) for the last 20 years.

Walmart did exactly what Sears did, only better

Walmart used the identical playbook from Sears: well-known brand names at a much lower price than you could get anywhere else. As Walmart grew up through the 1970s and 80s, the focused on being the perfect store for the small towns or rural areas because they offered everything you would need in one place. As Walmart moved into suburbs in the 1980s and 90s, they met face-to-face with Sears.

What did Sears do to fight back? Nothing.

If we go back to the 1970s, I would label Sears as the “Power Player” brand of the retail category. Power Player brands should be the share leader or perceived influential leader of the category. These brands command power over all the stakeholders, including consumers, competitors, and retail channels. power player brands

Regarding positioning, the power player brands own what they are best at and leverage their power in the market to help them own the position where there is a tie with another competitor. Owning both zones helps expand the brand’s presence and power across a bigger market. These brands can also use their exceptional financial situation to invest in innovation to catch up, defend or stay ahead of competitors.

Power player brands must defend their territory by responding to every aggressive competitor’s attacks. They even need to attack themselves by vigilantly watching for internal weaknesses to close any potential leaks before a competitor notices. Power player brands can never become complacent, or they will die.

Sears should have squashed upstart Walmart in 1970 when they only had 38 stores, yet it was obvious that they were onto something. The smart power player brand would have paid Sam Walton $100 million for his stores and signed a do not compete. Within five years, their sales grew 10-fold from $40 million to $350 million, yet Sears still did nothing. That $100 million would look pretty cheap by the mid-1980s when Walmart grew another 40-fold up to $15 billion in sales. Keep going and by 2000, Walmart sales were $220 billion.

Sears failed to attack any competitive move made by Walmart, and they certainly never attacked themselves.

Sears once owned what Amazon now makes billions doing

For decades, Sears delivered catalogs with the widest assortment of products, customers would pick out exactly what they wanted, send in their order through the mail, Sears would send it from a central warehouse to one of their local stores and then the customer would go pick it up at their local Sears store.  I’m sure we are all looking at this model, baffled at how Sears never mastered online retailing. All they needed to do:

  • Put the entire Sears catalog on a website.
  • Let your customers order through the Sears website.
  • Mail it from your central warehouse to the customer’s house.

Not only did Amazon steal this model, they even paved the way with a “books only” model that still allowed Sears the time to launch their full catalog online.

The problem for many leaders is that to be a visionary, you must be able to visualize the future, and then take action. Many leaders of brands about to be replaced by a smarter model for the future resist the future as hard as they can. The leader could actually replicate the brand attacking them, and become the future faster than the brand attacking them. That’s crazy.

Too many of the brands link their brand with the format they deliver. Newspapers think they are in the business of broadsheets, and retailers think of locations. Remember that phrase “location, location, location.” I would rather brands think of the idea they stand for, and adjust the business model to deliver that idea.

Running a brand takes imagination

Just imagine, if in 1975, Sears fought back with all their power and squashed Walmart. It would have worked.

Just imagine, if in 1995, Sears saw the future of online shopping, and moved their entire catalog model to an e-commerce platform.

Without a vision for the future, Sears is now part of our past. 

To learn more about this type of thinking, you should explore my new book, Beloved Brands.

With Beloved Brands, you will learn everything you need to know so you can build a brand that your consumers will love.

You will learn how to think strategically, define your brand with a positioning statement and a brand idea, write a brand plan everyone can follow, inspire smart and creative marketing execution and analyze the performance of your brand through a deep-dive business review.

Beloved Brands book

To order the e-book version or the paperback version from Amazon, click on this link: https://lnkd.in/eF-mYPe

If you use Kobo, you can find Beloved Brands in over 30 markets using this link: https://lnkd.in/g7SzEh4

And if you are in India, you can use this link to order: https://lnkd.in/gDA5Aiw

Beloved Brands: Who are we?

At Beloved Brands, our purpose is to help brands find a new pathway to growth. We believe that the more love your brand can generate with your most cherished consumers, the more power, growth, and profitability you will realize in the future.

We think the best solutions are likely inside you already, but struggle to come out. Our unique playbook tools are the backbone of our workshops. We bring our challenging voice to help you make decisions and refine every potential idea.

We start by defining a brand positioning statement, outlining the desired target, consumer benefits and support points the brand will stand behind. And then, we build a brand idea that is simple and unique enough to stand out in the clutter of the market, motivating enough to get consumers to engage, buy and build a loyal following with your brand.

We will help you write a strategic brand plan for the future, to get everyone in your organization to follow. It starts with an inspiring vision that pushes your team to imagine a brighter future. We use our strategic thinking tools to help you make strategic choices on where to allocate your brand’s limited resources.

Our brand playbook methodology will challenge you to unlock future growth for your brand

  1. Our deep-dive assessment process will give you the knowledge of the issues facing your brand, so you can build a smart plan to unleash future growth.
  2. Find a winningbrand positioning statementthat motivates consumers to buy, and gives you a competitive advantage to drive future growth.
  3. Create a brand ideato capture the minds and hearts of consumers, while inspiring and focusing your team to deliver greatness on the brand’s behalf.
  4. Build a brand planto help you make smart focused decisions, so you can organize, steer, and inspire your team towards higher growth.
  5. Advise on advertising, to find creative that drives branded breakthrough and use a motivating messaging to set up long-term brand growth.
  6. Our brandtrainingprogram will make your brand leaders smarter, so you have added confidence in their performance to drive brand growth.

To learn more about our coaching, click on this link: Beloved Brands Strategic Coaching

To learn more about our training programs, click on this link: Beloved Brands Training

If you need our help, email me at graham@beloved-brands.comor call me at 416 885 3911

You have my personal promise to help you solve your brand building challenges. I will give you new thinking, so you can unlock future growth for your brand.

Signature

Graham Robertson

Founder and CMO, Beloved Brands Inc.

 

 

 

If your brand is afraid of Amazon, then you should be terrified of Alibaba

[sg_popup id=”9″ event=”onload”][/sg_popup]Now begins the North American battle of Amazon vs Walmart, with the winner to take on Alibaba on the world’s retailer stage.

alibabaI love watching the Kentucky Derby, especially those horses that start off slow, then pick it up on the back straight, and then basically fly past everyone on the last turn, like they are standing still. That’s how I feel about watching the Alibaba brand.

The joint venture between Walmart and Google is a signal that both might be a little bit scared of Amazon. 

But, Alibaba is using their dominance in the world’s largest market (China) to pick up all that speed in the back straight and likely beat both Amazon and Walmart.

Walmart is a tough competitor. They won’t go down without a fight.

Obviously, Amazon has a huge advantage in the US, but things are about to get really ugly as Walmart and Amazon attempt to destroy each other. 

But, if you have ever dealt with Walmart, you would have to be an idiot to ever count them out. Their culture focuses on the relentless fixation on fast-moving items that helps drive cash flow. Sure, Walmart beats up their vendors over price–but that’s mainly to drive sell through. If your brand moves slow, there is no debate–you are told to speed up your sales, and if you don’t, you are gone.

I remember when Walmart starting sending us their weekly sales data. My first thought was “Wow, this is true partnership, amazing data, thanks Walmart”. Then the questions started to come. “Your 250ml cherry flavored cough syrup is not selling fast enough, what will you do to accelerate turns”. We lowered the price. Or even worse, “Your Listerine Pocketpaks product accounts for the highest theft of any product in our stores, fix it”. We changed the packaging, just because they asked us.   In the bricks and mortar space, while most department store retailers sell through their inventory in 130-150 days. Walmart sells through their inventory in 29 days. That’s cash flow.

I expect Walmart will go lower on price than Amazon can tolerate. What retailer owned the low price positioning before Walmart?  Sears. If you go compare prices at Walmart and Sears, you will see why Sears stores are empty and about to go bankrupt.

Does the Google partnership help Walmart?  A little. But both better step it up fast. If Walmart loses to Amazon, the case study class starts off with “Walmart should have started their on-line war with Amazon in 2002, not 2017.”

Even if Amazon can tolerate lower prices and eventually beats Walmart, it will do some damage to their profits. Amazon will experience lower margins, squeezed cash flow, and a divided consumer base. It will further open the possibility of seeing Alibaba entering the US market.

Why Alibaba will win

Alibaba, valued at $420 Billion has seen an 80% increase in the market capitalization in the past twelve months. In the same period, Amazon has seen a 20% increase, still with a slight lead at $465 Billion. 

Here are 5 reasons why Alibaba will eventually win the global e-commerce retail space:

  1. Alibaba can utilize their home-field advantage. Alibaba is dominating the Chinese market, which is the #1 e-commerce population in the world. China has 500 million active on-line users, is twice the size of the US market. Walmart and Amazon will divide up the US market.
  2. Alibaba has a business model that delivers higher profitability. Alibaba’s business model, with no listing fees, with the bulk of their revenue coming from keywords and digital-advertising is closer to the social media model. This gives Alibaba significantly higher margins than Amazon. 
  3. Alipay payment system.  Alibaba launched a digital payment system in 2004, just for their own customers. Along with WePay, it has become the accepted method of payment in China. They have moved to a cashless and even cardless payment world. 
  4. Alibaba will ride the growth curve of the Chinese Economy. Despite the recent slowdown, China’s economy is still growing at almost three times the rate of the US – around 7% over the last couple of years, compared to less than 2.5%.The US has a growing trade deficit – it imports more than it exports – while China imports significantly less than it exports, resulting in a trade surplus.
  5. Alibaba’s sales will benefit from the growth of the Chinese Middle Class. In the last ten years, the average income for China has tripled. It is expected that from 2012 to 2022, those in China making more than $34K US will increase from 3% currently up to 9%, and those in the growing middle class ($16K to $34K) will increase from 14% up to 54%.

So when will Alibaba move west? Likely after the Walmart vs Amazon dust settles. By 2020, I would expect both Walmart and Amazon to be weakened. Whoever wins will have to take on a very healthy, highly profitable, cash-rich Alibaba. Realistically, Alibaba could end up two or three times the size of Amazon.Then it will be like watching that horse in the Kentucky Derby, with Alibaba rounding the final turn on the way to the finish line.

To read more on competitive strategy, click on this link: 

Competitive Brand Strategy

 

In retail, the smart money should be on Alibaba for the win.  

 

To learn about strategic thinking, follow this powerpoint slide presentation. 

 

Beloved Brands: Who are we?

Beloved Brands is a brand strategy and marketing training firm that is focused on the future growth of your brand and your people.

It is our fundamental belief that the more loved your brand is by your most cherished consumers, the more powerful and profitable your brand will be. We also believe that better marketing people will lead to smarter strategy choices and tightly focused marketing execution that will higher growth for your brands.

With our workshops, we use our unique tools force you to think differently and help unleash new strategy solutions to build around. I believe the best solutions lay deep inside you already, but struggle to come out. In every discussion, I bring a challenging yet understanding voice to bring out the best in you and help you craft an amazing strategy.

We will help you find a unique and own-able Big Idea that will help you stand out from the clutter of today’s marketplace. The Big Idea must serve to motivate consumers to engage, buy and build a loyal connection with your brand. Equally, the Big Idea must work inside your organization, to inspire all employees who work behind the scenes to deliver happy experiences for consumers.

We will help build a brand plan everyone can follow. It starts with an inspiring vision to push your team. We then force strategy choices on where to allocate your limited resources. With our advice on brand execution, we can steer the brand towards brand love and brand growth.

To learn more about our coaching, click on this linkBeloved Brands Strategic Coaching

At Beloved Brands, we deliver brand training programs that make brand leaders smarter so they are able to drive added growth on your brands. We offer brand training on every subject in marketing, related to strategic thinking, analytics, brand planning, positioning, creative briefs, customer marketing and marketing execution.

To learn more about our training programs, click on this link: Beloved Brands Training

If you need our help, email me at graham@beloved-brands.com or call me at 416 885 3911

Graham Robertson Beloved Brands

 

Retailers are destroying Black Friday

Black-Friday-LineFor the past 20 years, it has been a tradition for american families to plan out their friday after US Thanksgiving by hitting the malls as the kickoff to Christmas season. For us too lazy to get up at 5am, it has been fun to watch on TV, seeing doors flung open with screaming people trampling each other trying to get to those door crasher specials. Whether you like the idea of “Black Friday” or not, retailers are doing what they do best:  taking a good thing and messing it up.  

Last year, we saw “Black Friday” ads on the Monday of Thanksgiving. This year, we saw them the week before. The problem when you mess with Black Friday is that you lose the buzz and excitement. You also lose the irrational consumer behavior brought about by the energy of the moment. So Black Friday used to mean getting up at 5am, running through the store to grab that Samsung TV for $179 by 6:15am and then adding a TV stand and gold-plated cables at full price on the way out of the store. Just like any emotion, causing consumers to feel more and think less puts the power into the hands of the brand. Retailers were winning this transaction. That’s gone if you do your sale over 10 days. You are just giving consumers time to think, search other websites and come to a rational decision. Now with time on their side, consumers can shop around for a week, review the specs on the TV and figure out that it has been down-graded with a lack of features, determine the gold-plated cables are a waste of money and just go to IKEA for the TV stand. Maybe they can even talk themselves out of the TV!!!  Why? Because now they can use their brain. After all, that buzz is gone.

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Another crazy trend is the idea that retailers open on Thanksgiving evening. Retailers are always trying to get a leg up, so they are now all trying to open when no one else is open. And yet with a low barrier to copy, they all just follow each other and negate any advantage. Last year the trend started where major retailers including Wal-Mart, Target, Best Buy and Sears opened on Thanksgiving Day–the night before Black Friday. This won’t mean a jump in revenues it just means revenues will be brought forward one day. Yes, retailers have this belief that it’s a constant dog-fight for sales, and if one my competitor gets a leg-up, that means a loss to me. Retailers are facing such pressure during these economic times so I’m somewhat sympathetic. Margins are shrinking and many retailers basically make or break their year during Thanksgiving and New Years. So I can understand the temptation. Before we get into the ethical part of opening, let’s look logically at the 8 ways a brand can make more profit: 1) increasing prices 2) getting consumers to trade up 3) lowering your cost of goods 4) lowering your marketing costs 5) stealing other users 6) getting users to use more 7) entering new categories and 8) getting new users. I realize it’s all about stealing other users. But if both competitors blink and open at 8pm on Thanksgiving, no one really wins over the consumer. The only thing I see here is a slight increase in the costs of increased wages and store opening costs. Net net, no one really wins.Slide1

So at the year end, no retailer will really be saying “we had a great year because we opened on Thanksgiving Day”. But come on guys, while your press releases are saying that you’re really just “catering to consumer demand”, we business people know that’s BS. I’d rather see all Americans sitting around the dinner table and watching football (go Patriots) with family and friends. If families are your main target market, you should be making a big deal out of the fact that you are closed so that all employees can spend time with their families. That’s a great way to establish love for your brand. My Hope is the Retailers Announcer Early that they will be closed on Thanksgiving 2015!!!

To all our American Friends, I want to wish you and your families a Happy Thanksgiving

At Beloved Brands, we run a Brand Leadership Center to train marketers in all aspects of marketing from strategic thinking, analysis, writing brand plans, creative briefs and reports, judging advertising and media. To read more on strategy, here is a workshop on HOW TO CREATE A BELOVED BRAND, click on the powerpoint presentation below:

We make brands better.

We make brand leaders better.™

We offer brand coaching, where we promise to make your brand better by listening to the issues, providing advice that challenges you, and coaching you along a strategic pathway to reaching your brand’s full potential. For our brand leader training, we promise to make your team of brand leaders better, by teaching sound marketing fundamentals and challenging to push for greatness so that they can unleash their full potential. Feel free to add me on Linked In, or follow me on Twitter at @belovedbrands If you need to contact me, email me at graham@beloved-brands.com or phone me at 416 885 3911

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