Sears has officially filed for Chapter 11 bankruptcy on October 15 in order to cut its millions of dollars worth of debt. It is also set to close more than a hundred stores in the wake of its declaration, leading to countless layoffs and an uncertain future for the mall retailer.
In response to its $134 million debt payment, the company filed on October 15 to work out a payment plan and restructure its business.
For many, this doesn’t come as a surprise. People thought it would quickly become one of the 25,227 businesses that filed for bankruptcy in the second quarter of 2016. As the numbers of bankrupt businesses grew, it seemed natural for the struggling business to become another notch on the list.
The company has managed to defy rumors of bankruptcy for years, but it quickly became one of the many businesses to file this year in the wake of increasing rates of inflation and freight costs.
Sears is scheduled to close another 142 stores that they deem unprofitable. As such, a vast amount of its 68,000 employees will be without a job as it begins to restructure its business.
The worst part? The impressive number of 68,000 employees is less than half of the 178,000 employees working for the company back in 2016.
It’s no wonder nearly 35% of American employees have changed jobs over the course of the last three years.
But why did Sears fall from grace?
According to professor of entrepreneurship and strategy, James Schrager, of the University of Chicago’s Booth School of Business, it was a lack of leadership.
“Once you lose your customers, once they’re not in the store anymore, it’s the end of the game. You have to spend a lot of money to try to get them to come back,” said Schrager.
The company used to be a hallmark for mall shoppers, but failed to jump on the bandwagon as big-box retailers like Walmart and Target grew to prominence.
As more appliance stores like Lowe’s and Home Depot began to tread on Sears’ territory, the store still did little to get a leg up over the competition.
According to Greg Portell, a partner of A.T. Kearny, Sears failed to find a new market.
“Middle-market, mall-based chains that tried to sell all kinds of goods to all shoppers fell out of fashion, and Sears never found a new niche,” said Greg Portell in an interview with the Chicago Tribune.
But it isn’t hard to imagine why the store didn’t make drastic changes. Nearly 95% of all new products will fail each year.
Combined with jumps in interest and import tariffs, Sears may not be the only store to struggle this year.
This will cause damage in conjunction with the increase in freight and shipping costs as well. Some prices have increased by as much as 12%, nearly double the estimated increase of 6% to 8%.
Other potential pitfalls? Keeping paper documents, for one.
An estimated 85% of business documentation is still used in paper form, thereby increasing the likelihood of lost information and contributing to unnecessary waste.
With an uncertain future, there were countless factors that led to Sears’ fall from grace. As the holiday season approaches, consumers will have to look toward other mall haunts while they pass by the ghost of Sears.