The Downfall of Sears: Why You Need To Compete In The Future, Not The Present

31 Mar The Downfall of Sears: Why You Need To Compete In The Future, Not The Present

“Planning is bringing the future into the present so that you can do something about it now.”

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A high point of the year during my childhood was receiving Sears’ Wishbook. Oh the wonders that were inside! The Wishbook made Sears seem like a better version of Santa, capable of fulfilling all my dreams.

With the ability to capture such imaginative power, it’s not surprising that Sears was once the largest retailer in the United States with a seemingly endless ability to innovate.[2. Chris Isidore, “How Sears changed America,” CNN Money, 2017.]

Viewed from this golden age, it’s inconceivable that Sears could reach the point it did last week when it announced: “Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern.”[3. Sears Holdings 2016 Annual Report.]

How did Sears get here? Many analysts point to this downfall partially resulting from a preternatural power that Amazon possesses to outpace its competition. But, Amazon doesn’t have any magical wand. Instead, it engages in strategies to satisfy consumer needs in the future, while Sears and most big box retailers are content to satisfy them in the present. Looking to the future instead of the present is at the heart of innovation. And, Sears stopped innovating.

“competing” In The Present

Anyone that’s done any retail research in the last decade will have noticed the growing importance consumers place on convenience. The rising importance of convenience isn’t a new trend—marketing scholar Eugene J. Kelley wrote about it in 1958.[4.Eugene J. Kelley, “The Importance of Convenience in Consumer Purchasing,” Journal of Marketing, 1958.] But, what is new—and what will continue to be new—is the ways retailers can satisfy it.

To capitalize on convenience, many were content to do more of what they did in the past instead of looking to the future: open more stores—so people had to drive shorter distances—and put more stuff in them—a wider selection would mean a greater likelihood that customers could find what they were looking for. Fixing their user-unfriendly web pages and eCommerce business models was something they would get around to eventually since their perceived competition wasn’t doing any better. And, investment in mobile was all but nonexistent despite obvious signs that it would be massively important in the future—last year 50% of all online retail purchases for Black Friday and Cyber Monday were made on mobile phones and tablets.[5. Mike Shapaker, “Convenience for retail consumers will demand innovation in 2017,” Retailcustomerexperience.com, 2016.]

This mindset of competing in the present rather than long-term has created what Urban Outfitters CEO Richard Hayne referred to earlier this month as a “bubble”:

Retail square feet per capita in the United States is more than six times that of Europe or Japan. And this doesn’t count digital commerce. Our industry, not unlike the housing industry, saw too much square footage capacity added in the 1990s and early 2000s. Thousands of new doors opened and rents soared. This created a bubble, and like housing, that bubble has now burst. We are seeing the results: doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.[6. Tyler Durden, “Urban Outfitters CEO: “Like Housing, The Retail Bubble Has Now Burst”,” ZeroHedge.com, 2017.]

COMPETING In the Future

Truly competing—competing in a way that outpaces your competition—requires understanding where your customers will likely be in five or ten years. And, understanding that requires a deep understanding of your customers’ needs.

A major driver of the need for convenience is widespread feelings of having what researcher Leslie A. Perlow termed a time famine—the “feeling of having too much to do and not enough time to do it.”[7. Leslie A. Perlow, “The time famine: Toward a sociology of work time,” Administrative Science Quarterly, 1999.]

Sticking more stuff in a store would seem to help solve this problem: if there’s more stuff in the location, customers will have a greater chance of finding what they need, so you’ll save them time. The problem is that people don’t have less time now than they did decades ago, they only feel like they do.[8.Sanford E. DeVoe and Jeffrey Pfeffer, “Time Is Tight: How Higher Economic Value of Time Increases Feelings of Time Pressure,” Journal of Applied Psychology, 2011.] This is at least partly due to an increase in the perceived value of time because higher incomes today than decades ago mean time is literally more valuable and our obsession with busyness as a sign of success compounds it by making us believe that we need to make every second count.[9. Ibid.] [10. Harvey Schachter, “Feeling time starved? Well, you’re not,” The Globe and Mail, 2015.]

Customers feeling like they don’t have enough time creates a very different problem to solve than an actual lack of time.

A key to understanding why putting more stuff in the store doesn’t solve the convenience—and the time—problem is looking at what happens to people when they volunteer: they experience a time affluence. As researchers Cassie Mogilner, Zoë Chance, and Michael I. Norton write, “We found that giving time increases perceptions of having time—in both the present and the future—by increasing feelings of self-efficacy.”[11. Cassie Mogilner, Zoë Chance, and Michael I. Norton, “Giving Time Gives You Time,” Psychological Science, 2012.]

The ability that feeling self-efficacy has to decrease the perceived time famine is why putting more stuff in a store doesn’t truly solve the convenience problem and can be detrimental to it: Too much stuff can make it harder to find anything—something may be there but unfindable. And, a customer not finding what they want can decrease feelings of self-efficacy.

In trying to be convenient, many stores were doing the opposite. But, the competition wasn’t doing any better so increased sales made it appear effective, even though the underlying need wasn’t being met as well as it could be, and certainly not in the way it eventually would need to be.

In contrast to these retailers, Amazon likely saw this need, understood it, and looked to the future to meet it in ways and places companies that had an almost myopic focus on brick-and-mortar and past performance never could: making it easy to find—without exhausting searches—and delivered fast.

It’s no mystery that things are as they are today.

Plan The Future Now

I quickly realized that an invention has to make sense when the technology is finished, not when it started, since the world is generally a different place three or four years later.

Currently, more than 50% of consumers say that having a self-checkout would be beneficial.[13.Kim Bhasin, “Consumers Don’t Want Amazon or Google to Help Them Shop,” Bloomberg.com, 2017.] Many retailers are likely looking to implement this effectively. But, like cruise ship designer John McNeece quipped, “There is a problem figuring out what people want by canvassing them. I mean. If Henry Ford canvassed people on whether or not he should build a motor car, they’d probably tell him what they really wanted was a faster horse.”[14. Greg Miller, “Creating Cruise Ships with an Eye on Next Generation,” Cruise Industry News Quarterly, 1999.]

Instead of building a more efficient checkout, Amazon, always trying to stay ahead of the pack, is building a no checkout with its Amazon Go technology: customers just have to activate the app when they enter, grab what they want, and leave.

Convenience isn’t the only need your customers have. Some needs like convenience are related to categories whereas others are unique to your business.

Ask yourself:

• What needs do your customers have related to your business and industry?
• How are you meeting them now?
• How should you be meeting them in five years?
• How should you be meeting them in ten years?

See you in the future.

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