Turnaround or footnote: Sears is about to learn which will be its future

A brand is a valuable and powerful thing. With one word — sometimes no words, if a company has a familiar enough logo — a brand can instantly tap into a wealth of stored knowledge, personal history and familiarity in the minds of consumers.

A well maintained brand has a strong command on those consumers’ loyalties — and their wallets.

So powerful are well-established brands that even when the business behind them is looking worn, tired and a laggard in comparison with competitors, companies can still coast on the legacy they’ve built up over the years.

For a while, anyway. Then it’s a question of when that reservoir of loyalty has been irreversibly drained, when even the most devoted of customers realize they’ve continued doing business with that company more out of force habit than the value that brand once represented.

Where is that point of no return? That’s what we’re about to find out with two once-venerable retailing brands.

By the time you read this Sears might well have fulfilled the published report from last week that it was working with advisers on a bankruptcy filing.

This news should come as a surprise to no one, other than those who thought it had already happened. Indeed, Sears Holdings subsidiary Kmart, another once powerful retailing brand name that has fallen on hard times, has made one trip to Chapter 11 in its history.

Sears has tried just about everything to get out of the fix it’s in. It bought catalog apparel retailer Lands’ End. It has closed hundreds of stores. It has sold off its Craftsman tool brand.

It still owns the Kenmore appliance brand, but in a perfect illustration of “if you can’t beat ‘em, join ‘em” it announced a deal to sell those appliances through the one retailer most credited with its financial problems — Amazon.

Sears had a reservoir of familiarity if not loyalty built up with American shoppers over decades and generations, through its retail stores, its mail-order catalog and its brands. Had it translated its know-how in the paper-catalog business and with distribution to the internet and online retailing, it might still be a dominant retailer and Amazon only a footnote to business history.

That’s not how it worked out, and now Sears is rapidly approaching footnote status in this part of the country. The bankruptcy filing, presuming it’s for Chapter 11 (reorganization, not liquidation), will be designed to keep the creditors at bay long enough to come up with yet another turnaround scheme.

A lot of people aren’t waiting around. Simon Property Group has submitted plans to demolish the former Sears store at the Tacoma Mall and replace it with a movie theater and space for several other retailers. Sears has closed other stores in Western Washington, including at The Commons in Federal Way, and those too will likely be redeveloped into something else.

The problem for Sears is that it has little brand legacy and loyalty left to draw upon for a turnaround; the world is running out of people who remember the catalog or the brands that drew them, or their parents and grandparents, into Sears stores. Any turnaround plan has to include some differentiation from other retailers and from Amazon.

But even a battered brand might still have some useful life left in it. At least that’s what the current holders of Toys R Us hope to prove.

The toy retailer, you might recall, closed all of its U.S. stores earlier this year. But in the process of auctioning off assets, creditors who had pushed for a liquidation in the first place decided to hold on to the brands and related intellectual property (the Canadian stores were sold off to another operator).

“The new owners are actively working with potential partners to develop ideas for new Toys ‘R’ Us and Babies ‘R’ Us stores in the United States and abroad that could bring back these iconic brands in a new and re-imagined way,” the company said in a statement earlier this month.

Iconic? Maybe, although Sears could lay claim to a much deeper legacy embedded in its brand, for all that was worth. And Toys R Us was running into competitive challenges even before Amazon showed up, thanks to Walmart, Target and every other retailer with a toy section.

But Sears and Toys R Us are gambling with the creditors’ money, not ours, so we can be spectators to this business case study in real time, testing whether closing all of a retailer’s stores is a fatal impediment to the underlying brand.

It’s a long shot, and will take some time to prove or refute, so hold off on planning your next shopping trip for stops at the new Sears, or at Toys R Us, or Circuit City, or Linens ‘n Things, or Tower Records, or Mervyn’s or …

This story was originally published October 12, 2018 at 6:27 PM.