Sears, Roebuck & Co.

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Sears, Roebuck & Co. traces its origins to 1886, when Richard Warren Sears, a freight agent in North Redwood, Minn., received an order of pocket watches local jewelers had refused. He began selling the stock to other freight agents, signing them up to distribute more watches and paying each agent a commission on sales.

A year later, the R.W. Sears Watch Co. was so busy Mr. Sears began making plans to move the enterprise to Chicago to be close to one of the nation's shipping hubs. Shortly afterward, he teamed with watch repairman Alvah Curtis Roebuck to form Sears, Roebuck & Co.

For advertising, Mr. Sears relied heavily on newspapers, writing his own copy with florid language and grandiose promises. In 1888, he added a guarantee to his products, an innovation at the time.

In 1891, Mr. Sears published a 52-page catalog of watches; a year later, he began adding other merchandise, including jewelry and revolvers. By 1893, the catalog had grown to 322 pages.

That fall, the company relocated to Chicago and its catalog adopted the slogan "Cheapest supply house on Earth," catering primarily to farmers and rural residents displeased with limited merchandise selections at their local general stores.

In 1895, Mr. Sears bought out Mr. Roebuck and added two partners, one of whom was Julius Rosenwald. Mr. Rosenwald oversaw operations and toned down the catalog copy's claims, instituting a new policy of honesty in describing products.

To counter rival catalog retailer Montgomery Ward & Co., in 1906 Sears opened a branch distribution office in Dallas and a third in Mexico City, the first of several international Sears enterprises. In 1913, Mr. Sears resigned; he died the following year at the age of 50, leaving Mr. Rosenwald as president.

During World War I, Sears became a supplier to the government and afterward, U.S. Army Quartermaster Robert E. Wood joined the company, where he served as chairman from 1928 to 1954. He contributed military-style efficiency to the company's rapidly expanding distribution channels.

The retail business

In 1925, Sears made its first foray into retail stores, opening a storefront operation at its Chicago warehouse. By 1929, the company operated 319 retail stores across the U.S. In the latter part of the decade, Sears developed its first in-house brands; eventually its house brand roster grew to include Kenmore appliances, Craftsman tools and DieHard batteries.

The stock market crash in 1929 slowed Sears' growth only slightly, and the company continued to open new stores during the Great Depression. In 1931, sales at retail outlets surpassed mail-order sales for the first time. That year, Mr. Wood devised the idea of selling automobile insurance to customers through the mail; the Allstate Insurance Co., named after a brand of Sears' automobile tires, became Sears' insurance retailer.

In 1933, Sears began to open Allstate branches inside its stores to serve walk-in customers, and catalog desks were added inside the stores. The growing clout of the retail side of the business vs. mail order also improved Sears' fortunes: Whereas mail-order prices were locked in for a year at a time, stores had the flexibility to raise and lower prices to meet the ups and downs of the marketplace.

Also in the 1930s, Sears revolutionized department store design by being the first to design stores around the merchandise. Store planners laid out the interior selling space according to principles of ideal merchandise placement, then built exterior walls around that.

While catalog and newspaper advertising were handled by Sears' own ad department, in the 1930s the retailer first used an agency, Homer McKee, to place magazine ads and radio spots. By the early 1940s, radio was handled by Blackett-Sample-Hummert, while Erwin, Wasey & Co. handled print. A small Chicago shop, the E.H. Brown Advertising Agency, was assigned the Allstate division.

The Sears empire

Throughout the 1940s and 1950s Sears continued to expand, including opening its first retail stores in Cuba, Mexico and Canada. The company added automotive service centers to all its full-line stores and opened direct catalog delivery outlets in small towns across the U.S. The catalogs offered household and fashion items; farm and specialty merchandise were featured in smaller, targeted catalogs.

Sears' consumer credit operation also gained ground and became one of the most profitable elements of the company's operation. At one point in the 1970s, almost half of all U.S. households had Sears' proprietary credit card.

Sears' money-back guarantee continued to be a strong element in its print, radio and catalog advertising and, in the 1970s, Sears stepped up its use of TV advertising. The company's catalogs helped drive store traffic and many customers came into the stores to order merchandise available only in its catalogs. In 1977, Sears mailed 15 million copies each of its hefty spring and fall catalogs to U.S. consumers.

In the '70s, Sears began to offer more licensed merchandise and brand-name toys in addition to its house brands. In 1978, Sears also introduced a line of home fashions designed by Diane Von Furstenburg, one of the first in a series of high-profile licensed merchandise arrangements with celebrities, including baseball player Ted Williams, golfer Arnold Palmer and tennis pro Yvonne Goolagong.

Model Cheryl Tiegs became an icon in Sears' catalogs, advertising and merchandise for several years as the company targeted apparel to working women.

Setbacks and restructurings

Around 1980, competition from rival retailers began to take a toll on Sears. Its booming Allstate operation was heavily dependent on its retail stores to generate traffic, and the possibility of setting up an outside network of Allstate offices led to a major strategic change at the corporate level.

In 1980, the retailer restructured, creating the Sears Merchandise Group to separate retailing and catalog sales from the company's other operations. In 1981, the company announced plans to create the largest consumer-oriented financial services entity in the world to house its Dean Witter Reynolds brokerage and real estate company Coldwell Banker & Co.

The strategy was to cluster the new real estate and financial services (and eventually mortgage services) along with Allstate inside Sears. In 1982, Sears formed a world trading company called Sears World Trade and in 1985 introduced Discover, a general consumer credit card accepted at Sears stores.

Throughout the late 1980s Sears struggled to build synergy between its retail and financial services operations, advertising the Sears Financial Network on TV, radio and in print. But by 1988, Sears' retail sales were losing momentum, and another series of restructurings followed. That year, Sears opened its first Brand Central in-store appliance center and expanded its offerings of national brands; soon afterward, it launched HomeLife, its stand-alone furniture stores.

Also in 1988, Sears began aggressively pursuing in-store boutiques to target specific demographic groups and established a relationship with McDonald's Corp. to sell licensed "McKids" branded apparel. Several stand-alone stores offering paint and hardware, appliances and even McKids merchandise were launched; only the stand-alone Sears Paint & Hardware outlets survived.

"You Can Count on Sears"

In addition to its in-house advertising department, over the years Sears has also sought counsel from a variety of advertising and promotion agencies, including, in the 1930s, Erwin, Wasey & Co., Chicago, for print and Blackett-Sample-Hummert, Chicago, for radio advertising.

In the 1940s, Sears used Roche, Williams & Cunnyngham; Schwimmer & Scott Advertising Agency; and Bisberne Advertising Co., all of Chicago. Throughout the 1950s, Sears relied on the renamed Roche, Williams & Cleary, for creative. In the early 1960s, Sears began a long-running relationship with Ogilvy, Benson & Mather, New York, which lasted through the 1990s.

Near the height of its power as a catalog and retail merchandising company in 1972, Sears' agency roster included Ogilvy & Mather, successor to Ogilvy, Benson & Mather (which handled home appliances, home fashions, sewing); J. Walter Thompson Co., Chicago (lawn mowers, paint, tractors, outdoor equipment); Foote, Cone & Belding ( sports, tires and batteries, hosiery, luggage, diamonds, women's apparel); McCann-Erickson (cosmetics, wigs, men's furnishings); Stern, Walters & Simmons (children's store, detergent); and the Vince Cullers Agency (special marketing).

By 1982, Sears had trimmed its roster to Ogilvy (all hard lines); Needham Harper Worldwide (all soft lines); Stern Walters/Earle Ludgin (catalog promotion); Hispania Advertising, New York (Hispanic); and Stone & Adler (direct response). By 1988, Sears consolidated most of its TV and general advertising with Ogilvy, but in the mid-1990s Sears added Young & Rubicam to its roster and the two agencies shared core brand duties.

Throughout the company's history, its advertising themes consistently touted reliability, the implied guarantee of "satisfaction or your money back," and merchandise diversity. In 1957, its advertising theme was general: "Serving all America's needs for family, home, car and farm." In 1962, Sears introduced a shorter theme line: "Shop at Sears and save." In 1965, the company debuted a long-running theme line: "You can count on Sears."

During the 1970s, 1980s and 1990s, major advertising themes included "Solid as Sears" and "Where America shops" (1970s); "There's more for your life at Sears" (1983); "Your money's worth and a whole lot more" (1988); "Come see the softer side of Sears" (1993); "Come see the many sides of Sears" (1996); and "The good life at a great price. Guaranteed" (1999). In 2001, the company switched to "Sears, where else?" but returned to "Good life. Great Price" in 2003.

Reinventing Sears

In the 1990s, Sears expanded its retail operations by acquisition, buying Western Auto Supply, Parts America, National Tire & Battery and Orchard Hardware Supply stores. Despite steadily losing market share to deep-discount rivals that offered a narrower assortment of popular merchandise in low-overhead, no-frills formats, Sears attempted to jump-start sales in its mainline stores in March 1989 by announcing a new commitment to "everyday low pricing."

Sears vowed to keep its prices low year-round, eliminating the weekly promotional sales driven by newspaper ads. Instead it moved to national, TV-based image advertising that emphasized quality, assortment and national brands.

Although its proprietary credit card was still a major source of profit and Discover had become profitable in 1987, Sears' concern to improve sales was underscored when it announced it would now begin accepting Visa and MasterCard. The various schemes to diversify failed, however, and from 1986 to 1994 Sears underwent almost continuous restructurings, which resulted in mass layoffs and the closing of dozens of underperforming stores in 1992.

In 1993, Sears spun off its Allstate and stock brokerage/credit card operation, Dean Witter, Discover & Co., as separate, non-affiliated companies. Also sold were the Coldwell Banker real estate operation, the Sears Mortgage Banking Group and Homard Development Group, Sears' commercial real estate development arm. The final blow came in 1993 when the company discontinued its venerable catalog.

In 1995, Sears began a renaissance under the leadership of former Saks Fifth Avenue executive Arthur C. Martinez, who served as chairman through 1999. The company moved its headquarters to Hoffman Estates, Ill., a Chicago suburb. Many of Sears' stand-alone businesses were also sold, including HomeLife, Western Auto Supply and Parts America. The Sears Auto Centers, however, remained. Sales improved steadily through the 1990s, but growth flattened again in 1999.

As the company faltered, Mr. Martinez was replaced as CEO by Alan Lacy, who struggled to turn Sears stores into shopping destinations by adding new brands. The company acquired Land’s End in 2002 and Structure in 2003 and integrated its apparel lines into the stores.

At the beginning of the 21st century Sears continued to try to redefine its merchandise mix to suit America's changing habits. Primarily locked into enclosed shopping malls, Sears lost market share to deep-discount retailers such as Wal-Mart and Target, which offered competitively priced apparel in "big-box" stand-alone stores and strip malls that allow consumers easier access in fast-growing areas. In 2003, it opened a new concept, Sears Grand, to compete with the big-box retailers. The stores were larger, stand-alone locations that combined traditional Sears merchandise with pantry items, groceries and health and beauty products.

In 2003, Sears ranked as the No. 12 U.S. advertiser, spending $1.6 billion, down 1.7% from 2002, according to Advertising Age.

In November 2004, Kmart Holding Corp. said it would buy Sears, Roebuck & Co. in a cash and stock deal the two firms valued at $11 billion. The deal, expected to be completed by March 2005, would give the new entity revenue of $60.8 billion, making it the second-largest U.S. retailer after Wal-Mart Stores, which takes in $256.3 billion annually.

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