Stuck in the Middle
October 14, 2009 Leave a comment
Following up on the topic of divergence in my last post, I would like to dive a little deeper into category development cycles.
As we discussed, Darwin described divergence as “the evolutionary principle responsible for the creation of new species.” According to this theory, humans didn’t evolve from apes, but rather branched off of the same ancestral tree that also produced monkeys, gorillas, and chimpanzees.
The same is true with product categories. In the 1950’s we had diners that served everything from hamburgers to coffee to ice cream treats. Fast forward 50 years and we have McDonald’s, Starbucks, and Baskin Robbins. Each of these brands, with their single product focus were able to separate their brands in a way that created a new product category.
Divergence is a two sided coin, however. With every successful brand who was able to create a new category and own a position in the consumer’s mind are countless brands who are stuck in the middle, dying a slow, but inevitable death.
Just look at Sears. As the retail industry has diverged over the past decades, Sears has not diverged.
Wal-mart is thriving at the low end of the retail market. Further diverged Target has been successful at the “chic” low end of the market.
Bloomingdale’s is doing well at the high end of the retail market. Further diverged Nordstrom is thriving at the “customer friendly” high end of the market.
Sears Net Income
Neither high end, nor low end, I’m afraid Sears is stuck in the mushy middle. I believe the net income chart of Sears Holdings (which also owns another middle of the road retailer, K-Mart) says it all.
