What Sears' recent troubles could tell us about Amazon's future

Sears was once THE powerhouse in retailing. Can its recent fall from grace provide any insights for current e-retailers?

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Credit: Thinkstock

Sears has been having severe financial challenges as of late. Its stock has dropped dramatically, and it's closing many of its Kmart and Sears stores. In fact, there is speculation it may not survive. While many of the problems may have been self-inflicted by not changing with the times, the situation does give us a potential window into where Amazon (and other online e-retailers) may be headed longer-term.

Sears was the original Amazon.

Although from a different era, it had many of the same characteristics. As its slogan, the Sears catalog claimed it "tamed the west." But what it really did was place a storefront in front of anyone with access to a catalog. And the catalog was extensive, with virtually everything anyone needed (even major purchases like houses, cars and livestock).

It allowed any person with access to the postal service to send in an order and payment and buy from Sears -- either from the individual catalog they received in the mail, or more often through the many places they could access one (in essence, the equivalent of today's affiliates stated in web terms). Sears would then ship the merchandise via the railroads and/or post office directly to the end purchaser. It even toyed with its own delivery force (sound familiar?).

Replace the above scenario with the web (catalog), credit cards/eBay (sending payment) and UPS/FedEx for the USPS (shipments), and you have a modern-day operation that is a direct imitation of what Sears did in the days before brick-and-mortar stores were ubiquitous. Indeed, the Sears model was so successful it spurred many competitors (e.g., Montgomery Ward, J.C. Penney, Spiegel) to try to imitate and capture market share.

From catalogs to real estate

As Sears became more successful, it started to open its own stores in key areas of the country (in online e-commerce terms, think remote distribution centers). This allowed purchasers to get the goods much more rapidly, and for Sears to get paid more quickly. These relatively modest stores in the early days blossomed into the full-service stores we have come to know, and which were established in the many growing-population areas that created viable retail centers.

This strategy served Sears well for many years. Indeed, during the 1950s-1980s era of massive consumer market growth, Sears was often first on the list of virtually every homeowner, with its convenient suburban (and even rural) locations, selling much-needed tools, clothing and appliances.

The times, they are a-changin'

Consumers are now demanding new experiences driven by new technology -- and Sears remains stuck in its old sales models.

Sears had so many stores and such a dominant presence that it felt it no longer needed a catalog. But its stores grew stale, and Sears was slow to try to recreate its catalog on the web. Its tardiness allowed many competitors to eclipse it.

So what does this portend for e-tailers like Amazon (and Alibaba, etc.)? Much like Sears in its heyday, you can buy virtually anything from Amazon by simply viewing its vast online catalog. And unlike the early days of Sears when it could take months to get your goods due to shipping constraints, most consumers now get their goods in a few days at worst. Amazon's model is similar to that of Sears, in that you may not always get the absolute lowest prices, but they are competitive and within reach of most consumers.

Amazon is now starting down the same path as Sears. It is opening local distribution centers that allow consumers to buy goods (called "stores" in old-school language). It's moving in some markets to open even more direct-to-customer models and playing around with its own delivery force (e.g., autonomous vehicles and drones).

But every sales distribution model has its day (perhaps lasting many years or decades). And each eventually gets superseded by a new one, most often driven by new technology (think web and/or mobile commerce).

The question is, can current leaders make a transition to what comes next?

Sears couldn't (nor could the railroads shipping goods when long-haul trucks and then airplanes came along). Amazon does have a backup in the web-based cloud services it sells (AWS) and technology it creates (e.g., streaming), but is this enough? Isn't this simply the equivalent of just renting out warehousing space (although in this case the warehouse is electronic)?

The next major transition could easily be on-demand goods for businesses and homes. Indeed, the expansion of 3D printing and the improving technology could ultimately turn in to our own "Star Trek" replicators -- although it will most certainly take years to fully achieve this.

Will this be the next phase of obsolescence in the commerce game? Will new companies emerge that are better at this than current e-sellers? Can the incumbents thrive in a new world that has completely decimated their existing infrastructure (you don't need warehouses full of goods or fast shipping methods if buyers can print their purchase in real time at a nearby location)?

Clearly, this is future stuff. But it is not as far off as some believe. We are already seeing very early signs of this. Who will be the companies that establish themselves in this new model and profit from the next phase coming within the next few years, and perhaps lasting the next several decades?

Only time will tell, but current e-commerce leaders: Remember Sears when you think you are invincible.

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