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Should this have raised a red flag to other retailers that if the retail trinity (Sears Roebuck & Co., Montgomery Wards & SuperKmart [Kmart]) were going bankrupt 1997-2001, sooner or later it would trickle down and heavily impact the rest of the retail industry? If this is true, how on earth is Walmart (btw, someone else did the flash chart) somehow surviving the retail riptide?
Wal-mart, along with several other major national retail chains, may not survive the cut in consumer spending. These companies indulged in major expansions financed by borrowed money backed by the illusion of an permenantly expanding credit driven bubble. That bubble has burst.
Wal-mart, along with several other major national retail chains, may not survive the cut in consumer spending. These companies indulged in major expansions financed by borrowed money backed by the illusion of an permenantly expanding credit driven bubble. That bubble has burst.
Do you think because the Retail Trinity was primarily credit-based and Walmart made (what turned out to be a smart move) the move to reduce its consumer credit lines drastically ('typical' Walmart consumer credit line is less than $1,000), that this helped them to survive along with them turning into a de factor grocery store?
I just cannot believe they have 3500 stores running like hot syrup in this economy... I am wondering too is JC Penney is not far behind the big 3?
I did not shop at the 'Retail Trinity' for at least 10 years before that (Sears occasionally for tools). I think they went under for perceptions of lower quality and poor service. Target and Walmart outran them. JCP as well.
I did not shop at the 'Retail Trinity' for at least 10 years before that (Sears occasionally for tools). I think they went under for perceptions of lower quality and poor service. Target and Walmart outran them. JCP as well.
JCP is one of my favorites but I am worried about them.
I was employed as a graphic artist in the ad department of Wards' corporate office in Chicago from 1996 down to the final day, December 28, 2000, when they announced the end.
What brought Wards down was the lagging sales in apparel, sometimes down as much as 60-70%, based on weekly data. Appliances and "soft home" (bath, curtains, bedding, etc.) usually did well, but not well enough to compensate for the losses in apparel. I had an employee discount of 15%, but rarely used it to buy clothing, because most of the stuff was cheaply made, synthetics. I preferred cotton. Shoes were also mostly synthetic materials. The electronics department managed well, but with fierce competition (Best Buy, Circuit City, Sears, Walmart), provided very low profit margins. The employee discount for electronics was only 5%.
In 1996, the CEO, Bernie Brennan, was "persuaded" to retire and received 3 million dollars. His position was soon filled by Roger Goddu, former CEO of Toys R Us. Only months later Wards filed for Chapter 11 and laid off several hundred corporate employees, as well as closed poor performing stores. One of the conditions of the Chapter 11 was that General Electric which previously had a 55% stock of Wards acquired 100%. With the finances of GE, Wards began to remodel stores and improve inventory. Sales picked up for a while, but, again, apparel dragged everything down. As the Christmas data for 2000 was complied, Wards gained about 3%, which discouraged GE, and GE decided to "pull the plug". Wards was finished.
Last edited by Visvaldis; 02-10-2009 at 10:46 AM..
I do think the failure of Montgomery Ward's was completely separate from the current crisis. And the falling fortunes of K-Mart and Sears started with the rise of several big competitors and what was an aging infrastructure. The economic crisis has just placed additional burdens on them. And according to January's sales figures, Wal-Mart is weathering the crisis well. Profits may not be growing as fast, but profits are still growing.
Should this have raised a red flag to other retailers that if the retail trinity (Sears Roebuck & Co., Montgomery Wards & SuperKmart [Kmart]) were going bankrupt 1997-2001, sooner or later it would trickle down and heavily impact the rest of the retail industry? If this is true, how on earth is Walmart (btw, someone else did the flash chart) somehow surviving the retail riptide?
Both the perception and reality that they offer lower prices. Wal-Mart is ruthlessly efficient, and utilizes IT very, very well. They do a great job of data mining, analyzing their mountains of data, and they also manage their inventory very well. (or so I'm told)
rubber_factory is correct. Sears Roebuck & Company (before Lampert & KMart) would always spend a huge amount of money on IT. Way, way way back before barcode scanners they hand OCR based inventory systems and enormous mountains of mainframe inventory systems. Unfortunately the "men the signed the contracts" were not just old school, but flat out backwards in their understanding of how IT was supposed to work. Regardless of what the accountants would glean from the data, the men that "made deals over 3+ martinis" ruled the place. The people that sorta understood the value of finance and computers eventually found homes in the leadership of places like Discover & Allstate. Sears was left with neanderthals that figured they'd fill stores with their grandma bought...
Wards was 100% a case of the lenders losing patience with the firm, Lampert has piles of dough from his hedge funds and tricked enough others to stick their money in the debt hole of Sears that he has orders of magnitude more room to manuever. He also has a heck of good firm in Land's End, that stand alone is a very valuable thing. Wards made wacky decisions with its "Gems & Gold" business that enabled it to have decent gross margins, but as others have pointed out, NOT on enough of the inventory to matter. Some sort of thing sunk Service Merchandise and other retail operations too. W. Bell, McDade. Lots of regional operators bought the farm over the super high margins on junk jewelery never quite offsetting the tiny margins on the stuff that really filled the bulk of its stores /showrooms / warehouses...
For retailers to thrive (survive...) they have to make a compelling case to investors that their overhead costs are more than covered by the day-in day-out routine mix of goods that turns over in their stores. For shoppers to open their wallets those good have to be cheap enough, unique enough for them to go their often and spend. Tough challenges. WalMart sets the bar very very low and generally manages to exceed expectations. Warehouse Clubs like WalMarts' own Sam's or Costco or BJ's have overhead costs so low as to threaten even online / mailorder (ask UPS to lower their rates? I don't think so...)
Negative news cycles really really hurt the mall retailers, even taking the wind out of the sails of Target. People that stop going to Target for toiler paper (becuase 50 rolls from the warehouse club or even even 10 with a coupon at WalMart are cheaper) stop also buying the "designer extras" that Target thrives on.
Positive news and feelings of life not being in constant unimaginable peril (thank you former Secretary Paulson and even the current administration) are the only things that are going to make people feel OK about doing a little bit of shopping anywhere but the absolutely lowest cost retailers...
My last experience with Mont. Wards was horrible - they had advertised an entertainment center that I thought I wanted. Little did I know: there isn't one on display, if I wanted it-I had to buy it sight unseen and they'd bring it up from the basement!! Give me a break - that was the last time I entered that store. I complained by email and on the phone even and got a brush-off. Good riddance.
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