Invincible American brands do vanish

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Tuesday, November 23, 2004

Invincible American brands do vanish

By BILL VIRGIN
SEATTLE POST-INTELLIGENCER COLUMNIST

FIRST OF TWO PARTS

Time for a little business word-association game. I'll name a business sector, you name the first company that comes to mind.

PART TWO

Read the second installment of this column.

Airlines.

Personal computers.

Retailers.

So what did you come up with?

For "airlines" you might have answered "Southwest." For "personal computers," maybe "Dell" was your response. For "retailers," the name that most likely came to mind first was "Wal-Mart."

This little exercise was designed to make a couple of points. First, what kind of answer you get depends on when you ask the question. Had you asked the airlines question 40 years ago, Pan Am or TWA might have been the most recognized brand names in that sector. Twenty years ago, the dominant name in personal computers, the brand whose advertising was inescapable, was IBM.

And in retailing, at various times the logical answers would have been Kmart and Sears.

Which gets to the second point, having to do with a recurring theme in this column: the rise and fall of once-venerable American brands. While it is difficult to build a brand to prominence, even dominance, in business, it is even tougher to maintain that position.

Consider the examples cited above. Pan Am and TWA were emblems of the globe-trotting jet age back before Southwest was even a mere Texas puddle-jumper. Today Southwest is a model of success in the airline business; Pan Am and TWA both are defunct. IBM built on its legacy of mainframe computers to dominate the PC market, from which it has long since departed.

The initial reaction to last week's announcement of a deal in which Kmart will buy Sears was "how?" As in, "how is a company that was in bankruptcy court not that long ago in a position to buy anything?"

Once people got over that shock, the next reaction was "why?" The concept of combining two struggling companies to make one successful retailer holds as much promise as the merger of the New York Central and Pennsylvania railroads (historical note: It did not end well), and lends credence to the speculation that the deal is more a real estate play than an attempt at retailing revival.

The third, more contemplative response was "how the mighty have fallen."

It would be hard to convince a lot of Americans that it was so, but there was a time when Sears was more than a retailer, just in the catalog segment alone. At one time the words "Sears" and "catalog" were joined at the hip in the American lexicon. Lots of retailers offered catalogs, but none approached institution status like Sears.

And Sears gave that business up, deciding that there was no future in it. Sears wasn't alone in making that assessment, figuring that the Internet had made the paper-catalog business toast. Sears also wasn't alone in being wrong in that assessment. In fact, Sears tacitly acknowledged that by buying catalog retailer Lands' End.

But then, Sears careened from strategy to strategy (remember the foray into financial services such as Dean Witter and Allstate, a strategy summed up as "buy your stocks where you buy your socks") trying to find something that works. Even with the advantage of having three of the best-known brands -- Craftsman tools, Kenmore appliances, Diehard batteries -- Sears has felt like a company adrift.

But then, being adrift would be a marked improvement for Kmart. It would be hard to convince a lot of Americans that it was so, but there was a time when Kmart wasn't just the best-known discount retailer, it was the one that had made the category work on a national level.

Lots of others tried -- the list of dead discounters runs from A (Ames) to Z (Zayre). Kmart, however, succeeded in establishing unmatched consumer recognition (remember blue-light specials and "attention Kmart shoppers").

Sears and Kmart are in the shape they're in for much the same reasons -- not responding, or responding incorrectly, to emerging competitive threats. For Sears, it was the discounters, the big-box category killers and the Internet. For Kmart, it was the growth of discounters such as Target and Wal-Mart that were better at the business than it was.

Successfully establishing a brand name is not like buying an annuity providing an infinite payoff. Ask Disney how much its legacy counts for success in next year's entertainment business. Ask A&P what good being the nation's first grocery chain is doing for it today.

The lessons taught by the misfortunes of lots of American companies are that, through neglect or negligence, seemingly invincible American brands can be toppled.

On Thursday we'll look at another iconic American company that has stumbled multiple times, another reminder why, when seemingly secure business executives scramble and claw as though they're down to their last dime, often they've got good reason to be in that position.

P-I reporter Bill Virgin can be reached at 206-448-8319 or billvirgin@seattlepi.com. His column appears Tuesdays and Thursdays.

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