Why Sears Failed In Canada

Sears used to be a staple name in every Canadian household. Clothes, appliances, tools, you name it, and Sears probably had it. However, all great things do come to an end and Sears was no exception. This study explores the rise and fall of Sears and how their downfall impacted the Canadian economy. Sears was first opened Canada in 1953 after the success of the brand in the United States. General Robert E. Wood, Chairman of Sears at the time, proposed a partnership to the President of the Robert Simpsons Company and later, the two formed a new brand named Simpsons-Sears. Simpsons-Sears was able to successfully implement the cataloguing system that made Sears so famous in the United States and as a result, Sears was a hit in Canada as well. Later on, Sears was able to gain full control of the Canadian brand as the joint venture was terminated once the Hudson’s Bay Company purchased the Robert Simpsons Company; they soon after changed the brand name to Sears Canada. For the next while, things were going pretty well for Sears. Around 2006, the decline of their sales had started to become noticeable. They continued to decline over the next decade or so until in 2017, they decided that they had had enough. Sears decided to close 59 different locations after filing for creditor protection and by January 14th of the next year, the remaining Sears stores in the country were closed. Stakeholders impacted the situation but not in a detrimental way.

The interest of the stakeholders was the reason why the company decided to move to Canada. This decision was actually very beneficial for its first 60 years or so and only began to backfire in the last decade. The reason for the downfall however, was due to the leaders of Sears Canada, not the stakeholders. The major business issue in this case was that Sears Canada was going out of business. The decline of Sears took place over the last 10 years before it was closed but the 2016 and 2017 years were the ones that finalized the end. The main decline started due to the fact that Sears was being left in the past. Sears was fixed on its image from an easier time and they refused to change. The store itself, the product line, and the merchandising did not seem to change at all from the 90s to now and as a result, the brand was not able to compete with any of the newer companies offering similar but better products and services. Additionally, Sears did not offer much that made it very different from newly introduced Canadian Big Box stores such as Walmart Canada. Although their products such as Kenmore and DieHard Batteries were still rather big, they spent time promoting their other products that could be attained at a cheaper price at many other stores. Finally, they fell especially behind once the internet became a major component in shopping. Being able to shop from home was what made Sears special back in the day but now that everyone was doing it, Sears had lost one of its biggest competitive edges.

Finally in 2016, Sears decided to act and planned an entire reinvention of the brand naming it, “Sears 2. 0”. ESL Investments, the largest shareholder in Sears Canada, warned that the reinvention would likely be unwise and was very risky so naturally, Sears decided to reinvent itself anyways. As a result, the operating losses and cash drain of this already declining company increased quickly leading to its eventual shutdown. Studying the benefits and detriments of doing international business helped myself understand this case better as I was better able to grasp why Sears made the decisions they did and why it ended how it did. One of the benefits of expanding globally is that you can find a new market to sell your products in. Sears was well aware of this concept and as a result, decided to create their Canadian subsidiary. All seemed well for a while but then one of the detriments of globalizing a business began to show. Sears was out-competed by other Canadian companies offering similar good and services and therefore, Sears Canada began their downward spiral. Although some of the concepts studied in class helped myself understand why Sears took the action they did and the big reason of why they failed later on with their expansion, many other concepts actually confused me on the matter. When looking at the steps to expanding globally, Sears had almost everything covered. However, since they were not able to adjust their plan once in Canada for some time, they were not able to succeed after their initial successes. Overall, although some concepts did help understand this case, most did not as Sears was quite the exception to many of the topics looked at while in class. The actions that needed to be taken to save Sears are by no means simple but if done overtime, were do-able. Arguably the biggest reason that Sears was not able to compete in its industry was due to its lack of an online platform.

Although people were able to use the catalogue, it is the age of technology so having a website to be able to order off of is what the consumer wants. Since Sears Canada did not meet the demand of the consumer, they moved onto other stores that could. Another thing that Sears should have done once they realized they had started to decline was to begin promoting their own exclusive items. It had become clear that stores like Walmart were winning over customers when it came to regular items but those stores could not carry brands such as Kenmore. If Sears Canada had focused more on these exclusive items, consumers would have more of a reason to still shop at Sears and in turn, still make the store worth visiting. Worst scenario, Sears could have decided to strengthen its overall brand by narrowing its product line by cutting off some sections of the store or ideally, by finding a way to merge with another large company such as the Hudson Bay. Due to the special case of Sears Canada, the possible solutions to the problems they had were never really covered in class. The concepts we looked at more talked about companies that failed from the get-go such as Target but Sears was initially very successful and only began to fail much later. Therefore, we can see that the solutions to Sears Canada’s problems relate more to the context of the study rather than the specific unit concepts looked at in class. As mentioned earlier, a large part of the reason that Sears Canada had to close down was because of the impact Canadian businesses or businesses operating in Canada had on the store. Competitors such as Walmart, Best Buy, and Amazon were offering what Sears had but for a lower price.

On top of that, these stores also had strong online platforms that were easy for consumers to use. The Canadian economy at the time was not doing too well which did not help Sears’ situation. On the other hand, Sears Canada’s shutdown had quite the impact on the Canadian economy. In the year that they closed, over 12 000 people lost their jobs accounting for a bit over 10% of all Canadian jobs lost in September 2017. Additionally, the debt held by Sears caused minor problems for some major companies such as Coca-Cola and Google but were a much bigger deal from small companies that Sears borrowed from. All companies, big or small, awaited their share of the liquidation profits eagerly. Once liquidation was underway, some of Sears Canada’s normal competitors like Walmart actually temporarily lost out on business as many consumers wanted to buy their normal products for a much cheaper price. This effect however, quickly wore off and next thing people knew, everything was basically back to normal. In terms of how the interactions between international businesses relates to Sears Canada, you can look at how the brand was actually started. The American Sears company proposed a joint venture with an already existing successful department store and in turn, formed the basis for Sears Canada.

Afterwards, Sears Canada actually became a wholly owned subsidiary in a sense after the purchase of Simpsons by the Hudson’s Bay Company. This new company was able to receive guidance from the Sears shareholders while still acting independently for the most part. There were not many factors that shaped this case other than the actual doings of the leaders of Sears Canada. Their refusal to change their store style, their arrogance, along with never introducing anything new was why Sears Canada eventually failed. Trade agreements, trade barriers, and no national factors other than Canadian competition is to be blamed for the failure of the company. Sears Canada had its share of global challenges and opportunities in its industry. The original Sears took advantage of an opportunity after seeing the potential market in Canada. They were able to act and as a result, were able to successfully operate for over 60 years.

However, near the end of its existence, Sears Canada had its share of global challenges. Due to globalization, stores such as Amazon have been able to succeed thus posing problems for Sears Canada. Additionally, because of globalization, the industry Sears was in was able to advance a lot in short amount of time. Sears was not able to keep up with the pace of the industry and as a result, fell behind and eventually, fell out of the industry. Overall, one is able to see how the case of Sears Canada reflects all of the concepts studied in class this unit. Although initially succeeding with their expansion, by not updating their style to match their competitors, they quickly fell behind competition. Although they did try to act and adjust their style, by that point, it was much too late.