Article/Fu Yifu, columnist of Sina Financial Opinion Leader (WeChat official account kopleader)
A retail giant, however, fell behind in the later competition. When Amazon and Wal Mart were flourishing, Sears gradually declined from more than 4000 stores and 350000 employees at the peak to hundreds of stores and tens of thousands of employees, and finally ended with bankruptcy.
Not long ago, Sears Group, an American department store with a long history of more than 120 years, formally filed for bankruptcy. As soon as the news came out, there was an uproar. Even President Trump of the United States regretted it.
Where is Sears sacred?
This is a retail giant with the reputation of "the ancestor of department stores". For nearly a century, it has been the first choice for American consumers to buy daily necessities. However, up to now, under the dual pressure of decreasing customers and high debts of the company, Sears' glory has faded and the road of operation has come to an end.
Behind the event, the future of the department store retail industry is worth pondering by every employee.
Sears
Sears rose from the railway era in the United States, broke through the geographical limitations by means of catalog mail order and retail, reached the vast rural population, and then keenly seized the opportunity of the automobile society to transform and open the era of department stores. In addition, thanks to the baby boom after World War II and the demographic dividend it brought, Sears has also made a great achievement in the home appliance market, earning a lot. In its heyday, its business scale was equivalent to the sum of Amazon and Wal Mart.
According to public data, in the middle of the 20th century, one dollar of every 100 dollars spent by Americans occurred in Sears, and half of American families were using goods purchased from Sears. Sears' copy of the commodity catalogue that flew into every household is regarded as the "consumer bible" by the public. Mark Levinson, an American business history writer, sighed: "Sears' catalog mail order can buy anything but houses." The Sears store, which can be seen everywhere, is as close to thousands of families as the post office. It was once thought that Sears would be an eternal part of American land.
However, such a retail giant fell behind in the later competition. When Amazon and Wal Mart were flourishing, Sears gradually declined from more than 4000 stores and 350000 employees at the peak to hundreds of stores and tens of thousands of employees, and finally ended with bankruptcy.
Strategic mistakes accelerated the decline
Rome wasn't built in a day. Sears' withering is not a sudden occurrence, but a long farewell. The clue of the situation was revealed more than ten years ago.
In 2005, under the impact of the Internet, Sears' sales had problems. In order to reverse the company's financial predicament, Sears decided to appoint Edward Lampert, a billionaire who started as a hedge fund, as CEO.
To be fair, if Lambert was a genius financier on Wall Street, it would be a different scene in Sears' retail industry.
Lambert, who has no experience in retail industry, began to implement cost reduction plan on a large scale when he took office, and among them, he focused on significantly reducing the income of grass-roots employees - this strategy greatly dampened the enthusiasm of employees: Their work is no longer active, and their sales performance will decline accordingly; The performance declines, and the wages of grass-roots employees are further deducted; Employees complained bitterly and their enthusiasm for work continued to decline; The enthusiasm for work continues to decline, and the sales performance is also getting worse This has formed a vicious circle, and its negative impact is far-reaching.
On the one hand, the loss of a large number of employees caused huge losses. From the perspective of employees, when the return on work is obviously disproportionate to the effort, they will protest, strike or even leave their jobs. Different from the general staff turnover, in the culture of American department stores, any sales and service personnel usually establish a very close and friendly relationship with customers. They know customers' various consumption preferences very well, and can be described as customers' "agents" in the store. However, once these sales and service personnel leave, in view of the fact that the establishment of trust has not been achieved overnight, it is very likely that a large number of consumers will follow these departing sales and service personnel to Sears' competitors, resulting in a large loss of customers, which is far more serious than the investment in re recruiting and training new employees.
On the other hand, the service quality is greatly reduced. For consumers, the shopping experience plays an important role in retail, and the attitude of service personnel is often the key to determine the quality of consumers' shopping experience. However, the sharp decrease in income has seriously affected the working attitude of Sears service personnel. They are no longer enthusiastic and friendly to customers, which is undoubtedly a major blow to the experience oriented retail industry. The direct result is that Sears' reputation is getting worse and worse.
At the same time, Lambert also boldly split the whole Sears into 30 mutually independent business project departments. Each project department not only needs to be responsible for its own profits and losses, but also must compete with each other to win CEO's attention and fund preference. This led to the fact that the 30 project departments of Sears acted independently, without communication and cooperation, and even attacked each other. It can be said that Lambert is using the "product portfolio" thinking to guide the cooperation and experience oriented retail industry. He was wrong from the beginning. Sears' decline naturally requires him to take some responsibility.
Fall into the "innovation trap" and lose to the times
Of course, it would be unfair for Edward Lambert to carry the pot that collapsed in a century old shop alone. The deeper reason why Sears will die is that he is conservative and weak in innovation.
Let's start with a story:
For more than 100 years, such an enterprise has been playing an important role as a "historical witness and recorder", from the storm of World War II to the Apollo moon landing to the assassination of Kennedy.
In its heyday, the company's flagship products firmly accounted for about 90% of the U.S. domestic market, with more than 100000 employees worldwide and businesses in more than 150 countries and regions. However, even if you are a leader in the industry for a long time, you cannot escape the fate of decline. When the external environment changed rapidly, the former Big Brother failed to seize the opportunity of the times and finally ended his foundation business spanning three centuries by applying for bankruptcy.
I believe you have guessed that this enterprise is Kodak. Its rise and decline has been regarded by the industry as a classic case of "failing to seize the opportunity of technological transformation and ruin its own future".
Globally, Kodak is not the only one. Japan's manufacturing industry leaders, such as Kobelco, Mitsubishi, Takata, Toshiba and Panasonic, have always been famous for their scientific and technological innovation and craftsmanship. In recent years, there have also been frequent reports of data fraud and poor management.
The reason is that large enterprises often fall into the "innovation trap" inadvertently in the process of development. Compared with the more disruptive innovation model, large enterprises tend to be more willing to move forward along their original technology and business expertise, thus forming an inherent development path, but they will also increasingly suffer from the constraints of the old track. At this time, Once new technologies or business models become dominant in the market, large enterprises will have to face the crisis of being eliminated from the market.
In this regard, Professor Clayton Christensen of the American Business School pointed out sharply in his book The Innovator's Dilemma: A company that once had outstanding achievements will only seek to "keep improving" its products. The new technology it has developed is just "continuity technology". The "destructive technology" that can really bring new changes has been ignored, thus giving up development opportunities.
It is not difficult to find that Sears failed because it did not avoid the "innovation trap".
When Sears' department store retail model was at its peak, Wal Mart, with a whole set of supermarket business models, emerged as a new force, and had the potential to compete with Sears offline. It is worth noting that while Wal Mart is striving to build an efficient and low-cost supply chain system and expanding rapidly in various places, Sears is unwilling to take innovative measures because of its long-term success, and still relies on its own rigid and aging supply chain system. The outdated equipment and backward technology seriously affected Sears' business performance. Its supply chain cost accounted for 8% of the total sales, while at Wal Mart, the supply chain cost accounted for less than 3% of the total sales.
Gradually, Sears' offline advantage disappeared, and a group of low price retailers represented by Wal Mart inadvertently seized the middle market. According to the United States Atlantic The monthly magazine reported that in the early 1980s, Sears' revenue was five times that of Wal Mart, but in the 1990s, its revenue was only half that of Wal Mart.
Then, with the rise and popularity of the Internet, online e-commerce has risen collectively, and the battlefield of retail has also shifted from offline to online. However, Sears went against the current and still focused on offline business. Under the theme of cost reduction, Sears not only did not invest a lot of money to upgrade stores and promote technological development, but also saved money by constantly reducing SKU inventory and even closing stores. In the experience oriented retail industry, this can be said to be self defeating martial arts. According to public reports, Sears stores often suffer from rain leaking from the ceiling, floor collapse, serious shortage of clerks, etc. As a result, Sears not only failed to get a share online, but also was criticized offline. It is reasonable that Sears will decline.
Sadly, in his speech after the announcement of bankruptcy, Edward Lambert claimed that he did not fail to foresee the future of e-commerce as a retail industry, but because of continuous losses and the commitment to huge pension payments, Sears had no enough funds to support its business transformation.
The so-called: After decades of hard work, I can see the sky changing at a glance.
What enlightenment can we get?
Sears' lesson is undoubtedly of profound enlightenment, especially for offline retail represented by traditional department stores, which is like the ringing of the alarm bell.
At present, the era of "consumer sovereignty" has arrived in China. In this context, the traditional retail pride of "full range of categories", "low profit but quick turnover" and "good quality and low price" has long been unable to meet the Chinese people's pursuit of consumption. How to comprehensively meet the consumer's shopping experience is a new topic that all retail enterprises need to face.
At the same time, when the new retail wave is sweeping across China, the integration of online and offline has become a general trend. The further development of the industry requires not only the accumulation of online big data, but also the real experience of stores. The growing maturity and penetration of AI, VR, cloud computing and other emerging technologies have attracted many retail giants to compete for layout. If traditional retail companies still stick to their own "one acre, three parts" rather than trying to achieve business transformation and upgrading, look at Sears, as well as those A, B, C and D struggling in the "innovation trap".
So, how should traditional retail transform? The author suggests to focus on the following two aspects:
Externally, the enterprise must jump out of its own inherent path and be in line with the times. That is, seize the opportunity of the new retail era, and develop online and offline simultaneously. At the same time, we should always keep in mind the industry tenet of "consumer experience first", and build the store into a more diversified comprehensive shopping center. In addition to retail, we should also graft tourism, leisure, entertainment, catering and other business functions, and be decorated with highly creative cultural and artistic decoration, so as to meet the needs of consumers in an all-round way, Realize the continuous growth of revenue. In addition, high-tech smart elements should be introduced into the retail format to bring customers more cool listening enjoyment.
From the perspective of the enterprise itself, in the process of operation, it needs to reduce costs through business upgrading, and invest generously in all aspects of improving consumers' shopping experience Instead of focusing on the company's financial situation and blindly reducing expenses. Specifically, we can start with building an efficient and intelligent supply chain, give full play to the advantages of emerging technologies such as artificial intelligence and cloud computing, and empower ourselves to promote the coordinated operation of raw material suppliers, outsourcing processing and assembly, production and manufacturing, sales distribution and transportation, wholesalers, retailers, warehousing and customer service, so as to improve quality and efficiency and reduce circulation costs. At the same time, we should also make effective use of consumer portraits based on big data accumulation to provide consumers with precision marketing and personalized services as far as possible.
(About the author: Senior Researcher of Suning Institute of Finance, Doctor of Management of the Chinese Academy of Social Sciences)
