Sears: Creating Multi Billion Dollars Business From Spare-time Activity

By | February 20, 10

Sears: Creating Multi Billion Dollars Business From Spare-time Activity … With Lessons On Starting And Growing A Business To Global Enterprise From Little Or Nothing For Entrepreneurs.

Business ideas and opportunities come in different ways; however, if you cannot recognize them, or are not prepared for them when they show up, you would have lost the chance to own perhaps a multi million dollar business without knowing it.

The founding of Sears, which has grown into one of today’s world’s largest retail store chains was not actually planned for. It came by chance dressed in not so attractive garment, but because Richard Sears had already prepared himself to see business opportunities where many couldn’t, the business came to be.

searsstoremallIt was in the 1880s, an era when most Americans, about 65 percent of the population, lived in the rural areas. Richard Sears was working as railroad station agent for the Minneapolis and St. Louis railway station in North Redwood, Minnesota. To occupy the free time which his job allowed him, he sold lumber and coal to local residents and made extra income from it.

Then one day in 1886, a Chicago jewelry company shipped some gold-filled watches to a Redwood Falls jeweler, who didn’t want them. Having been buying and selling stuffs in his spare time, he saw an opportunity to make some extra cash, and so went ahead to buy the watches.

He later sold them to other station agents and made a good profit. With more demand for the watches, Sears ordered more of it, sold them, and ordered even more – he was in business, he had found a fast selling product.

Quickly, he founded R.W. Sears Watch Company in Minneapolis, and the following year moved to Chicago where he sought a watchmaker and found Alvah Roebuck, a highly knowledgeable watchmaker in his twenties (same as Sears) from Indiana, with whom he took his business to the top.

The business, which became known as Sears, Roebuck and Co in 1893 prospered. Its model was mail-order service, which enabled farmers to obtain goods at lower prices compared to what they would have paid at retail stores. At the time, prices at rural retail stores were almost 100 percent more than what they were at wholesale, and farmers didn’t find it funny.

So when Sears, Roebuck and Co and other mail order services came into operation, taking advantage of volume buying, availability of railroads and post office, rural free delivery and parcel post, to offer their products at lower prices, it was a pleasant welcome to farmers.

Richard Sears understood the needs and desires of farmers very well and was exceptionally talented in writing advertising copy that caused them to make orders. By 1895 his catalog had grown into 532 pages featuring other items, in addition to watches and jewelry. These included shoes, women’s garment and millinery, wagons, fishing tackle, stoves, furniture, China, baby carriages, firearms, and glassware.

Sales climbed to $400,000 in 1893, then over $750,000 two years later. Realizing he needed someone who was better than him at organizing the company to be able to manage orders economically and efficiently, Sears sold part of the company to Rosenwald, a Chicago clothing manufacturer who became the Vice President of the company in 1895 with Roebuck resigning due to ill health.

The company became publicly owned in 1906 when Sears and Rosenwald went to the stock market to raise more funds to expand it. With the needed funds at its disposal, the company’s $5 million mail-order plant and office building on Chicago’s West Side was opened that year, and was the largest business building in the world with 3 million square feet of floor space.

Also in 1906 the company opened its Dallas office, which transformed into a full-fledged mail-order plant in 1912, that provided customers incentives such as lower freight rates, faster delivering, and reduced damage to their merchandise.

By 1925, America was changing fast. With cars and modern roads across the country, a lot of people were leaving for the cities abandoning their farms. This meant Sears customers who were totally the rural population were declining. And even those left behind were no longer limited to shop by catalog as they could move on their cars to shop at retail shops far away.

This development posed a grave danger to the survival of Sears, and it needed to change fast to avoid been made irrelevant. And that change, driven by the company’s new president, Robert E. Wood was to see Sears moving into the cities with retail stores rather than using its traditional mail-order business model as city duelers were not used to buying by catalogs, but at retail stores.

So with one store opened in Chicago to test its new business direction, which became an instant success, Sears was set for the top in the retail store industry. By the end of 1927 it had floated 27 stores, then 192 a year later, which became 400 in 1933. For the first time, sales from its retail sales (53.4 percent) were greater than sales from its mail-order service, with total sales reaching $180 million.

It developed a comprehensive code of retail operating techniques that increased the efficiency of its operation, allowing store managers to concentrate on selling and proper ordering. It also set up store planning and display department, which was responsible for all elements of the store – tables, fixtures, space requirements for the different merchandise lines, customer flow and width of aisles.

The department came up with the innovative idea of building retail stores from the inside out around merchandise, instead of fitting merchandise into buildings, which was the norm. The first of such buildings was the Glendale, California store opened in 1935.

Sears’ expansion continued outside the shores of U.S. It opened its first permanent retail store abroad in 1942 when it opened a store in Havana, Cuba, and another in Mexico City the following year. As the years went by, the company expanded to Central and South America, Europe, and Canada.

Today, Sears operates over 863 mall-based retail stores, 1,200 retail locations, which include hardware, outlet, tire and battery stores, and independently owned stores mainly in smaller and rural markets. And as majority owner of Sears Canada Inc., one of Canada’s largest retailers, Sears has no doubt established itself as world leading retailer.


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