Why sears is failing

He then took two already weak retailers and merged them in The hedge fund owner saw value in the retailers' real estate and believed that combining two fading giants would make them stronger. At the time, he said he thought he would be able to bring together Sears' Craftsman tools and Kmart's Martha Stewart Everyday home goods in stores to make a merchandise mix that could compete with the likes of Target and Walmart.

He also thought he would be able to cut costs by selling under-performing stores and then rebuild a smaller, mightier business.

But some analysts say Lampert hasn't been able to do either. Sales haven't manage to rebound, and stores continue to go dark across the country as they can't achieve profitability, and shoppers are finding better options elsewhere.

As other retailers have poured money into their businesses, Sears has arguably been on the sidelines. A report from Susquehanna Financial Group had said Sears in was spending roughly 91 cents per square foot to make upgrades both online and in stores, while J.

The trend started under Martinez. Under his tenure as CEO, from to , Sears closed more than stores, laid off more than 50, workers and discontinued Sears' famous catalog. He was trying to slash costs as sales started to fall, but the troubles only mounted. When Lampert took the helm as CEO in , he continued to cut some of its marquee brands and assets.

It also has failed to invest back in its remaining stores. After Sears merged with Kmart, the holding company had more than 3, locations. Today, it has fewer than , many within shopping malls that are already struggling to draw foot traffic as more and more shoppers go online. For Rand, community equals communitarianism, the evil power of the many to circumscribe the positive contributions of the few. As a Rand disciple, Lampert was predisposed to be suspicious of the entire idea of community, especially when it consists of the hoi-polloi who might consider "hanging out at Sears" to be something worth doing.

It was far easier for Lampert to gravitate to an online world that reduces everyone to infinitely measurable bits and bytes. Top Stories. Top Videos. Getty Images. There are three lessons that entrepreneurs can learn from Lampert's failure to adapt:. Imitation is the sincerest form of failure. Unless you can massively outspend a competitor like Kinko's taking on local copy shops , pursuing a competitor's successful strategy is destined to fail.

Position yourself to ride the backlash. The "online revolution" is now creating the inevitable backlash. While the failure of the company could certainly wipe out his hedge fund's investment in the stock, these deals have set Lampert up to benefit in other ways, creating a conflict of interest, a shareholder lawsuit claims. Failure is a near certainty, according to industry watchers. Analysts are expecting Sears to file for bankruptcy within the next two years, and perhaps much sooner.

Former and current Sears staff members who spoke to Business Insider put the blame squarely on Lampert for destroying the iconic American brand. Lampert, 54, has the pedigree of a Wall Street blue blood. He was a celebrated investor for much of his three-decade career. But Lampert's career before Sears' downfall was not without drama. Most notably, on a January evening in , as Lampert was walking to his car from his office in Greenwich, Connecticut, four people grabbed him, shoved him into a rented SUV, and took him to a cheap motel, where he was held captive for 28 hours, according to The Journal.

The ever private Lampert has never spoken about the incident publicly. At the time of the kidnapping, Lampert was hammering out the final details of a deal to acquire the discount retailer Kmart out of bankruptcy.

Then in , he combined it with Sears to create Sears Holdings in what was, at the time, the largest retail merger ever. ESL, which has long been one of Sears' largest shareholders, now owns about half of the company with Lampert. He has publicly compared Sears' strategy to Apple's and Microsoft's, and in his most recent letter to shareholders, he said that Sears is trying to meet new customer needs like Uber, Amazon, and Tesla are doing.

Sears is facing more scrutiny from Wall Street than those companies, however, because of the sheer fact that it's a retail company, he said. A hard look at the numbers shows that Sears Holdings looks nothing like a fast-growing tech company. The company is doing just that.

And Lampert has been lending the company money to pay off debt and keep it afloat. Traditional big-box retailers have been hit hard by the rise of online shopping and falling foot traffic in shopping malls.

But current and former workers say Sears' problems have more to do with Lampert's management and strategies than the larger industry changes. The videoconference room where employees meet, virtually, with Lampert has become infamous for the shouting matches that happen inside. The first time a new Sears vice president strolled into the room, two years ago, he found top managers sitting around a table, burying their faces in computers.

He tried to introduce himself — "Hey! He later understood why. Lampert has been known to get so angry in these meetings, particularly when he is challenged, that employees gossip about who is getting ushered into the conference room on any given day to "get their knees cut off," one former manager told Business Insider.

The meetings typically start with a presentation, and then Lampert fires off a series of questions to the presenter until he finds one that the person can't answer, one former vice president said. Lampert's management style — including the harrowing videoconferences — has been questioned before. In a July Bloomberg Businessweek profile that focused on the fierce competition between business units, the CEO defended his approach as a way to "drive decision-making and accountability at a more appropriate level.

But the situation has taken on a far greater urgency in the three years since that story was published. To meet its obligations, the company has been selling off valuable brands and properties. Before Sears and Kmart, Lampert had no experience in retail. The big plan he hoped would transform Sears was a rewards program called Shop Your Way, which the company introduced in Through the program, frequent buyers accumulate points for their Sears and Kmart purchases and turn them into coupons and discounts.

One primary goal of Shop Your Way was to acquire customers' personal information and sell it to other companies, according to a former executive who worked on the program. There's also a social networking component on shopyourway. In February , Lampert, presumably posting as Wexler, clicked on a pair of boxing gloves and posed a question: "Does anybody have these?

Will it protect my hands since I punch very hard? Because of the program, Kmart cashiers went from scanning 18 items a minute to just five, according to a former assistant manager at one store who left in after 12 years with the company.

Some frustrated customers abandon their shopping carts, forcing employees to return all the goods back to shelves. At the same time Lampert was pushing Shop Your Way and posting on the site, employees started complaining that Sears had stopped investing in its physical stores. Sears stopped reporting its e-commerce growth in , and Shop Your Way is now a "giant margin drain," according to two former executives who worked closely with the program.