Founded in 1886 by Richard W. Sears, a Minnesota railway agent, Sears grew through the years by adding financial services and clothing to its original inventory of durable goods. However, in 1995, Sears decided to refocus on its core retailing business, and shed its financial operations such as Allstate insurance, Dean Witter financial services, and Discover credit card. (The company recently has decided to re-launch a Sears credit card; however, it will team with Mastercard this time.) Sears also shed many of its employees. CEO Arthur Martinez, who led the charge in revamping the Sears's image, is credited with much of the company's turnaround in revenues, though the recovery hasn't been without its share of controversy.

Legal woes

During the first four years with Martinez at the helm, Sears enjoyed robust sales and laudatory cover articles in business magazines. But after extending generous credit through its Sears Card program, the company fell on hard times in 1996. First, federal courts penalized Sears for its aggressive method of collecting debt from credit-card holders in personal bankruptcy proceedings. The company finally settled the issue to the tune of $475 million, but a federal probe - aimed at Sears employees directly involved in debt collection - is still pending. These problems, combined with sluggish sales, kept profits low in 1997.

In 1999, Sears continued to run into trouble with the law. The Labor Department fined the retailer for violating child labor laws. A month later, a lawsuit alleged that Sears' auto business cheated clients out of $400 million between 1989 and 1994 for tire-balancing services it didn't perform. Although the fraud took place before Martinez's tenure, the bad press has not helped sales.

A marketing makeover

The company hoped that showing its "softer side" would help rake in some cold hard cash. After coming close to bankruptcy, Sears Roebuck & Co., the nation's second-largest retailer, strongly rebounded thanks to its discovery of a whole new market for its products: women. Following years of declining sales, Sears replaced its male-centered approach with an aggressive sales and marketing approach aimed at women. To make itself more attractive to that market, Sears not only increased its selection of women's apparel, but it also began to offer home services like repairs and installations of major household appliances. It also initiated a move away from mall-based department stores toward freestanding specialty stores. The move came as Sears found itself sandwiched between bargain retailers like Wal-Mart (at No. 1) and high-end firms like Federated Department Stores.

Mining the customer data mountain

Sears claimed that it had one of the most sophisticated customer database systems in the retail industry - with the capacity to record purchase information for almost 100 million households. The company used purchase information to specialize its merchandise offerings and catalogs, and to monitor the success of its direct marketing campaigns. Sears also took the initiative in building customer relationships through loyalty programs directed at specific demographic groups. These included the Sears Best Customer Club, the Craftsman club, the KidVantage club, and the Gift Registry. Club members received perks like invitations to members-only sales and a "wear-out warranty" for children's apparel and shoes.

Pushing the shirts and fridges

In addition to brand names like Champion, Reebok, and Nike, Sears offers a growing variety of affordable clothing lines. Brands sold exclusively at Sears include "First Issue," by Liz Claiborne, the Circle of Beauty cosmetics line, and Mosaic - a line aimed at women of color, created by the celebrated African-American Designer Alvin Bell. To concentrate on its clothing and appliance lines, Sears sold Western Auto, its auto parts chain, and HomeLife, its furniture chain, in 1999.

The many sides of Sears

The last twelve months have ushered in yet another era at Sears; since summer 1999, the company has again chosen to re-focus. In August, after cutting 1,400 jobs in an attempt to compete with bargain retailers like Target, it chose to shed its "softer side" image by launching a value-centered advertising campaign: "The Good Life at a Great Price. Guaranteed. Sears." Its product line shifted dramatically as well. The company severed its ties with clothing manufacturer Benetton, while it reduced its mix of apparel by 20 percent. Furthermore, the company terminated its catalog business in 1993; it increased its focus on tools and home decor; and it planned to offer insurance after an alliance with Hartford Financial Services Group Inc.

Perhaps Sears' most fundamental shift has been a sudden concentration on its web site, which offers its top-selling appliances. Although the company hoped to rely on its site to boost slumping sales, a host of startups has attacked the appliances and tools market. Furthermore, Sears' e-commerce venture has been overshadowed by Kmart's Bluelight.com and WalMart.com; Home Depot is another looming rival in the home products market. To strengthen its online presence, Sears will add lawn, garden, home electronics products, and services to its Web site