Sears has another chance to avoid closing down • Hacker News Board

Re: Sears has another chance to avoid closing down

#111

Post by Spooky23 » Tue, Jan 08, 2019, 5:21 PM UTC

bluedino wrote: post #11

How much of Sears's demise was due to Walmart? It's not like retail completely died. The home improvement chains hurt them too, once they started selling tools and appliances. We bought everything at Sears in the 80's. Electronics (including computers), appliances, toys, clothes, tools, lawn and garden... Was Sears too 'friendly' with their suppliers? When I worked at Sears at the end of the 1990's (the store was a g…

It's all about real estate and moving tax writeoffs around.

Big box is all about "financial innovations" that juice up financial statements.

Sears owned everything and had to carry most of the costs. Big box retailers like WalMart own as as little as possible, there are a thousand LLCs, trusts, etc that hold the big fixed assets like stores, etc. None of the big retailers own much of anything.

Doing this allows them to operationalize most of their costs. Instead of depreciating a building over 30 years, they write-off all of the value of leasing the building from some other entity. (ie. Store #5622, LLC) It's also a big part of why strip malls have a short shelf life. A dead strip mall with a Tae Kwon Do studio is a depreciated asset that exists to lose money for someone to write off a profitable one.

It works well as long as they hit the growth targets. When these operators miss the mark, even for a short time, you end up with a RiteAid or Linens n Things scenario where the numbers don't add up, and everything goes "poof".

Re: Sears has another chance to avoid closing down

#112

Post by OldHand2018 » Tue, Jan 08, 2019, 5:21 PM UTC

alexhutcheson wrote: post #73

wil421 wrote: post #20

Earlier quoted context omitted.

Costco is an upscale place to shop? I’ve never seen them lumped together with Whole Foods or even Apple. Edit: Wow I didn’t realize Costco’s profit margin was higher than Whole Foods, Wal Mart and almost a full percent above Kroger’s.

Costco's average customer is definitely higher income than the average American, although I've seen different attempts to quantify this. The first result from a Google search gives me this: https://www.fool.com/investing/2016/06/17/who-is-costcos-fav... A couple of factors act as a "filter" that makes Costco less worthwhile for lower income shoppers: - Buying in bulk requires a bunch of cash up front, which not every…

In Chicago a Costco membership is worth it just for the gas. It's usually at least 50 cents per gallon less expensive than nearby stations. I have no idea how they do that.

Also, for new parents: you can easily save the cost of the membership on diapers and wipes for the year or so your child wears them.

They always have a car parked in front or by the customer service center to advertise their auto purchase program. It has almost always been a Lexus, but for the past few months the one near me is a Maserati. I think this may be their signal on who their ideal customer is. Yet my parents used it to buy a Subaru and it was a good deal.

Re: Sears has another chance to avoid closing down

#113

Post by baddox » Tue, Jan 08, 2019, 5:21 PM UTC

braythwayt wrote: post #81

lotsofpulp wrote: post #16

Earlier quoted context omitted.

It's a good example to those that claim companies should pay employees liberally. Unless you're in a niche that people are willing to pay a margin for or serve upscale customers who also don't mind paying margins (Costco, Whole Foods, Nordstroms, Apple, etc), then you're going to lose business to competitors offering lower prices. In this situation, the only way to improve the well being of those whose labor isn't as…

I am extremely wary of n=1 reasoning. It ends us being confirmation bias. We look at Sears, note that they pay more than Walmart, and say that paying employees more either has no effect, or is harmful. But are we also looking at the thousands of businesses that pay their employees terrible wages, but go out of business? Businesses are complex systems that defy the search for simple explanations. That won't stop human…

> This is like saying that if all other things are equal, a restaurant that pays more for its ingredients will lose business to competitors that pay less.

Well, isn’t that one also true? There are limits and exceptions, obviously, but yeah, I’m pretty sure there is a strong correlation between the cost (cheapness) of ingredients and total sales.

Re: Sears has another chance to avoid closing down

#114

Post by dsr_ » Tue, Jan 08, 2019, 5:21 PM UTC

lotsofpulp wrote: post #77

RankingMember wrote: post #41

Earlier quoted context omitted.

> It's a good example to those that claim companies should pay employees liberally. Is it? Paying employees well isn't what killed Sears. Sears has been a ghost town for years, and anyone who's been in one in the past 20 years can probably tell you why. The customer experience simply sucks. Help is hard to find, checkout is slow, their warranties are garbage and a pain to exercise, and their once-great store brands h…

I should have wrote that it's just one factor, but at the end of the day, people opted for lower priced goods rather than the service that Sears offered, which I assume was partly due to the decent compensation they provided. Another example of a low wage industry where paying employees more doesn't work in the grand scheme are hotels. People like to stay in newer, renovated, upscale hotels. Well if one hotel pays mo…

Counter-example for basically everything you said: Trader Joe's.

Sears used to be like Trader Joe's: customer service was great, the best products were the house brands, and if you weren't satisfied, you walked back in and got a new one or a refund.

Then Sears' new management went off in pursuit of higher profits and killed everything.

Re: Sears has another chance to avoid closing down

#115

Post by mceldeen » Tue, Jan 08, 2019, 5:22 PM UTC

xigency wrote: post #96

wombatpm wrote: post #5

Sears had everything. Global supply chain, check. Top notch distribution operation, check. System and infrastructure to take orders and handling billing, check. Name recognition and established customer base, check. They threw it all away, ending catalog operations in 1993 a year before Amazon.com opened in 1994. They owned part of Prodigy in 1984! Yet somehow thought it was a better move to expand into bigger box re…

I thought this as well until I heard a counter-point [0] which was very convincing. The reason Amazon is successful is not because you can shop online (from a catalog) and receive items in the mail. The reason Amazon is successful is because you can do those things and receive your items within two days. Before Prime existed, Amazon had very quick fulfillment, and after Prime two-day it became even better. The Sears…

So what I'm hearing is "so big they had to fail".

Re: Sears has another chance to avoid closing down

#116

Post by euvitudo » Tue, Jan 08, 2019, 5:22 PM UTC

When the local Sears was about to close up shop, the kids they hired to help with the closing were playing Marco Polo over the store intercom. Eventually the person in charge came over the intercom and told them to cut it out. Was the only thing I enjoyed while in that store at the time.

Re: Sears has another chance to avoid closing down

#117

Post by kevinconaway » Tue, Jan 08, 2019, 5:22 PM UTC

lotsofpulp wrote: post #16

bluedino wrote: post #11

How much of Sears's demise was due to Walmart? It's not like retail completely died. The home improvement chains hurt them too, once they started selling tools and appliances. We bought everything at Sears in the 80's. Electronics (including computers), appliances, toys, clothes, tools, lawn and garden... Was Sears too 'friendly' with their suppliers? When I worked at Sears at the end of the 1990's (the store was a g…

It's a good example to those that claim companies should pay employees liberally. Unless you're in a niche that people are willing to pay a margin for or serve upscale customers who also don't mind paying margins (Costco, Whole Foods, Nordstroms, Apple, etc), then you're going to lose business to competitors offering lower prices. In this situation, the only way to improve the well being of those whose labor isn't as…

> Unless you're in a niche that people are willing to pay a margin for or serve upscale customers who also don't mind paying margins (Costco, Whole Foods, Nordstroms, Apple, etc)

Is it fair to lump Costco in with these other companies as an example of places where consumers don't mind paying higher margins?

From a quick google search on gross profit margins:

- Costco: 13%

- Nordstrom: 38%

- Apple: 38%

- Costco: 33%

Costco's is also likely skewed due to their house brand where they likely make a much higher margin than the name brands

Re: Sears has another chance to avoid closing down

#118

Post by wil421 » Tue, Jan 08, 2019, 5:22 PM UTC

tracker1 wrote: post #68

bluGill wrote: post #32

Earlier quoted context omitted.

They are. You need to have a good amount of extra money to afford the membership and the cost of buying 6 months of toilet paper in advance. Those are cheap items that you will need, if you are not poor you probably don't even think about it. However when you are poor it doesn't matter if it is cheaper or not to buy in bulk because you don't have the cash to afford it. (you also are unlikely to have the storage space…

I've known plenty of people on various levels of welfare support who would shop at costco/sam's club. They got their support once a month, making a big shopping trip perfectly in reach. The busiest Costco locations I've been to have been the lower income areas of town (Phoenix area).

This was the reason I asked. I’ve known of people using food stamps there.

Re: Sears has another chance to avoid closing down

#119

Post by jakelazaroff » Tue, Jan 08, 2019, 5:23 PM UTC

lotsofpulp wrote: post #93

braythwayt wrote: post #81

Earlier quoted context omitted.

I am extremely wary of n=1 reasoning. It ends us being confirmation bias. We look at Sears, note that they pay more than Walmart, and say that paying employees more either has no effect, or is harmful. But are we also looking at the thousands of businesses that pay their employees terrible wages, but go out of business? Businesses are complex systems that defy the search for simple explanations. That won't stop human…

If a restaurant is located in an area that has no customers interested in better ingredients or food, then it will lose business to competitors. And Sears' customer experience has been terrible for a couple decades, but from all accounts I've heard it was great in its heyday. What changed, and this is my conjecture of course, is the introduction lower cost options such as Walmart, Home Depot, Amazon, etc, that reveal…

> Sears' customer service has been terrible for a couple decades, but [...] was great in its heyday.

Wouldn't "worse customer service" be the change that allowed other retailers to eat Sears' lunch, then? You say Sears' clientele were not willing to pay a premium for whatever extra Sears was offering, but by your own words they haven't actually offered anything premium for a long time.

More expensive and better is a viable value prop; more expensive and worse is not.

Re: Sears has another chance to avoid closing down

#120

Post by icelancer » Tue, Jan 08, 2019, 5:23 PM UTC

xigency wrote: post #96

wombatpm wrote: post #5

Sears had everything. Global supply chain, check. Top notch distribution operation, check. System and infrastructure to take orders and handling billing, check. Name recognition and established customer base, check. They threw it all away, ending catalog operations in 1993 a year before Amazon.com opened in 1994. They owned part of Prodigy in 1984! Yet somehow thought it was a better move to expand into bigger box re…

I thought this as well until I heard a counter-point [0] which was very convincing. The reason Amazon is successful is not because you can shop online (from a catalog) and receive items in the mail. The reason Amazon is successful is because you can do those things and receive your items within two days. Before Prime existed, Amazon had very quick fulfillment, and after Prime two-day it became even better. The Sears…

> I think this is especially relevant here on HN because it shows how startups are required to solve problems. For many problems, a behemoth company has no reason to improve, and a lean startup can rush to a solution faster in many cases.

Pretty much. Jurvetson calls it the luxury of being a new entrant. It's very hard to steer the Titanic away from an iceberg.