Nov 9, 2018
Last week you may have noticed that Sears filed bankruptcy with little more than a whisper. Knowing history is important for so many reasons. Those reasons are not to live in the past, but remind us of decisions, strategies, and opportunities for the future. It does not need to be just business history or that of our country to require understanding history. A peripheral vision of events and application to our position today is what we all strive to apply to life and business.
I don’t have to tell most of you that Sears was the greatest retailer of the past century. But many have forgotten what else they did. Copying the name of one of their tire brands they created Allstate Insurance in 1931. This was the middle of The Great Depression, but the ubiquitous insurance counter at the Sears store remains in my memory while visiting Chapel Hill Mall with my mother. Ironically, created in hard times, they spun off the company in 1993 during another tough time in retailing in what was then the largest IPO of all time.
The Dow Jones Industrial Average was less than 900 (now over 25,000) when Sears bought Dean Witter in 1981 followed by Coldwell Banker and then formed the Discover Card. All were disposed in the same 1993 crisis period. And only the real nuts with nothing to think about (me) will remember a joint venture with IBM and CBS when they formed Prodigy, one of the first Internet service providers. This was disposed of in 1996. And during this time they stopped printing their 100-year-old catalog, where once you could buy and build an entire house!
When they finally were removed from the Dow 30, they were replaced with Home Depot. Talk about adding insult to injury. So if I asked you to envision a company with a universal audience, a catalog, an insurance company, a stockbroker, a real estate arm and the internet platform to deliver it all, most people today would think we are talking Google or Amazon. What went wrong with Sears?
This is not my opinion as the autopsies have been well published. When folks thought of Sears as a great retailer, they lost out to the Targets, Walmarts, Macy’s and others in the retail world while they were trying to enter other businesses. We all have retail shopping preferences and can tell the story of why we like one or another. More subtle though, it is well documented that they left employees without the tools, platforms or ambition to be the best at what they did—sell stuff. The ground lost in the retailing business, particularly in leaner economic years, caused them to then sell assets at a reduced price in order to survive. Today, Allstate’s market cap is $31 billion, Discover’s market cap is $23 billion and Morgan Stanley is $78 billion (Dean Witter was half of their $10 billion merger in 1997). Prodigy has morphed into AT&T’s internet platform and is really hard to value. So with more than $100 billion of value in the sold-off entities that each seem to have adapted to their customer base, we see the mighty parent company in the gutter, with no way out.
In many ways, we are seeing the same thing happen to once mighty General Electric and you can draw some parallels to General Motors, Ford, and other once-mighty companies. How does this apply to us? We are blessed to have products and customers that need our products. We have a client lifespan really unmatched in most business. The duplication of that loyalty and following is not likely for the future, but it is not unobtainable in significant segments. It is up to leadership and employees to sharpen our delivery, knowledge of products, and processes to be relevant and valuable to the client. Much as we feared Allstate and State Farm back over the decades, we see and hear from those predicting the takeover of our business by Insurtech interests. While important to watch, and we never know where the most competition will arise, it is probably best for us to really sharpen technology, skills, and products while focusing on the things we do well.