The other day I turned on the news to the headline of Sears Canada closing 59 stores. My thoughts went immediately to images of my mother passing around the Sears catalog as she asked us to mark pages with gift suggestions. That tradition continued with my own children as she would sit down with them and shift through the toy section for ideas. What happened to those “good ole days?”
Those days of bonding over the Sears catalog were over a decade ago and the strategy of mailing a catalog has long been left in the dust. In the meantime, Sears hasn’t turned an annual profit since 2010, with losses in the billions. The gut reaction for many would be to say Sears, or its Kmart brand, didn’t keep up with the growth of online shopping, but the store’s troubles started long before browser buying became the norm, and can be tied to the brand not planning for the future of their supply chain.
For the most part during all those years of losing money, Sears didn’t change the way it did business. The company just went about the day doing things the way they’d always been done, like mailing catalogs. It did little to invest in its brand and tried to work its way back to profitability by cutting. There was also little done to attract new customers and the Sears clientele remained for the most part late baby boomers. One would have been hard pressed to find a millennial coming out of Sears and pulled aside for an interview on what they thought about the store’s demise.
Doing things better
By just doing things as is, Sears did little to set itself up to compete with new competitors like the low-priced Walmart or box stores like Home Depot and Costco. These companies built great brand recognition while Sears lost its place in the Dow Jones index of the nation’s most important companies in 1999. Yes, 1999. That’s pushing 20 years to turn things around and re-invent yourself after a huge red flag is thrown your way. Sears took a major punch to the mid-section from the companies doing better but were still in the fight. But is a knockout blow on its way?
Doing things differently
There’s no question Sears lost ground to the companies doing things better. But will companies doing things differently make it impossible for Sears to come back from the brink of bankruptcy? Amazon and Apple easily come to mind as companies doing things differently. These companies revolutionized how consumers can research, buy and take delivery of product. They know their customers. They figured out how to best service them, and made it easier for customers to buy. On top of that, the brand recognition of these companies dwarves that of Sears, especially with younger generations.
It seems the grave is dug and we’re just waiting for the plug to be pulled on Sears. Sears has had recent initiatives to change its course such as its strategy to mix online and in-person shopping, allowing customers to buy online with convenient store pickup, or chatting with in-store experts who have done little to course correct. But wait, is there still a heartbeat?
There is if you look at one more company that’s doing things differently, Best Buy. In Kevin O’Marah’s weekly insights, Beyond Supply Chain, (http://www.scmworld.com/best-buy-and-retails-long-road-back/ ) O’Marah highlights how Best Buy, which was also on life support not so many years ago, is staying alive in the growing online economy. He called out the factors that brought Best Buy back from the brink.
Best Buy got closer to its manufacturing. Kevin states that “retail’s traditional merchant mentality has an operational flaw: it essentially ignores the supply chain.” Traditional operations are full of silos, with separate teams managing logistics, merchandising and store operations. In this case, it’s build product, ship, stock and wait for purchase. Amazon changed all of that by taking orders first. With that, came the collapse of supply chain silos to support this leaner mode. As a result of that shift in traditional operations, Best Buy now allows brands to operate within its stores, giving them direct links back to factories, new product launch plans and technical support. For Best Buy, the store is now an extension of the supply chain.
The other key thing Best Buy did was to view the store from a shipping and logistics standpoint. O’Marah quoted a Wall Street Journal article stating half of Best Buy’s online orders are shipped from a store. With so many stores, ship-to locations are only a few miles away from the majority of customers, making delivery times shorter. This model will only get stronger as in-store operations improves its shipping capabilities.
Sears is now trying the same approach Best Buy took with in-store experts and improving the face-to-face experience. But can it learn from the other lessons of investing in the brand and getting closer to the supply chain? Time will tell. There are some lessons learned for supply chains in both Sears and Best Buy’s cases. Are we just doing, or are we doing better, and are we looking at doing things differently?
Doing things differently in supply chain
It’s difficult for supply chain practitioners to catch their breath while keeping up with the planning and execution of their networks. It’s critical though to dedicate time to preparing for the future. Gartner talks about the bimodal supply chain. With supply chains, we have to keep executing (doing), but in parallel, we need to test for the future to see how we can do things better, and eventually do things differently. Key ingredients for the bimodal supply chain are the flexibility to fail, to test new ideas and quickly move on if they don’t achieve the desired results. To dive a little deeper into this concept of a bimodal supply chain, check out my colleague’s blog post on the topic.
There are a number of factors affecting successful bimodal supply chains, including leadership, talent and technology. At the top of the list will be supply chain analytics. Supply Chain Insights highlighted critical analytic techniques we should all be investigating.