If you've built a brand on the idea of durability and reliability, and then build shoddy products that coast on the reputation, that reputation goes away and leaves you with a brand that no one wants to buy.
I've been looking at a new fridge, and I'd consider a Chinese Haier over a Sears Kenmore, ceteris paribus.
It used to be that Sears was mighty because of the catalog; then they were mighty because of logistics; then they were mighty because of the iron-clad house brands. Now Amazon is the new catalog, Walmart beats them on logistics, and their brands are mud. Sears has nothing. You'll see a Sears bankruptcy within 5 years.
We've been buying most of our appliances from Sears.
We purchased a Kenmore refrigerator about a year ago. The thing to remember is that Sears doesn't build refrigerators, it simply puts the Kenmore name on them.
Our refrigerator had a "made in USA" sticker on it. It was built either by Whirlpool or by Amana (same thing). I like the new fridge better than the previous GE we had, but of course the book is yet to be written on its long-term dependability.
With Sears you must buy only when they are having a periodic sale. They often discount specific appliances as much as 30% or 40% during those sales. In comparison, at the time Costco was selling a down-featured version of our refrigerator for considerably more money than the Sears sale price. Also Sears will give you extras during these sales, e.g. free 1-year financing, free delivery, etc.
There might not be a way around the surcharge they put in place for paying up front, but that's not free financing, it's exploiting the fact that people are generally uninformed to charge more for a less expensive transaction.
1. Buy Harbor Freight Version....
2. If a break the Harbor Freight tool, then I will look at a SnapOn, Dewalt, Ridged, or other Contractor/Professional Brand
I have very fews tools in the #2 category...
That said, I've got a lot of HF in my toolbox and can't say I've been unhappy with them. When I'm 100 miles from nowhere and my motorcycle breaks, it'll be HF sockets and Torx bits that get me back on the road.
My Cars are worked on by Professionals so I do not have alot of Automotive tools or needs
If I'm not investing in something I need to be very precise or efficient, it's harbor freight I go. Perfect example, my angle grinder was $30 from HF like 5 years ago and it's still humming along- I could've dropped $150+ easy going with a name brand.
If it's a really nice woodworking tool (like a block plane or chisel), I go direct to the specialized brands.
If it's something general but I want a 'nicer' or more reliable product, I'll go to the big box store and pick up Kobalt, Milwaukee, or DeWalt- mostly because that's already what I have.
Idk always small things you find. Hopefully craftsman will still be around.
Or it might be the most valuable company on the planet. Remember Apple in the 90s? They were lagging behind in technology, design and usability. Now look at Apple today.
Sorry, but I'm calling bs on that.
From Wikipedia :
"At the time, the media viewed the problems with the PowerBook 5300 series as yet another example of Apple's decline."
In this case, hedge fund manager Eddie Lampert took control of Sears about 10 years ago, merged it with K-Mart, and 3 years ago installed himself as chairman and CEO. He's been selling off assets left and right to keep it afloat (real estate, Lands End, etc.)
Prior to this he had been compared to and called "the new Buffett" due to similar investment styles (if you squint real hard). Since then Sears has lost over 90% of its market value. Yikes.
For another example, see Bill Ackman, who has been absolutely slaughtered, and seems to be asking for more. It started almost immediately after Fortune put him on the cover with the slug line "Baby Buffett".
Arrogant investors seem to think, "running a business can't be that hard..."
Running a country can't be that hard...oh my god.
Guy Spier also comes to mind. He won the charity auction to have lunch with Buffett and wrote "Education of a Value Investor." You don't hear as much of him or Mohnish Pabrai after the Horsehead Holdings bankruptcy.
I actually really like Pabrai, and enjoyed his two books.
But I cannot figure out what he was doing in Horsehead. Three strikes: high debt, highly cyclical, commodity product. Any one of those would be a tough sell, but all three?
I thought after 2009 he learned his lesson with high debt companies, so I was really surprised to see him at it again. Not only to invest, but putting in such a high % of assets.
The part I don't get is with the debt load he was essentially betting on timing of a commodity price, and if you are going to do that you might as well just play in futures where the upside on a correct call is higher. The same setup with a lower debt load might make more sense, since there is no timeframe on the cycle turn and you can quietly wait for it (like he did with the shipping company).
I don't think Spier and Pabrai were trying to get jobs with him, although it could be they pretend now like they weren't, but they both were running their respective funds at the time.
My "relationship" with Buffett is like the proverbial parent / child relationship: first you think they can do anything, then you think they don't know that much, then you realize how much they really knew all along. It doesn't hurt that I made good money following him into IBM early this year after I sat down and tried putting together the pieces for myself.
The guy is packing some serious horsepower that I think is underestimated, even given that everyone knows he's super smart.
My first mistake, of course, was in buying control of
Berkshire. Though I knew its business - textile manufacturing - to be unpromising, I was enticed to buy because the price looked cheap. Stock purchases of that kind had proved reasonably rewarding in my early years, though by the time Berkshire came along in 1965 I was becoming aware that the strategy was not ideal.
If you buy a stock at a sufficiently low price, there will usually be some hiccup in the fortunes of the business that gives you a chance to unload at a decent profit, even though the long-term performance of the business may be terrible. I call this the "cigar butt" approach to investing. A cigar butt found on the
street that has only one puff left in it may not offer much of a smoke, but the "bargain purchase" will make that puff all profit.
Unless you are a liquidator, that kind of approach to buying businesses is foolish. First, the original "bargain" price probably will not turn out to be such a steal after all. In a difficult business, no sooner is one problem solved than another surfaces - never is there just one cockroach in the kitchen. Second, any initial advantage you secure will be quickly eroded
by the low return that the business earns. For example, if you buy a business for $8 million that can be sold or liquidated for $10 million and promptly take either course, you can realize a high return. But the investment will disappoint if the business is sold for $10 million in ten years and in the interim has annually earned and distributed only a few percent on cost. Time is the friend of the wonderful business, the enemy of the
You might think this principle is obvious, but I had to
learn it the hard way - in fact, I had to learn it several times over. Shortly after purchasing Berkshire, I acquired a Baltimore department store, Hochschild Kohn, buying through a company called Diversified Retailing that later merged with Berkshire. I bought at a substantial discount from book value, the people were
first-class, and the deal included some extras - unrecorded real estate values and a significant LIFO inventory cushion. How could I miss? So-o-o - three years later I was lucky to sell the business for about what I had paid. After ending our corporate marriage to Hochschild Kohn, I had memories like those of the husband in the country song, "My Wife Ran Away With My Best
Friend and I Still Miss Him a Lot."
Sears, on the other hand, has been a cash consumer, not producer. Just look at the FCF numbers from the past 10 years:
-2,175 -2,378 -1,657 -1,438 -681 -707 -311 1146 495 977 931
There was some money at the beginning, but not nearly enough to justify a $20B market cap.
If you want to be like Buffett, buying a dying business is a terrible place to start. It'd be like someone idolizing Steve Jobs, so they go get a woman pregnant then abandon the offspring.
I think Sears has lost its way because a new generation of shoppers don't see Sears as vital. Back in the late 1800' when it was founded the idea that you could look in a catalog and order something, only to pick it up at the store a week later was nothing short of a revolution. And as a result Sears because exquisitely good at logistics. For decades the ability to move product where it needed to be, when it needed to be there, at scale allowed Sears department stores to dominate the retail market. It was rare to go to Sear's and discover what you wanted was out of stock, and even then they could tell you to either come back in 1 or 2 days to pick it up, or they would deliver it to you. That service, that experience, was enabled and powered by logistics.
Old companies can get senile though and Sears did. They forgot they were a logistics company and started trying to compete with Internet retailers as a retail company. If instead they has offered white label logistics service for internet merchants Amazon wouldn't be Amazon, instead it would be a buying consortium that was shipping everything through to consumers through Sear's logistics infrastructure. Instead you've got Amazon of today re-creating what Sear's had 20 years ago but using more advanced technology.
Sears was the Amazon of 80's. Peering through the lens of time, the concept of a mail order catalog was no different from the convenience of today's Amazon e-commerce experience. They are both points on an evolutionary timeline of the retail distribution experience. Sears disrupted retail, just like Amazon has disrupted Sears.
What's interesting about companies like today's Amazon is that they are scared shitless they'll end up becoming another Sears and eventually dead in the water, so they are constantly investing their own profits into re-inventing themselves (see Amazon Go and drone delivery for example). And hence why the PE ratios of these companies (Amazon, Google, Apple, etc) are catastrophically high.
The S&P 500's average PE ratio is currently 24.22 .
Google/Alphabet is a little higher than average at 27.9, and Apple is solidly in blue-chip territory 13.6
Let's wait until Amazon has been around for, oh let's say 100 years, before we talk about them "doing it better" than a company who has been around for 120+.
Sears could have been what Amazon is today.
Also, Amazon did not start out being anything like what it is today. For years it was just books. I remember as they added departments, they would tack an extra tab onto the homepage--"CDs", "Video", etc. So what was Sears going to do? Instantly transport the entirety of a dying catalog business to a non-existing consumer Internet? That wouldn't parallel Amazon at all. Not to mention that Sears did not have access to a bunch of giddy investors who were willing to pump in money despite no sign of profitability.
Only under a superficial analysis could Sears have been what Amazon is today.
Since OP's point was
> Sears could have been what Amazon is today
it's quite relevant that Target, Walmart, Macy's are not nearly to the scale of Amazon.
It may seem like Walmart is following the footsteps of Sears, but they are not out of the game yet. They need to face the innovator's dilemma head on and do it quickly because the broader issue is their e-commerce growth rate is declining instead of accelerating and the way people shop is fundamentally changing. They need to be dominant in e-commerce to be a dominant retailer in the future.
Walmart is better positioned than anyone to take on Amazon online. Their massive distribution footprint is a huge asset they are not leveraging. They need to morph into a logistics company and announce an all-encompassing same-day delivery service. They also need to completely re-haul their web/mobile UX.
I would gladly buy from Walmart. Amazon is just a lot easier right now. In the end, Amazon is not all that differentiated and if Walmart had some strong technological leadership, they could certainly close the e-commerce gap.
Hardly - it was the logistics they had in place to power both of those.
> The catalog was shrinking and dying.
So was brick-and-mortar. Just not quite as fast. Jumping ship from the Titanic to the Exxon Valdez is not a long term strategy.
How many companies that existed pre-Sears could have been what Sears was, but weren't? This is business.
"...In 1984 [Sears] starts a joint venture with IBM called Prodigy, an online computer service, sort of a prototype AOL. In 1985, Sears launches a new major credit card, the Discover card. For the next eight years, the only credit card you can use at Sears is Discover.
At this time, the early 80's Sears is the largest retailer in the U.S.
By 1993, the 100th anniversary of the Sears Catalog, Sears had built up considerable goodwill in the mind of consumers. They weren't the lowest price, but they had what you needed at good prices and the service was second to none. […]
This is 1993. In quite possibly the greatest example of corporate shortsightedness, Sears shut down it's mail-order business in a cost cutting measure. It spins off Allstate that same year, and soon dumps Dean Witter and Coldwell Banker.
In 1993, Sears had the most extensive and sophisticated mail-order retail operation on the planet and they closed it.
Two years later, Amazon.com launched, and was soon selling everything that sears sold through it's catalog. By the late-90's Walmart's push of low-cost China imports killed Sears retailing. Online banking takes off. Credit card use surges as mail order and retail purchases are shifted online.
Sears had its own computer network in 1993. They had access to IBM, they should have understood the power of the internet. All they had to do was shift the catalog online instead of killing it off, promising in store returns and the same Sears satisfaction guaranteed. Discover could have been the credit card of choice for security and protection online. Dean Witter could have been what Schwab, E-Trade and Ameritrade became. Back in the mid-late 90s when many people were hesitant to use credit cards online, Sears could have been a familiar face online."
Waited hours only to see the fucking cashier or staff chatting it up with each other with a line queue forming.
Same experience in The Bay. I think these traditional marts are on their way out. I have zero sympathy, kill this fucking monstrosity.
We always bought appliances from sears, but recently the refrigerator was from Lowes, and the microwave and oven from Amazon.
They don't stock appliances (very long waits for refrigerators) and the sales people can be horrible. The fridge we bought recently sight unseen, online.
The checkout process at Sears is fully fucked up. A convoluted connection of iPads, credit card swipers, and ancient IBM registers.
Best Buy also sucks, so it's not like they have much local competition.
I swore I'd never buy a large appliance from Amazon, but the in-wall oven was just fine, and I installed it no problem. If you can do your own appliance installations, I suppose online is the way to go.
Of course the internet didn't help them much either.
I'm sure someone will gladly buy up Craftsmen when it goes up for sale but I agree with you that it's their only exclusive asset that sets them apart.
As a kid, we'd spend literally hours pouring over the Sears Catalog to circle christmas/b-day gifts (each kid with a different color pen), and we'd actually fight each other to get to it first.
That culture doesn't really exist anymore, and Sears really didn't adapt to it. Amazon would be the modern version, I guess.
My first Nintendo came from that Sears Christmas Catalog :)
I have a 20+ year old Craftsman socket set that I use regularly... then a couple years ago I bought a new set for a project at work -- I broke one of the sockets within 2 days trying to loosen a tight fastener, and then the snap-ring that holds the socket head together came out a week later (not sure if it broke, or somehow worked itself out, I never found it), and the socket head fell apart.
Sears did refund my purchase price, no questions asked, but I'm no longer buying Craftsman.
They also stopped going out of their way to honor the warranty.
Power Tools and Specialty Tools have limited time warranties
When I bought a new oven, I bought it from Costco.
You mean like "do you want to apply for a credit card?"?
There's a reason for that. The associate gets $2 for every store credit card and $4 for every bank credit card sign-up. It's a big deal to a kid making $10/hr. But it certainly doesn't help the overall experience for those people who don't want another credit card.
If you were lucky.
I remember reading that article some times ago :
It has been posted a few time to HN.
Ayn Rand is a real thing.
Sears was, for as long as I know them, been mismanaged by their executives. They would spend insane money to hire consultants and developers, only to change direction after less then a year and fire everyone.
Who shops at Sears? For what reason?
Amazon Manager to subordinate:
How is the progress going on our new jet and drone fleets?
Sears Manager to subordinate:
Why the HELL aren't our website sales up?!?!
Amazon just entered the retail grocery business. When they did it, they looked at the process and noticed that in the existing process everyone was double handling merchandise. Once when they select it, and once when they checkout. So Amazon decided to make it a single handling process, making life a bunch easier for consumers. That also decreases purchase friction, which is great for Amazon.
That thought process illustrates why Amazon is the leader and will continue to humble it's rivals. It will take a huge culture change, and a probable industry consolidation before the likes of Sears will become competitive again.
taking from the shelf to the cart
from cart to checkout belt
from belt to bag (ok they help with this one)
from bag to car (several at once)
from car to counter in pantry
from bag to shelf
from pantry shelf to kitchen counter
from kitchen counter to trash/recycle bin
from bin to curb
I think their point was that the reason you think Amazon's culture and competency are so strong is due to marketing and isn't the truth. I have no idea if this is actually true or not though.