With the news of Sears Canada’s demise, the postmortem begins.
To some, it’s a quick one, as tattooed across the body from head to toe, seemingly, are the tire tracks of that hummer of a retailer, Amazon. But despite its appealing narrative —the old store-bound has-been gets trampled by the more fleet-of-foot online powerhouse— how true to life is that image? In fact, Amazon played but one part in the death of Sears.
Last week after 65 years in business, the Canadian icon of a bygone shopping era called it quits, putting over 12,000 employees out of work and starting up a massive liquidation process at its remaining 130 stores across the country.
The vultures (meaning people like you and me) in search of fire sale fridges and discounted washer-dryers will be swooping in en masse, so much so that Christmas sales at other retailers are expected to feel the hit this year. The closing has even led one political party, the NDP, to call for an emergency debate in the House of Commons to address the job loss and potential impact on the retail sector.
But in the public eye, the debate on who’s to blame is all but over, with no better indication of where people will point the finger than the move in July of this year when Sears Holdings in the United States (which includes both Sears and Kmart stores and up until 2014 owned 51 per cent of Sears Canada) announced it would begin selling its line of Kenmore appliances on Amazon, fully kitted out with Amazon’s own voice assistant, Alexa, so that purchasers could start talking to their refrigerators while at work.
“The launch of Kenmore products on Amazon.com will significantly expand the distribution and availability of the Kenmore brand in the U.S.,” said Sears Chair and CEO Edward Lampert.
The announcement immediately raised Sears’ stock price by ten per cent, with little to no movement in Amazon shares. The takeaway? Wave of the future tosses a life saver (cherry-flavoured) to drowning, mall-bound ghost-shop.
But really? Yes, Amazon is the king of online sales, everyone knows that. In Canada, its numbers are four times bigger than its closest rivals (and 35 times bigger than Chapters). But e-commerce is still a small piece of the retail pie, especially in Canada where the trend has been slower to catch on.
How small? According to Statistics Canada, retail sales in Canada were on average $44 billion for every month of 2016, with e-commerce making up just two per cent of that amount.
When people talk about the rise of online sales, they are right: while brick-and-mortar sales are growing at a reported pace of three-per-cent per year, e-commerce is jumping up 15 per cent. That’s not nothing, but it’s still not the whole story when it comes to the victim in question.
Sears was once the biggest retail store in the world. In the world! But that was the mid-20th century, and ever since the 1960s, long before anyone ever clicked an item into their shopping cart, experts say the company has been on a steady decline. They point to a bunch of issues: along with a failure to adapt to changing markets, Sears’ side ventures such as their insurance business, Allstate, caused a drain on the company. A lack of brand support made customers to turn elsewhere. And then there was the ill-conceived link up with Kmart, another bad brand store. Finally, we have the rise of Wal-Mart, in case you forgot about them.
“It would be easy to read this story as a triumph of e-commerce,” writes David Floyd for Investopedia. “[But] competition with Amazon alone [did not] precipitate Sears’ decline.”
“When sales and profits began to fade, in the mid-2000s, other big box retailers – particularly Wal-Mart – were thriving. In 2011, the year Sears lost over $3.1 billion, Wal-Mart made $17.1 billion,” says Floyd.
Did Amazon take a bite out of Sears? Sure. But while e-commerce grows in today’s market, other brick-and-mortar retailers like Best Buy, Home Depot, Lowes and Wal-Mart are still turning a profit. For Sears Canada, though, the problems trace back to unwise moves by its US parent. If anything, Sears’ death was an inside job.