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SEARS STRIKES BACK : Inside the Retail Giant's Struggle to Regain Its Position--and Profits--in the Los Angeles Market It Once Dominated Completely

September 27, 1987|DONALD R. KATZ | Donald R. Katz is a contributing editor and columnist for Esquire magazine. His book, "The Big Store: Inside the Crisis and Revolution at Sears," from which this is adapted, will be published in October by Viking.

BY THE SPRING of 1983, the empire of Sears, Roebuck was finally mending. The great corporation of the Heartland--a company that had employed one in 30 Americans and dominated between 1% and 2% of the GNP since World War II in the act of supplying Americans with the trappings of everyday life--had survived years of crisis and internal upheaval so profound that many of the half million people who worked for Sears along its vast supply line believed the company would die.

If the United States was indeed the consummate culture of consumers in all of history, then Sears had served as the warehouse of the culture. Under founders Richard Sears and Julius Rosenwald, the company's famed catalogue had made a world of new invention available to the average American. The business wizard who inherited the catalogue empire in 1924, Gen. Robert E. Wood, dedicated himself to taking the company beyond mail-order merchantry into an even more powerful system of retail stores. The General envisaged Sears at once as the supply house of the people and as the last refuge of true democracy. Wood, the leader of the company for half a century from the time he took over, declared that Sears, Roebuck would be a corporation that "had a soul." The General would preach a doctrine of individual freedom and managerial independence that his "boys" had accepted over time as Holy Writ. The managers bought goods from the army of buyers in Chicago through an internal free market. The localities controlled how the stores were operated, how they looked and how much the goods in them would cost.

The big stores were divided into five powerful and astonishingly independent territories, each of them run from the former "catalogue towns," where huge warehouses had been built during the golden age of mail order. So independent was the Pacific Coast Territory of Sears that it was known within the company as the "separate kingdom." By 1977, the longtime "King of the West," John Lowe, ran a sovereign business that employed 60,000 people--as many as entire corporations such as Boeing and General Mills. Lowe had built his organization a steel-and-glass headquarters in Alhambra with money generated from his stores, from his sales.

But on a fall day in 1977, Edward Telling, who had been named chairman of the corporation only hours earlier, flew to meet John Lowe on a wind-swept airstrip in Pueblo, Colo., and there, for the first time since the General ceded the true power at Sears out to the territories and the stores, Telling forced Lowe to relinquish his power base.

By 1977, Sears was in big trouble. Profits had fallen away, and customers were defecting in droves. The Sears stock price--adjusted for an intervening split--had collapsed from a 1972 high of $61 per share to $24, and was headed much lower. The company had careened out of control under the decentralized system, and Ed Telling believed that the only way to pull it back together was to take the power away. The company was running out of control, and any effort to impose change from above was resisted at the grassroots. by employees who'd been taught that resistance was their right under the democracy of Sears. He was determined to crack Sears' calcified system so that power and the ability to make business plans and employ economies of scale could return to headquarters in Chicago.

But under Telling's reformist regime, by the end of the 1970s Sears descended into a bitter civil war that pitted the powerful buyers in Chicago against the merchants who dominated the huge network of retail stores. He replaced John Lowe with one of his longtime cronies, Henry Sunderland, who'd begun his career in the old L.A. mail-order plant. before heading to the Eastern Territory. When Henry Sunderland left Los Angeles in 1959 there were 21 powerful Sears stores, no Penney's, no K marts--nothing but Sears. When he returned there were 27 big Sears stores, but there were also 27 Ward stores, Penney's in the malls everywhere you turned and K marts that appeared on almost every corner.

"Henry," Telling said to Sunderland when he sent him out to replace John Lowe, "I want you to go out there and bring them back to the company."

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