Sears, Roebuck Inc.
Marketing Management 445-02
April 6, 2006
Team # 6 Presenter Team
Ryan Davidson
Wes Davis
John Jedlinski
Megan Rowe
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Executive Summary
Statement of the Problem
Sears didn’t think it was necessary to keep up with trends and now they have fallen
behind discount stores because of their lower prices and fashionable merchandise.
Background
Sears began as a small watch store, with great prices in 1886. It was under the
management of Richard Sears that made this company a success. Within six months Sears was
moved to Minneapolis under the name R.W. Sears. In 1887 he opened a second location in
Chicago and hired his first watchmaker Alvah Roebuck. A year later, Sears retired and left the
company to Roebuck. He didn’t stay in retirement long about a year later the two opened Sears,
Roebuck Company.
Discussion
Sears, Roebuck remained successful up until around the early 70’s. It was then that Sears
was too confident in themselves that didn’t think they needed to change with the trends. When
this was noticed it was too late. Sears tried to get out of this crunch but the FTC accused them of
baiting and switching.
Sears was now seen as a place customers use to go rather than the place to go. Although
they tried to lower prices they didn’t lower other expenses so the company just suffered more.
Recommendations

Open a Sears discount store, like a Nordstrom’s Rack

Give the store a facelift and a new image

Devote more time to advertising
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History
The story of Sears, Roebuck Inc. begins in 1886. A man by the name of Richard Sears
took notice that there is more money to be made in sales than there was in working on the
railroad. Sears saw a chance for opportunity when a jeweler refused a shipment of watches. The
factory offered these watches to sears at a price of $12; he took the watches and offered them to
freight agents for $14. These watches sold for about $25 retail. This process had Richard Sears
hooked. He ordered more watches and in six months made $5,000.
He then moved to Minneapolis and founded R.W. Sears which grew like wild fire. In
1887 he opened a new location in Chicago where he hired a young watchmaker, Alvah Roebuck.
The company was so profitable a year later Sears wanted to sell the company so he could retire.
His retirement didn’t last long because Sears started a new watch company called the
Warren Company which he later sold to Roebuck in 1891. After trying retirement Sears decided
he wanted back in the business so he asked Roebuck to sell him half share. They named it the
Sears, Roebuck Company. It too was successful and in its first year published a 52 page catalog
of watches, “a 100-page catalog of watches, charms, rings and other goods the following year.
In 1893, the catalog had expanded to 322 pages and included sewing machines, bicycles, organs,
pianos, and men’s and boys’ clothing.” Roebuck decided to leave the company and a man by the
name of Julius Rosenwald was brought in. Rosenwald had a philosophy of, “sell honest
merchandise for less money and more people will buy it.”
In the 1970’s Sears was confident in itself because it was the largest retailer in the United
States. Sears was unable to see and act on trends faster than their competitors. With earnings on
an increase Sears “promoted more expensive brand names and encourages its loyal customers to
trade up to these products.” This was done in such an aggressive manner that in 1974 the FTC
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accused Sears of performing a “bait and switch act.” This hurt the company image and
consumers started to shop at the new trend, discount stores. In 1976 Sears felt the aftermath of
the declining customer base and lowered prices to try and regain those once loyal customers.
Sears’ problem was they only lowered prices and didn’t lower administrative and selling
expenses. This caused a decrease in income and profit margin the following year.
In the early 80’s Sears had 1,700 catalog locations, 900 stores, 13 distribution centers,
and 124 warehouses. With profit on a decline Sears felt the need to cut back and began to close
unproductive locations. During this time the companies’ competitors were growing in prime
locations. “Senior executives began to seriously analyze these competitors only after they had
successfully attracted large numbers of Sears’ customers.”
Over the next several years Sears’ profits and customers continued to decline. This
decline was for many reasons, some of which are; Sears didn’t reduce time between order
placements and when it was on the racks and the failure of their catalog around 1992 due to the
inability to produce a successful mailing list.
Sears did however try and lower distribution costs in the 90’s by partnering with Menlo Logistics
and using EDI. “Where Sears use to receive and process freight bills from 100 different carriers,
the company now received electronic freight bills from one company.” Even with the
introduction of EDI Sears still couldn’t get the fashion good on the racks quick enough. Now
Sears is seen as a retailer that use to be. Although they were once number one, they now have to
rely on their stores which use to be their weakest link.
Highlights
In 1886 Sears, Roebuck was started by a man by the name of Richard Sears. The original
beginning of Sears was started with the emphasis being on jewelry. That was the industry that
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Richard was most familiar with and was the reason the company was created. In the late 1800’s
the majority of the U.S.’s wealth was located in the rural agricultural areas of the country. Sears
began marketing to these people because of their limited options where they lived. After selling
the company off and trying life in retirement, Richard Sears quickly bought back into the
company which then took on the name sears, Roebuck Company. As the company began to
expand Alvah Roebuck left the scene and Julius Rosenwald was brought in. He brought with
him strict management tactics and some straight forward business philosophies. One of the main
philosophies that guided Sears to success for many years was “sell honest merchandise for less
money and more people will buy it”.
By the 1970’s Sears had seen huge success and thought of itself to be secure as the
nation’s number one largest retailer. In fact, the stock of the company was selling for thirty
times the annual earning. Investors viewed sears as a stead fast company that would be able to
adapt to any market change in the future.
During this time the Sears Company decided to change some of their selling tactics.
They did this by promoting more expensive brand names in the stores and encouraged their
customers to trade up for them. This change in policy would be the start of Sears decline. They
promoted the new selling strategy so aggressively that is 1974 the Federal Trade Commission
reprimanded them for uses “bait and switch” tactics. Right around the same time Sears was
dealing with the FTC, customers started going to other discount chains like Kmart. Sear,
realizing they were losing some of their customer base, decided to go back basics.
In the start of the 1980’s the Seas, Roebuck company had 1,700 catalog offices, 900
stores, 13 regional distribution centers, and 124 warehouses. It was during this time that the
company acquired the Dean Witter Reynolds securities brokerage business and the Coldwell
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Banker real-estate operation for $812 million. These new ventures by the company began to
obtain most of the attention of the executives, mainly because they accounted for half of the
company’s profits. Also during this time Sears began closing unproductive stores around the
country, while Kmart and Wal-Mart were opening new ones.
Throughout the late 1900’s Sears failed to foresee and change to the changing times. One
aspect that hurt the company was its lack of advancement in technology. It was until after the
competition had obtained to competitive advantage that Sears finally recognized the need and
implemented a computer classification system. At the start of the 1990’s Sears again fell behind
in advancement by having a retail delivery system that took 5 times longer then the competition.
This allowed companies like Kmart to put newer items on the shelves faster then Sears.
Sears did make attempts to change their marketing format, but again Sears fell behind
and the new formats only reached 20 percent of the stores. Once the formats did eventually
reach all the stores, the new fashion division did become a big success. This success proved to
come too late and in 1993 the Sear Company closed 113 of their unprofitable stores. While the
catalog division was separated from the company because of its poor performance, the mailorder division grew to over $200 billion a year. Again this achievements were far and few
between and by 1993 50,000 employees and lost their jobs with Sears.
Marketing Strategies Evolved
Sears was in serious trouble of losing their position as America’s number one retailer
unless they made some changes. Some ideas thought up by the chairman and CEO, Ed Brennan
was the sale of the Sears Tower, a new pricing strategy for the entire retail operation and a stock
buy-back plan. Of all these ideas only the stock buy-back plan worked. This was a small change
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for the company but it did not pay off to well in the long run and because of this Sears made
some changes in the stores.
One of the big marketing strategies that Sears focused on in the stores were remodeling
the stores into seven power formats: women’s apparel, appliances and electronics, home
improvements, children’s clothes, automotive, men’s fashion, and furniture. (Peter 190). With
this change also brought about the use of point-of-sales registers. The registers were able to
perform all kinds of functions such as credit checks inventory adjustment functions and more.
This brought bar-code scanners which could tie warehouses, home offices, stores, and supplies
together. “These systems enabled Sears to react more quickly to changing fashion trends, move
items which are not selling and thus, compete more effectively with specialty stores.” (Peter
192).
Sears implemented a partnership with Menlo Logistics, by introducing electronic data
interchange (EDI) which allowed Sears to receive electronic freight bills from one company
rather than 100. This was a huge step for the company in reducing distribution costs which
would save them money, but because of this Sears had to let go of 5,700 employees that worked
at the distribution centers. Another way that Sears was able to improve was by the Sears
Distribution Operating System (DOS) that linked all 868 stores. “The system allowed managers
to see individual turnover rates, inventory levels, and reorder cycles at any particular moment.
This system enabled Sears to reduce inventory levels without increasing in-store stock outs.”
(Peter 195).
Sears had a big change in their financial service division in which they had plans to sell
off Dean Witter Financial Services Group; this included Discover credit card operations. Sears
also had plans of selling the Coldwell Banker real-estate business but hold on to the Homart
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Development Corporation. One more way that Sears was trying to regain its status was offering
20 percent of Allstate Insurance Group to the public in stock. Investors believed that once
separated from the bureaucracy of Sears each of the subsidiaries will be even more profitable.
Target Markets
In regards to the evolution of specific markets, Sears has revolutionized their scope
drastically from a minimal watch operation, into a multi-tasking corporation. Sears expanded
their seemingly basic operation by targeting more rural and agricultural areas, rather then using
local newspapers as the primary source of advertising. This generalized market accounted for
over seventy-two percent of the United States national wealth. Based on this statistic, Richard
Sears incorporated advertising tactics designed to designate this category, which had such
limited shopping options. As Sears expanded through the years from newspapers, to catalogues,
into actual brick and mortar, their success evolved as well. The company reconsidered their
advertising tactics as well as products being offered and integrated more goods such as bicycles,
sewing machines, pianos, and clothing into their existing stock.
Over the years Sears maintained a high level of customer loyalty with the successful
mission statement, “Sell honest merchandise for less money and more people will buy it.” Sears
has always had a high customer perception of goods and service, but the company decided to
change their advertising slogan from “Seller to American Farmers” to “Buyer for American
Farmers”, a subtle change that lead to many more. With the company’s increase in revenue,
there came confidence, and the company ran into trouble with the Federal Trade Commission
due to “bait and switch” methods used by Sears.
Around this time, Sears started to battle with other local chains such as Kmart and WalMart over market share. These up-and-coming discount chains started to slowly capture a
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portion of sales that had gradually been declining from Sears for years. Sears portrayed itself as
a specialty store, not only for small household items, but also available for customers to purchase
high end home accessories; including washing machines, dryers, lawnmowers, etc. Specific
brand names helped Sears entice customers to come to Sears, with names like Kenmore,
Craftsman, and Diehard.
Competitors
The main competitors that grew in Sears’ shadow during the beginning were Kmart and
Wal-Mart. Kmart took a lot of the Sears customers after the problems they faced with the
Federal Trade Commission. Wal-Mart became more powerful then Sears in the 1990’s because
in made advancements in their technology and were able to have their prices lower then that of
Sears. In fact, the new wave of discount stores in the U.S. has produced many retail stores that
fight for their position in the market share. Sears main advantage is that they were fist on the
scene and were able to create a positive brand image not only of the Sears name, but also of other
brand names that were created for Sears. Having focused on the financial division of the Sears
Company for so long, Sears suddenly saw themselves having to play catch up to the other retail
giants.
Customer Service
Sears values its customers and holds relationships between employees and consumers at a
very high standard. The company considers its achievements over the years in part to service
and products, but mainly to their dedication for customer satisfaction. The company offered all
customers with the reassurance of a satisfaction guarantee on all products sold by Sears. But,
because of Sears’ commitment to customer satisfaction and perceived quality the company has
been able to maintain repeat customers year after year.
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Analysis of Sears, Roebuck Company
Strengths

Exclusive brand name products like Kenmore, Craftsman, and Diehard products

Perceived high quality

Well established company
Weaknesses

Inability to get products on the racks fast enough

Failure of their catalog due to the inability to produce successful mailing lists

Tarnished name after being accused of “baiting and switching” by the FTC

Always a step behind in realizing a problem and keeping up with trends
Opportunities

The stock buy back program

Open a Sears discount store, like a Nordstrom’s Rack

Sell more variety

Sell overseas
Threats

Discount stores like Kmart and Wal-Mart

Trends in fashion
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Works Cited
1. Peter, J. Paul and Pitterle, L. Sara. “Sears, Roebuck Inc.”. Reprinted in Melvin R.
Mattson, Marketing Management Case Analysis by Teams. Boston. McGraw-Hill. 2005
pages 185 -195.
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