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Lost in Space

Two entrepreneurs, Sebastian S. Kresge and Richard W. Sears, each established storefronts and built them into the twin titans of retail during the last century. But today the merchants represent a sliver of their once immense size, having closed thousands of stores and leaving only a handful of locations scattered around the country. In fact, what became Sears, Roebuck and Co. and The Kresge Co. could be considered the retail innovators of the late 19th century, with both Sears and Kresge seen as that era’s Elon Musk and Jeff Bezos. The lesson for today’s high-fliers is that as invincible as they appear, a lack of innovation, flawed customer insights, and arrogance can conspire to bring the greatest companies to their knees.

Sears’ business began to decline in the late 1980s when the company went on an acquisition spree, believing it could entice its millions of customers into other revenue-bearing services by leveraging brand affinity. The retailer acquired Allstate Insurance, Dean Witter Investment Services, and Coldwell Banker Real Estate, and launched the Discover Card.

“They poured billions of dollars into these disparate businesses, which required an enormous amount of capital,” says Mark Cohen, director of retail studies and adjunct professor at the Columbia University Business School and former chairman and CEO of Sears Canada Inc. “The money came from the cash flow that they were harvesting from the retail business. While this diversion of energy, effort, and funds took place over a period of years, the stores received less investment and became less focused.”

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