Why Some Stores Thrive In a Tough Retail Environment

by MAi Research December 19, 2019

 

 

The holidays and retail shopping go together like hot chocolate and marshmallows. But recent trends have not been kind to retailers. We read about the impending death of retail channels nearly every day. We’re told that brick and mortars retail is in a steep decline, that consumers are buying everything online, and that wise investors and nostalgic shoppers alike should say goodbye to once-beloved retail institutions.

 

But is this the whole truth?

Augmented reality in retail business concept application in supermarket for discounted or on sale products.

 

While it’s true that retail has been in general decline, some retailers have managed to buck the trend and grown stronger even as others are withering away. To understand the difference, we can compare two retail companies: the highly successful Walmart and the seemingly doomed Sears.

The Sears Model

For consumers today the decline of Sears may not seem surprising, but it’s important to remember how dominant Sears once was. Its status as a pioneer of mail-order retailing was as big a game changer in its day as Amazon.com has been in recent years.

 

Before there was Amazon.com, there was the Sears catalog. Founded as a mail-order watch company in the late 19th century, Sears, Roebuck and Company made its name with its swollen, jam-packed catalogs that advertised everything from underwear to entire house kits. Around the holidays, families across the country would circle items in its legendary “Wish Book.”

 

Throughout the first half of the 20th century, Sears succeeded by embracing market transformations. The store became a fixture of the shopping malls that sprouted up throughout suburban America. The key to Sears’ early dominance was tenaciousness, innovation, and a willingness to carry everything from the appliances within a home to the home itself.

 

So the decline of Sears shouldn’t be seen as simply the fall of another retail chain, but as the fall of a company with incredible financial power and a history of tremendous innovation behind it. That being said, things have clearly changed. The Sears situation is getting so bad that some are wondering if this year will be Sears’ last holiday season.

 

Inability to Specialize

The decline began when Sears entered the financial services sector. While this expansion included the start of successful brands like Allstate and the Discover Card, it also destabilized the company’s foundations. These successful launches were also matched by failures such as the early online portal Prodigy.

 

Whereas previous Sears projects had been marked by commitment, in later years even successful projects were sold off or made public at the slightest sign of doubt. Even projects that formed the basis of Sears’ income weren’t safe. In spite of the company’s credit division forming a significant portion of its income, Sears sold Discover in 2002 due to a fear of regulation.

A Failure to Innovate

If the early Sears were around today it would be called a disruptor. The Sears Catalog became a mainstay of Americana that transformed the relationship between consumers and products. But as Sears became more dominant it began to lose its innovative edge. While it would be easy to blame this failure on the company being too conservative, a more likely cause was an unfocused innovation agenda.

 

Sears did launch an online store in 2000. However, while the store had a far larger selection than Amazon, Sears became complacent regarding prices. Thus, consumers who once flocked to the affordable retailer could not justify spending more money at Sears than more affordable online alternatives like Amazon.

 

In recent years Sears has focused on cash-saving measures such as reducing locations and cutting staff. While these may cut costs, they also damage brand ubiquity and the customer experience. And at this point the gradual accumulation of errors make it unlikely that mere cost-cutting will enable Sears to survive, let alone return to its former glory.

The Walmart Model

The decline of Sears might make it seem likely that Walmart is also facing collapse. However the discount retail giant continues to thrive, even as it competes with Amazon and an intimidating digital sector. To industry outsiders, Walmart confounds expectations. However, those that understand its business model are not surprised by its continued growth. In fact, Walmart entire strategy can be looked at as a recipe for financial success.

Staying on Task

From its humble beginnings Walmart focused on being a budget store. While the chain has been around for over 70 years and seen many changes, it has stayed true to that mission. By focusing on “everyday low prices,” Walmart has established a reliable market niche. The company’s particular genius can be found in its ability to scale to that model.

 

Walmart is also able to maintain lower prices than its competitors by taking advantage of both its ubiquity and dominance over supply chain management. Because of this, the growth of Walmart has only led to success upon success: the bigger Walmart gets, the cheaper it gets, and so its core benefit always remains front and center.

Progress, Not Change

While Walmart has maintained a singular focus, that doesn’t mean it hasn’t progressed. As the retail marketplace has changed, Walmart has continued to evolve, for example by continuing to invest in technology and e-commerce initiatives. What makes these investments successful is that Walmart continues to focus on providing low-priced products.

The Takeaway

Sears and Walmart took two very different paths in a difficult market. Sears lost sight of its focus and valued change over consistent innovation, resulting in an anemic company that continues to face market difficulty. Walmart, however, was able to grow while staying true to its initial mission.

 

Ultimately, these contrasting examples suggest that surviving and thriving in today’s shifting marketplace requires, above all, a sense of consistency and a willingness to evolve without compromising a company’s core principles.