Some Thoughts on the Apparent Demise of Sears
By Steven Horwitz
Sadly, the company that made its name on mail orders couldn’t quite figure out what to do in a world of email orders.
Sears was, in many ways, the Amazon of its time. It made the mail-order catalog a staple of American households, and in so doing brought the latest and greatest products of American capitalism to people in every corner of the country at significantly lower cost. The catalog also offered African-Americans in the rural south not just access to goods, but provided them a way to shop with dignity and equality in a world of Jim Crow. Our contemporary shopping experience with Amazon and other online retailers is a descendant of the Sears catalog.
Even when the car and suburbanization created a shopping mall culture that made their catalog secondary, Sears was able to adapt, and their stores were omnipresent anchors across the country. But like the catalog, the shopping mall experience has fallen by the wayside as consumers seem to be less willing to devote several hours to driving to the mall to go to multiple stores to get what they want. The exceptions are often high-end malls and department stores, with whom Sears could not compete.
At one end, consumers frequently prefer large specialty stores, like a Best Buy, for some of what Sears offered. And customers who want the variety of a Sears are finding it much cheaper at Target, Walmart, or even a warehouse club like Costco. As Target and Walmart, not to mention larger grocery chains, work to meet the speed and convenience of Amazon by offering pick-up or even delivery to your car or home, the old-fashioned department store has seen its market disappear. Sadly, the company that made its name on mail orders couldn’t quite figure out what to do in a world of email orders.
The big problem that Sears never solved was carving out a distinct identity in the very different retail landscape of the 21st century. It wasn’t an appliance store. (In fact, it allowed the quality of its Kenmore products to decline.) It wasn’t a clothing store. It wasn’t a discount store. It wasn’t a home goods or home improvement store. It had no distinct presence online. It tried various strategies for broadening its market, from Allstate to Kmart, but those just muddied its identity even more. In fact, broadening its market was probably the completely wrong strategy. The generalized economic growth of the last few decades has expanded the extent of the market, and as we’ve known since Adam Smith, that expansion will come with a finer division of labor. Sears never found a more precise niche in that new ecosystem. By still attempting to sell something of everything to everyone, Sears ended up selling very little to anyone.
So what’s the good news here? I think there’s two things. First, the churn of creative destruction is alive and well in the US economy. The examples of once-dominant firms who have met their maker in recent years keeps getting longer. If we go back a bit, A&P was the Amazon (or perhaps Walmart) of its time, and it no longer exists. The more recent demise of firms like Borders Books and Toys R Us, and the competition that reduced the dominance of Walmart, makes clear that any firm that’s doing well now, even Amazon, cannot rest comfortably. Today’s consistent profits are tomorrow’s liquidation sales.
Second, it shows that despite the bailouts and subsidies and the general restraints on the invisible hand of the market, consumers are still sovereign and that it’s still possible to go bankrupt if you can’t please them. The resources that Sears owned were destroying, not creating value, and its failure enables those resources to be purchased by those who think they can do better. As Deirdre McCloskey refers to it, “market-tested betterment” is still alive and well in some sectors of the US economy. As much as discussions of economic growth focus on the ability to start new businesses, it’s probably true that our willingness to let businesses fail is a better indicator of a healthy economy.
In this way, while the demise of Sears might be a sad day for Sears and those associated with it, it’s a day worth celebrating for the US economy and for the long-run well-being of all of us as consumers.