Sears Canada demise named Canadian Press business story of 2017

A smattering of retail chains closed their doors in another tough year for the industry in 2017, but the demise of Sears Canada seemed to resonate most with Canadians, many of whom grew up devouring its annual holiday wish book and shopping at the department store.

The high-profile closure and ensuing controversies helped make Sears Canada's demise the 2017 Business News Story of the Year. It received 47 per cent of the votes from journalists in an annual poll of the country's newsrooms conducted by The Canadian Press.

Small business tax changes received 16 per cent of the votes from a field of nine candidates, while trade talks and marijuana companies tied for third place at 14 per cent each.

"For many Canadians, Sears is more than a store, it's an institution," said Allan Shifman, managing editor at Yahoo Canada Finance.

"Add to that the horrible way the retailer wound down... This is a story that resonates with all Canadians, not just the ones tuned into the finance news cycle."

The struggling chain spent the bulk of the year attempting to re-invent itself a hodgepodge process that included adding grocery stores to certain locations, hosting a pop-up shop in a trendy Toronto neighbourhood and developing dash buttons that would give customers the ability to restock favourite products from home.

But those efforts failed to materialize and the long-time staple of Canada's retail landscape filed for creditor protection in June, sold off some locations and decided to liquidate the rest of its roughly 190 stores, leaving some 15,000 employees out of work.

The chain's closure sparked a number of controversies.

Sears Canada planned to dole out millions of dollars in retention bonuses to head office staff while grappling with a more than $260-million shortfall in its pension plan.

A plan by executive chairman Brandon Stranzl that would see the company continue to operate was rebuffed in favour of liquidation, prompting further questions about whose interests were being prioritized.

After the sales began, the Competition Bureau said it was investigating allegations that some merchandise was marked up ahead of the liquidation.

• Competition Bureau wants answers from Sears liquidators on alleged price mark-ups, says report
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The way Sears Canada treated its employees also struck a chord with many, given the chain was a big employer across the country, especially in smaller towns and cities, where few retailers are present.

The company originally wanted to pay a total $7.6 million to 43 top employees, but, facing backlash, revised that to a total of $6.5 million to 36 employees.

The reduction was approved by an Ontario judge, but some employees argued it was still too much money given the company was also facing a 19 per cent pension plan funding shortfall, meaning employees would likely see a similar cut to their benefits.

'Retail apocalypse'

The Sears story also points to a larger trend in business today "the so-called retail apocalypse, in which brick-and-mortar stores lose out to online sales," said Daniel Tencer, senior business editor at HuffPost Canada.

The rise of e-commerce was one of several factors that led to Sears Canada's struggles, said Brandon Stranzl, who stepped away from his position in August to lead an unsuccessful bid to buy the company and save it from liquidation.

"The major moat of a department store was aggregation," he said, explaining Sears Canada was once the go-to for all household needs.

• Sears Canada creditor process biased toward liquidation, says former exec

That model was upended when specialty retailers appeared and started to eat away at the department store's mattress, appliance and other core businesses, while discount chains like Walmart forced prices down and internet-based retailers swooped into provide a direct to consumer option, he said.

"The company would have had to execute flawlessly to avoid, you know, a restructuring," he said, adding they did everything possible to avoid that fate, but it came down to time.

"We didn't have sufficient time to get through all the plans."

Closures and vacancies

The closures are the latest in a string of department store exits in recent memory. Target, Zellers and now Sears Canada have left repeated vacancies at malls across Canada and shopping centres have struggled to fill the void with new anchor tenants.

Now, former competitor and one of the few remaining department store chains in the country, Hudson's Bay Co., appears to be struggling with similar headwinds.

The company is in the midst of a transformation plan that includes laying off 2,000 people across North America and posted a $243-million loss in its most recent quarter.

Interim CEO Richard Baker has said the company expects to benefit from the Sears Canada closure.

But Stranzl isn't so sure.

He warned any sales bump to HBC after Sears Canada's liquidation sales end is likely to be temporary due to the long-term challenges facing department stores.

"I think their business model... fundamentally has to be altered for it to be, you know, successful over a long period of time," Stranzl said.

"Consumers just aren't going to shop that way any more."