Father Time and Baby New Year.
They’re the very personification of the holiday season. The father character first emerged in Greek mythology as Chronus, the godlike manifestation of time itself. The baby character, though, is a relatively modern creation, surfacing in consumer magazines a century ago and then becoming a fixture of American culture.
Pictured together, they personify the adage “out with the old, in with the new.” Although the news media seems to embrace this adage every time it fawns over the introduction of a new technology product, it diverted its attention during the final week of 2011 to note the stark decline of a pair of American corporate icons.
The Softer Side of Sears
An advertising jingle regarding the “softer side” of Sears once referred to the department store’s apparel offerings, but it can easily be applied to its 2011 revenue figures as well. Last week, CEO Lou D’Ambrosio announced that same-store sales during the crucial holiday season plunged 5.2% at a time when industry sales grew 4%, and that over 100 Sears and Kmart stores would thus be shuttered soon.
It’s easy to forget that Sears once reigned for decades as America’s largest retailer, with a mail order catalog business that was launched in 1888 and that later became an indispensable resource for America’s emerging consumer economy. But in 1993, Sears walked away from the mail order industry and simply shut down its catalog business.
Just two years later, Jeff Bezos founded Amazon.com and reinvigorated the industry; and what of Sears? Although the firm is still the fourth largest broad line retailer in the United States, the store closings will undoubtedly accelerate its decline.
The Kodak Moment
The final week of 2011 was also a brutal one for the Eastman Kodak Company. Although the firm’s classic advertising campaign associated the phrase “the Kodak Moment” with happy times, the phrase now connotes an image of a failing firm, desperately trying to transition away from an obsolete core product.
As with Sears and the mail order retail industry, Kodak virtually invented the film industry in the United States. Since its founding by legendary industrialist George Eastman in 1880, Kodak became an icon of American society; by 1976, its ubiquitous Brownie, Instamatic and Kodachrome brands helped it achieve respective market shares of 85% and 90% in the camera and film markets.
The emergence of digital cameras, however, doomed the entire industry to obsolescence, and Kodak to decline as well. Last week, after the firm announced that Laura Tyson was joining two other high profile professionals by resigning from its Board of Directors, the media reported that the Academy of Motion Picture Arts and Sciences might shift its Academy Awards ceremony from Los Angeles’ Kodak Theater to a larger venue.
Understanding The Product Life Cycle
Many investment analysts characterize Sears and Kodak as similar organizations that are facing similar circumstances. However, most marketing professionals would disagree with this characterization.
That’s because marketers define the product life cycle as an arc that progresses through four distinct stages. Film, for instance, was only a niche product for professional portrait artists during its introduction stage during the late 1800s, until it entered its growth stage and rode the wave of American economic prosperity.
Once products like Brownie, Instamatic and Kodachrome achieved market dominance, film entered the product maturity stage. And finally, as low-cost competitors like Fuji entered the market and consumers began to adopt newer products, film fell into its current stage of decline.
Indeed, the aging of the film business is reminiscent of the life of the proverbial Baby New Year, as he ages into Father Time. But can we characterize the arc of Sears in the same manner?
Simply Poor Decision Making
Although Sears, as a firm, progressed through the stages of introduction, growth, maturity, and decline during the same era as Kodak, the American retail industry hasn’t done so as well. After all, the advent of online shopping holidays like Cyber Monday has reinvigorated the mail order industry, and the emergence of innovative retailers from American Girl to Cabela’s has redefined the live shopping experience.
So how can we explain the decline of Sears? It may simply be attributable to a case of poor decision making. After all, Sears failed to follow the “big box” warehouse trend that was pioneered by firms like Costco and Walmart, preferring to remain in more traditional shopping mall locations. And yet Sears also failed to spruce up its traditional decor, while department store rivals like Macy’s and J.C. Penney opted to do.
In other words, investment analysts may be overlooking an important distinction when they characterize Sears and Kodak in a similar fashion. After all, as long as Sears continues to operate hundreds of stores in viable locations, a corporate turnaround does indeed remain possible. It is difficult to envision any turnaround, though, of a firm that sells film.