Byanca Christopher
Business
4/20/2015

Sears Holdings Corporation

There have been many large chain retailers to grace the United States, but Sears (or Sears, Roebuck and Co.) has been a staple for as long as many people can remember. Sears was once the largest retailer in the United States and is still one of the largest today. In recent years the retail giant has seen a major decline in revenue and stores have been closing across the country. However, Sears is not completely out of options or business and has a formula to continue its longevity. Sears, Roebuck and Co. is still one of the most recognized names in retail and has shown to be adaptable to the changing business environment. The Sears, Roebuck and Co. was founded in 1886 by Alvah Curtis Roebuck and Richard Warren Sears. Sears started his career as a railway agent. He began selling watches after a shipment of watches were unwanted by the receiver (Weil 20). After selling watches for a while Sears moved to Chicago and hired Roebuck who was working as a watchmaker at the time. The company became known as Sears, Roebuck and Co. In 1888 the first catalog was produced offering watches and jewelry (A Brief Chronology of Sears ln.1) There catalog enabled the duo to offer fixed prices to farmers for a larger variety of items rather than base the prices on the creditworthiness of the customer. The business’ growth was stratospheric and they quickly became a household name (Weil 22). This was not the end; the catalogs began to add more and more items. The popularity and sales increased helped the company to add higher ticketed items. By the 1910 the Sears catalog was more than 500 pages long and listed items from baby dolls to automobiles (Clymer p.91). Sales for the company were reached nearly three quarters of a million dollars in 1895 and that is also when Alvah Roebuck sold his shares to Sears for $20,000 (Weil 25). This was an unprecedented move but did not break the company. After the departure of co-founder Alvah C. Roebuck in 1895, Sears sold Roebuck’s half of the company for $75,000 to a businessman from Chicago named Aaron Nusbaum. Nusbaum was well known and with the addition of Nusbaum’s brother in law Julius Rosenwald, the company began to bring in new ideas, perspectives and revenues (Emmet and Jeuck p. 48). With this new team in place Sears’s revenues went from $750K to $50 million annually. This was due to the ever diversification of the catalog. With this success in mind, Sears and Rosenwald, who by now had become one of the owners after buying out Nusbaum for $1.3 million, had sights on becoming the first American retailer to go public (Emmet and Jeuck 55). This goal was achieved with $40 million in stock in 1906. Two years later Sears named Rosenwald the President and Sears himself stepped down because of health issues. In 1906the first Sears, Roebuck and Co. catalog plant in opened in Chicago and the catalog became a staple among rural homes in America (Longstreth 237). It was so much a staple that people in the rural areas of the United States anxiously awaited copies of it to look at the pictures. The Great Depression hit in 1921 and Sears took a hit right along with it. Rosenwald utilized his own assets to the tune of $21 million to stabilize the company. After the depression Rosenwald imitated the expansion of the company with the opening of its first retail store on Chicago’s west side in 1925. The store at Homan and Arthington was huge and contained a wide selection of items. During this time Rosenwald also resigned as president of the company. He did not give up his seat as chairman of the board and held the seat until he died in 1932. Sears did not build their stores in business districts; many of their stores were located in working class areas. This allowed the company to reach its target market a lot easier than other retailers. They also offered ease of service, air conditioning, and products for men and women (Longstreth 244). Bringing in such variety meant that revenue would soon increase. This revenue increase is what helped the company to expand even more; by the 1950s Sears was expanding to suburban markets and in 1959 formed Homart Development Company. In the 1960’s and 70’s Sears also expanded into shopping malls. This gave the brand more visibility to new demographic of shoppers and was one of the things that kept the company relevant in a changing business atmosphere. In 1931 Sears added an insurance company to their portfolio. Allstate Insurance Company is one of the largest insurance companies in the United States and it offers home, auto and life insurance. In the ensuing years to follow Sears, Roebuck and Co. added many brands to their belt including Discover Card (Katz 25). Sears has made headlines over the years with business moves that included selling off non retail assets that included Discover Financial. But it also took the title of world’s tallest building from the World Trade Center when they built the Sears Tower on Adams St. in downtown Chicago (Katz 33). The rights to the name Sears Tower expired in 2003 but the building kept the name until 2009 when Willis Re purchased the building. The building is now called the Willis Tower publicly but remains called the Sears Tower by Chicago natives and traditionalists. There are two main elements to connecting with the communities that keep the doors open to a business. One of those elements is corporate social responsibility. Corporate social responsibility refers to the obligation of a company to act for the benefit of the community at large. For Sears, Roebuck and Co., now a part of Sears Holdings Corporation, corporate social responsibility has been and is a major part of business. Over the years Sears, Roebuck and Co. has donated, through time, services, and merchandise, hundreds of millions of dollars to charities, sports organizations (3bl Media LLC pg.1). Corporate social responsibility is an aspect of business that helps to show the customers that they are in the thoughts of the people that run the company. By engaging in acts of corporate social responsibility the company helps its image become a household name. People will associate that company with giving and warm memories. It is an effective technique to gain new customers and retain the ones you already have. Sears Holdings Corporation has programs like “The Heroes Wish Registry” that helps deployed Americans send gifts home for the holidays. One hundred percent of the donations received go to the families of the military service members (3bl Media LLC pg.2). Along with many other services for the community Sears Holding Corporation reaches out and helps the people that keep their doors open. The other element to connecting with customers in the technological age is by having a strong social presence. “Sears Holdings Corporation (SHLD) has been a silent giant in social media for some time. Its online community now boasts more than 300,000 users and it was one of the first major retailers to adopt OpenID to connect MySears.com directly from major social networks”, is what Jennifer Leggio had to say about the company in her 2009 article, “Sears Holdings Corporation: A silent giant in social media” (pg.1). One of the ways that Sears stepped ahead of other companies was by using their own web community to reach their customers. This move ensures brand loyalty and makes the customer feel like they have a say in the direction of policy. Being accessible to customers also helps to resolve customer service issues more efficiently and adds to customer satisfaction. Sears also responds to customer complaints on Twitter and Facebook. Sears Holdings Corporation is a holding company. That means that it was created to buy other companies, either outright or through stock, so that it can control them. Since Sears, Roebuck and Co. was acquired by Kmart in an $11 billion deal in 2005. As a result Kmart changed its name to Sears Holdings (Bhatnagar pg.2). A move like this was supposed to help the retail giant, who had fallen behind WalMart, Target and Home Depot in sales, to reclaim its position in the business world. There are many benefits for owning a holding company. For instance, if the holding company owns at least 80% of the shares of another company then it can get tax free dividends. Holding companies also get all the brand recognition of their subsidiaries and none of the legal issues that may arise from the subsidiaries. So in essence, Sears is a public company that sells its shares on a public exchange. Even though the majority of the shares are owned by the holding company, the company is still vulnerable to a hostile takeover if another business decides to by more than 50% of the shares which would effectively make them the majority shareholder. Sears Holding Corporation is not a small business. It is a major corporation that does offer franchise opportunities. Through their website you can learn about the advantages of owning a Sears Home franchise. They offer support to franchise owners and the cost of owning a Sears franchise can run to the hundreds of thousands of dollars. The company also wants the owners of any franchise to have a net worth of at least $500K and that much cash in liquid assets. Having qualifications like these helps to ensure the longevity of the franchise. That is because the franchise owner can seemingly focus on success rather than financial issues. Sears Holding Corporation is 74% owned by other institutions. The other 26% is public owned. These companies, through their ownership voices, help direct the company. The CEO of Sears Holdings Corporation is a hedge fund manager named Edward Lampert. He makes many of the major decisions regarding the company. In recent years the company has been selling off assets to other corporations. According to a New York Times article in 2013 when Lampert orchestrated the purchase of Sears the company was already embattled with trying to maintain market share (Gelles pg.11). The style of leadership that is utilized by the management of Sears Holdings is called transformational leadership. Transformational leadership motivates people to transcend their personal interests for the good of the group. In other words, a transformational leader will motivate the employees to sacrifice for the good of the company. They do this by assigning responsibilities and generally making employees feel like they have a say in the direction that the company goes. Unfortunately for the CEO of Sears Holdings Corporation Edward Lampert this did not fare well. According to the article titled, "How An Ayn Rand-Loving CEO Tanked Sears," Lampert is characterized as an inexperienced CEO who has the wrong type of ideas for the retail (Madrak pg.1-6). His management style was described like “cage fighting” and the end results left Sears with empty shelves and adjusted gross earnings negative $300 million dollars (Madrak pg3, Gelles pg.1). Maybe the management style that helped Edward Lampert become a billionaire did not work for Sears and he should have gone another route. That point is evident. However, with a trusted brand name like Sears, a fluid business plan that will allow for the rapid changes that are associated with today’s market and the right leadership, Sears can still be turned around. According to the balance sheet for Sears Holding Corp. for the period ending January 31, 2015, the total liabilities added up to $14,160,000 while its total assets were $13,209,000 (Yahoo Finance Balance Sheet for SHLD). This has been a trend for the company for the last three years according to the balance sheet. A company that has more liabilities than assets is at risk for going out of business. It is at risk for defaulting to shareholders and creditors as well. The balance sheet for Sears Holding Corporation shows what the articles and critics have been blogging about, and that is the failure of the management style of Edward Lampert.

Analyzing the past, present and possible future of Sears Holding Corporation I see where things may have gone wrong. The company began with a truly innovative idea for the time. In the business world innovative, practical and different are the keys to longevity. By the time Edward Lampert took over as the CEO, the formula that made Sears what it was had been copied and watered down to the point that it having catalog or sales paper became the norm. The innovative ideas had to be reborn. The techniques had to be revamped and harnessed again. Doing so would make Sears the powerhouse it once was. Instead the management went in a different direction. Even though the direction seemed to be a great idea, it suffered from short sightedness that is unbecoming of a supposedly experienced CEO. Sears, Roebuck and Co. was the spearhead for a lot of innovative ideas that took the retail world by storm. The only thing that can bring Sears back is a reliance on those same innovative thinking techniques. Companies like Proctor and Gamble and Dupont send their employees into the homes of customers to do ethnographic research into the usage habits of consumers. Taking advantage of other metrics like infographics and psychographics also helps determine store layout that will encourage more customers to spend more money when shopping. Other retailers have done everything in their power to become a one stop shop for their customers by providing food, clothing, automotive and home supplies. These are not arbitrary changes but they are changes that have affected the bottom line of many retailers and are what has led to Sears becoming fifth in the nation.

Works Cited
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