The BIG screw-up, in my opinion, was getting rid of the catalog. Sure, catalog sales may have been lagging, but it would have been an easy transition from the paper catalog to internet sales, when the internet started becoming popular in the mid/late 90's.
They sell internet. However, their prices are absurd. Everything I've looked at online can be found elsewhere much cheaper. No one is going to pay $100 for something at Sears when they can get it for $75 elsewhere.