1-GM and Sears…slip sliding away

Posted 3/7/08

Over the last few weeks, both GM and Sears, while leaders in their markets, have announced a new round of layoffs. This is a sad development to watch, especially since these layoffs are unlikely to be the last.

I have watched these two great companies stumble toward oblivion throughout my entire working life. I have been fortunate to have nearly forty years in a professional life. In my earliest years, I consulted for a company who wanted to sell to Sears. In those days, the early 70s, Sears was then what Wal-Mart is today. They were extremely demanding and highly quality conscious. No products got into Sears without jumping over many hurdles. Today that no longer seems the case. Each year, Sears continues to lose market share to more successful retailers at price points above, below and comparable to them.

GM offers a similarly sad story. I recall that back in the late 70s, after the oil crises of the times, GM beat its domestic rivals to the market with appropriately downsized automobiles. Its market share at the time was about 50%. Today its market share is about half that… and it continues to fall.

These layoffs are unlikely to be the last for Sears and GM. Layoffs will continue until these companies find a way to reverse the market share losses both have suffered in an almost uninterrupted slide over the past generation. Economies of scale work against a share losing company. You may not see economies of scale as a company gains share in its industry because many industry leaders do not force them to develop as the company grows. On the other hand, you will always see the effects of economies of scale when a company shrinks. In that case, declining economies of scale make things a lot worse.

A company cannot reduce its costs unless it has customer sales volume with which to do it. These layoffs at GM and Sears are simply catching up with the excess capacity created in each company as customers leave them for greener pastures. As market share losses continue, there will be another period of catch-up. For everyone’s sake, I hope that both GM and Sears find a way to make their market shares grow again. If not, the future is bleak indeed.

 

Update 6/16/2025

Neither company was able to overcome its Reliability problems in the form of poor reputations with customers. GM declared bankruptcy in June of 2009, Sears in October 2018.

What happened to GM from 2008 to 2025?

GM remains a major player in the international automobile market; however, these years have not been kind to the company. GM’s market share declined precipitously, from 28% in the mid-2000s to 16.4% in 2023. During these years, GM’s workforce declined from 242,000 in 2008 to 162,000 in 2024. The company has evolved into a much weaker player.

Why did this happen? Primarily failures in Reliability. Customers perceived GM as slow to innovate and offering products of questionable quality.  GM failed many customers seeking electronic vehicles and some of its traditional brands. It’s comparatively poor Reliability reputation in its product lineup was the major drag on its competitive performance.

GM was slow to adapt to the electric vehicle market where Tesla set a torrid pace during these years.  GM further failed potential customers by dropping several brands. After its 2009 bankruptcy and government bailout, GM shed several brands (i.e., Hummer, Saturn, Pontiac, Saab), which reduced its product lineup and market reach. Its most critical misstep was its poor performance in the Reliability of its products. Across the range of vehicles, GM’s quality ratings by third parties indicated that it had spotty quality, especially compared to the Japanese and surging Korean manufacturers.

Has GM righted the ship? Time will tell.

 

What happened to Sears from 2008 to 2025?

If these years were difficult for GM, they would be an unmitigated disaster for Sears. Company revenue, which peaked in 2007 at $53 billion, declined to below $11 billion in 2025. And that $11 billion produced nearly a $900 million shortfall. Store numbers peaked at 3949 in 2011 and fell to 20 in 2022 after the company’s bankruptcy. As more consumer purchases migrated online, Sears.com generated less than $3 million in sales in 2025. Wayfair’s online sales produced over 30 times that level.

Sears’ slide into retail irrelevance was the consequence of several failures in the Customer Buying Hierarchy. This conclusion emerges from the short examination of major competitors of Sears. Amazon offered far better Function, Convenience and Price. Amazon offered an unmatched range of products on its website, a Function advantage. It’s easy purchase procedure and fast deliveries produced its Convenience advantage. The intensity of competition on Amazon’s website produced very competitive low prices. As Amazon grew to retail dominance online, Sears largely ignored the online potential, a company failure.

Amazon was not alone in pressuring Sears. Target, Home Depot, and Lowe’s saw substantial sales growth due to their Function innovations as they expanded their product lines. Sears reduced its product range due to enormous financial pressure. To generate cash, Sears sold both its Kenmore and Craftsman product lines, clear leaders in their categories. Walmart’s “everyday low pricing” undercut Sears’ pricing, a Walmart win on Price and the Sears failure to respond.

These catastrophic failures have left Sears barely alive. It now depends on less attractive customers for survival. Its average order value is less than $100 compared to that of Amazon at $425. Its Reliability reputation is a major drag on its recovery. A recent quality rating ranked Sears core products at 1.5 on a five-point quality scale compared to its peers.

The future looks much bleaker than in 2008.

 

Both companies failed their customers on Reliability. HERE is one way to look at a company’s failure.

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THE SOURCES OF STRATEGYSTREET.COM: For over 30 years we observed the evolution of more than 100 industries, many hostile.  We put their facts into frameworks applicable to all industries and found patterns.  Strategystreet.com describes the inductive results of these thousands of observations and their patterns.