Faced with slow sales, the Nordstrom family is exploring taking the iconic department store private. It’s no secret that despite the strong economy, the retail industry has been hit hard and the rise of ecommerce has impacted brick and mortar stores across the world. Department stores like Nordstrom, Macy’s, JCPenney, and Sears are struggling to adapt to a changing retail environment and new online competitors like Amazon.

While normally not viewed this way, privatization is a type of acquisition where the Nordstrom family, along with key shareholders, would acquire the department to strategically reposition the company. Here are three reasons why going private might help Nordstrom grow in today’s tough market.

  1. Shed Cost – Nordstrom will be able to shed some of the costs associated with being publicly traded. While not the primary driver for going private, this is certainly an advantage for a company looking to increase the bottom line.
  2. Focus on the long-term – Publicly traded companies must manage the expectations of the stock market and file quarterly reports. On the other hand, private companies can pursue strategies that may have a longer pay off period, without answering to anxious investors. Nordstrom will likely have to make some drastic changes including restructuring, which may impact revenue in the short-term in order to reposition the business for long-term success.
  3. Stealth – Why should Nordstrom share its strategy with a competitor like Macy’s? As a private company, Nordstrom will be able to maintain a level of stealth in a marketplace that is becoming increasingly competitive. Secrecy will be advantageous as retailers compete in the shrinking market of brick and mortar stores and try to expand in ecommerce.

Going private may help Nordstrom grow in a changing retail landscape, but it may not be enough to ward off powerful market forces. One thing is certain: retailers can’t keep going about business as usual and expect to survive in the future. In any industry, successful companies are those that proactively adapt and anticipate changes in future demand.

Photo Credit: Mike Mozart via Flickr cc

Sears, which was once a thriving department store, is dying a slow death and the company is grasping for cash in order to stay afloat. Last year, Sears borrowed $200 million from CEO Eddie Lampert’s hedge fund and most recently Sears agreed to sell Craftsman to Stanley Black & Decker. Under the terms of the acquisition Sears will get a cash payment of $525 million followed by a payment of $250 million after three years. It will also receive royalties from the sales for Craftsman for the next 15 years. Stanley Black & Decker is focused on strengthening its position in the tool market. In October 2016 the company announced it would acquire the tool business of Newell Brands, which includes Irwin, Lenox and Hilmor, for $1.95 billion.

From Success to Struggle

So how did Sears go from successful department store to its current situation? Of course many retailers have been hit hard – not just Sears. Faced with competition from online stores, traditional retailers are struggling to keep up. Macy’s is in the process of closing 100 stores in order to cut costs and Walmart is now offering free two-day shipping when shoppers spend at least $35 in order to compete with Amazon.

But, we can’t blame everything on competition. Competition is the very nature of business and there will always be changes to in the industry, which are beyond your control. It’s up to leaders to anticipate these changes and proactively develop a strategy in order to survive and even thrive when times are tough. Instead, Sears did nothing. Sears is not the only company to fall into this “strategy.” When things are going well, or at least satisfactorily, it’s easy to get comfortable and keep doing the same thing.

However, the result of doing nothing can be disastrous for your business. Think about Montgomery Ward, which was the Amazon of the 1800s, accepting and delivering orders by mail. But now the company doesn’t even exist. If Sears wants to avoid the same fate, it will need to be more innovative to fix its long term growth problems. Getting cash now is a temporary solution and it will be interesting to see what steps the company takes once they get the cash.

Are You Doing Nothing?

For business leaders today, I urge you to take a serious look at your business and marketplace. Don’t let yourself get too comfortable or get too caught up in the day-to-day tasks that you neglect the bigger picture. Any company that doesn’t remain on its toes can succumb to doing nothing.

No matter your current situation, you should always think about what could happen next and question your assumptions. Just because your plan works now, doesn’t mean it will work in the future. Where might the market be headed to tomorrow? In five years? Set aside time to look at your business strategy to make sure you answer these questions.

Photo credit: Mike Mozart via Flickr cc