April 7, 2008
Sears Goes Back to Its Roots, Sort of
Sears financial performance over a number of years now suggests that the chain might simply not get it when it comes to what it takes to getting its stores turned around.
One area where the company apparently has a clue is its online business, which has quietly begun to increase sales while expanding its selection à la Amazon.com to begin including music, movies, software, video games and books.
According to a Chicago Tribune article, Sears (Sears, Kmart and Lands’ End) was the second fastest growing company online among retailers serving the mass market since in 2007. Only Costco is growing faster, according to Nielsen Online.
Sears, which grew to become a retail giant through its mail order catalog business, appears to be going back to the future with the 21st century’s equivalent – the internet.
“If you think about what the Big Book originally tried to do, it was to open up all this stuff to people living in the cabins in the Plains, and that’s essentially what they’re doing,” Bill Bass, who ran Sears’ online operations up until 2005, told the Trib. “When you think about the power of the Internet, that’s what it’s really good at.”
Jonathan Salem Baskin, president of Baskin Associates, believes that Sears has a tremendous potential to grow through its online business.
“Talk about a rich heritage,” said Mr. Baskin. “Like anything, it would take some commitment. Why couldn’t Sears bring the world to me?”
“Strategically, in the long run, Sears has to find a reason to exist,” Love Goel, chairman and CEO of Growth Ventures Group, told the Trib. “They have a significant direct-to-consumer heritage. It is probably one of their strongest assets and the only silver lining in their business.”
Sears’s web business is proving successful both in traffic numbers and sales revenues. The number of unique visitors to Sears.com and Kmart.com was up 20 percent in February compared to the same month a year earlier. Sears.com’s traffic was up 28 percent as 12.3 visitors came to the site.
Discussion Questions: Will Sears’ online business be its saving grace? Considering the low overhead and higher profit nature of the online business versus individual store operations, do you expect the company to begin divesting store assets to focus more on its e-commerce efforts? What do you see as the proper mix among sales channels for Sears Holdings’ properties?
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“Considering the low overhead and higher profit nature of the online business…”
These 2 assumptions are often wrong. Just driving traffic to a retail web site is often ruinously expensive. And picking, packing, and shipping individual orders is often quite expensive, too. Sears’ online profitability is far from automatic, and considering their convenient (for most Americans) bricks and mortar presence, it would not be surprising if cannibalization is a major consideration.
Everything Sears does is analyzed internally from a financial point of view, so if the online expansion continues for a while, it’s likely to indicate profitability. However, Sears has tested many new alternatives, so the online expansion could simply be a test.
Yes, they’re on the right track, but this could also be a self-fulfilling prophecy in that the stores themselves offer nothing of value in terms of experience…so why go?
The online sales are a tiny fraction of what Sears is going to need in terms of increases to right-size the business. They should not lose focus on their in-store experience as that’s where the real key lies.
I’d say there is a more basic problem–finding the consumer. Sears is still struggling to find its “target” shopper both for its own brick and mortar units and for Kmart. Unless they are better able to target their shopper any success is going to be hit and miss–at best.
It is clear Sears has no retail solution, vision or directions so why not go consumer direct? When Sears started, it was a way to expand sales to markets that did not justify a store. Today, you can find everything Sears offers in many stores. The last part of Sears that has any value is its Private Label brands (Kenmore, Craftsman). These they may sell well over the internet.
Large sales increases on small numbers do not a business make. Until Sears and Kmart get into the retail game, this is just a Real Estate play which may not work out as planned.
If Sears still has the physical capacity and distribution space from its catalog heritage to handle web fulfillment, it’s a sensible adjunct to their brick & mortar business. However, this must be a relatively small piece of the overall pie and there are still too many issues requiring attention in the Sears and Kmart stores for e-commerce to be a solution.
More important, Sears seems to be lacking focus on its website just as it lacks focus in its stores. By selling the same type of product as Amazon (books, music, movies) it runs the risk of being an “also-ran” instead of a top-of-mind retailer. This is the same approach that has lost Sears and Kmart market share to everyone from Kohl’s to Lowe’s to Wal-Mart over the years, and has cost the company whatever relevance it used to have.
When you are doing such low sales numbers to begin with, it’s easy to show big percentage gains. Considering Sears’ lack of commitment to turning the company around, I’m not going to buy into this. When this segment of the company fails, Kramer won’t be able to talk about the underlying value of the real estate connected with the internet sales.
Sears built its foundation on direct to consumer sales and might do well to get back into that specialty area via online marketing. At this stage, unless Sears can do so with certain aspects of specialization or differentiation, it will continue to be a dinosaur.
It is amazing how long it is taking them to react. But finally, they are getting it. Online retailing is noting more than their old traditional catalog sales business without the printing cost.
Sears needs to revamp and reload their image profile. In merchandising they do a good job they just need to get the word out and change the perception of being “old and outdated.”
There are assets that Sears/Kmart has: Martha Stewart, Craftsman, Kenmore the rich history of Lands’ End and of course, their catalog. Leveraging the internet to build these brands and beginning to eliminate real estate holdings that do not reinforce this strategy may be some first small steps. But just a first steps….
I’d say let’s fix the bricks and mortar first before investing online. And the reason for this is the average consumer connects online stores with their physical equivalent when applicable. If consumers don’t have faith in the retail operation, why would they shop the online store?
The growth they are seeing online is because the overall industry is growing and Sears.com is swept up in that. Granted their original business model is based on non store selling, the stores have become the cornerstone of Sears’ operation and the outlets cannot be ignored. By improving service, price and selection at the store level, they will be able to achieve real growth with their online ventures.
Sears problem is with its B&M stores. When I go into a Sears or Kmart, it’s still like it’s 1970. Now I am kind of nostalgic and that is ok, but it doesn’t do much for sales.
They have to step up their merchandising. Try shopping for a movie at Kmart. The department is unorganized, junky and just not shopper friendly. They need to realize that you have to do some loss leading in order to maintain a competitive edge.
They have a lot of strong assets as already mentioned, but they don’t capitalize on them enough. Lands’ End and Craftsmen are the leaders in their particular category.
I personally want them to succeed because the world doesn’t need to be Wal-Mart only.
It seems to me you always have to ask a core question when looking at ANY business. That question is “Why does this business deserve to exist?” Second question that immediately follows, “Would there be a gap in customer needs if this business DIDN’T exist?”
So if you buy that as a concept, then we can say this:
– Sears has a great line of appliances and tools.
– There likely would be a gap if those items ceased to exist.
– There are really no other lines of business Sears is in that justifies its existence. Wal-Mart does the “full service mass merchant” thing better, as does Target.
– Consumers already have plenty of places to buy the items Sears is considering adding to its assortment.
Multi-channel retailing is great…no question. And if Sears can compete on price and service, the company could acceptably perform on-line with these products. BUT…the company’s core problem is the square footage of its brick and mortar stores far outstrips the needs of its core product assortment – that which makes it “deserve to exist.”
In my view, the decision to abandon smaller footprint formats was a disastrous one because the company keeps filling up those extra square feet with products customers can get elsewhere. You can’t fix that problem by selling CDs online. it’s the retailer’s core issue. Everything else ignores the 800 pound gorilla in the room.
Reinvent the B&M stores while building online sales. Neither effort should lag or be put on hold in favor of the other. Developed in tandem, each effort can support the other. Virtual online tours of new store layouts and departments; Pick up online orders at a Sears store (and handle returns there, too); Provide in-store terminals where customers can order sizes and colors that may not be in stock locally; etc. Additionally, some effort should be devoted to asking online shoppers what could be improved in stores operated by Sears Holdings.
Let me answer George’s questions first.
1. No, the online business is NOT the saving grace of the retail entity known as Sears. It MAY be the saving grace of the financial entity known as Sears Holdings.
2. Will Sears divest it’s physical holdings to focus on the online business? They have very little to do with one another in the long term. The “focus” required to continue the current strategy doesn’t require disinvestment elsewhere. It’s a unique business.
3. What’s the right mix of channel volume? Easy answer: anything which reduces the negative comps or actually generates a gain. However, it may not be the right question. The right question might be “Is Sears actually a multi-channel retailer?” And that one, I might answer…in the long run…might be “no.”
It’s too easy to critique what’s wrong with Sears. This article discussed something which appears to be right. Let’s focus on that. The metrics by which “success” are measured in the online world are (obviously) volume and traffic. Profitability is very often a function of the cost of generating that traffic compared with the conversion rate from those visitors. Assuming that the infrastructure exists and is scaleable, the variable costs of driving volume are primarily those related to driving eyeballs to the site.
I’m not familiar with what Sears is spending to drive those eyeballs, and maybe that’s telling. If Sears was spending large amounts of money to generate additional traffic, perhaps it would be apparent to industry observers. Let’s assume that they are NOT dumping buckets of money into driving eyeballs. Yet traffic is up substantially. This is great. Online sales volume is up substantially. This too is great. Why is there anything but approval for these results?
Because they aren’t doing it elegantly. So what if Sears is trying to become a “portal” as opposed to a “retailer” in the mode of Amazon? As analysts, we want to see compelling business advantages, unique and defensible positioning, and focused strategic efforts. Well, in a way, doesn’t Sears have this for the online business? Isn’t the existing site traffic a compelling advantage? Does anyone out there know what kind of ad spend it would take to generate 20 million monthly visitors from scratch? What about the legacy of Direct business inherent in its catalog operations (however recently moribund)? Within the industry of “portals,” who has a better brand name, higher recognition, and also the physical locations to pick up the merchandise? Amazon has high recognition, but no physical locations, and one can argue, no brand identity. Sears, while a struggling concept to retail analysts, actually DOES have brand identify with a significant consumer base, and it is NOT entirely or even primarily negative for a huge chunk of those people.
So what’s wrong with becoming a “portal”? Is the marketplace so small that we need only one of those behemoths (Amazon)? Has ShopNBC or Buy.com or any of the others done so incredibly well that there are barriers to entry? The real barriers to entry are generating the eyeballs, having the scaleable infrastructure, and attracting a broad enough assortment. Sears has all of those.
In further “fairness,” the Sears site is in the upper echelon of e-commerce sites for navigation, purchase support, and ease of use. Like most sites, it needs work, and can be nitpicked to death. However, there has been investment to create a flexible, easily navigated, and moderately support-friendly site. All of which are critical to success as a portal.
Amazon generates almost $15 billion in revenue. Its market cap is over $32 billion. Profit is 3.2% of revenue. SHLD does $2.5 billion online, and the entire company has a market cap of just under $14 billion. We don’t know the net profit for the online business unit, but I’d guess it’s higher than 3.2%. Who’s to say that a Sears Online business unit, valued independently, after another year or two of 20% growth, couldn’t have a market cap all on its own of $8 billion? It’s not out of line for the industry. How much would THAT help with the salvaging of Lampert’s investment?
While it’s admirable that the online segment of Sears business shows promise, still it’s the brick and mortar that must be corrected. For some time now, Sears has struggled with an identity issue. Finding its unique niche in the sea of retail has not been easy. To help the turnaround there, executives need to be more willing to learn from the experience of others.
Also, a much more open mind could be helpful in gathering information and intel from experts in certain areas of the business where they are weakest. When a particular way has proven not to work, why continue to pursue it? Such a change in thinking is not only necessary, it is mandatory. Consumers and competitors continue to get smarter and that’s not likely to slow down.
Sears is a great American story. The company has a rich heritage in our country and it would be wonderful to for the business to be successful. However, it will take much more than sales over the web to rescue a this great American icon.
I think the last paragraph in the Trib story sums it up perfectly:
At less than 1 percent of Sears’ total annual sales of $50 billion, the online business isn’t going to provide the panacea for Sears’ chronic sales decline. And simply throwing millions of products online without direction will ultimately confuse and drive away shoppers.
I actually shopped–and bought!–something in a Sears last week, and while that may not seem like much in the way of qualifications to comment, it does (apparently) make me almost unique….my verdict: the merchandise was OK (though a @2.95 rake and a pair of 505s don’t present much of a challenge) but the presentation (crowded merchandise and cluttered fitting rooms) and lack of staffing (4 sales counters in a 200,000 sq. ft. store) are definite downers; as long as that “cut our way back to profitability” mindset remains, their only movement is likely to be backwards.
I just don’t know. Like others have pointed out, when your base is small showing huge gains is easy. Sears has strengths, especially with its product lines and experience.
One of Sears major strengths is its distribution system and buying power. This is extremely important when buying major appliances and contracting for Private label like Craftsman and DieHard. I just can’t see how these and other categories can move any advantage to the internet. Internet sales are primarily one item/one customer. This makes major appliance sales impossible unless you are buying online and picking up in store. Other brands, like Lands’ End, aren’t going to give their “mail order” business to Sears. I don’t think they can out-electronics the Best Buys, or any other category killer. I just can’t see the Sears web site being anything but a means of providing product and promotion information. If you want to order and pick up in store that’s fine. I just don’t think that there are that many people so far out in the wilderness that they would pay for Sears to deliver. If so, then I question whether they will have electricity to power up the laptop so they can place an order….
The internet marketplace has many well-established players, unlike the mass retail environment Sears entered over a century ago. Their best opportunity is likely as a niche player, which isn’t likely to generate the volume they need to change their fortunes.
I don’t recall if I wrote about it at the time, but about a year ago I bought an automobile jack from Sears online. It was one of the best shopping experiences I have had. I reviewed all the features and specifications of the various jacks online, selected the one that best met my needs, and ordered it for delivery to a nearby Sears. When it came in, I received a notice it was there along with a pickup number. When I arrived at the store, I went to a special entrance, gave them my receipt, and someone helped me load the jack into the truck. The only thing I regret is that no one drove home with me to help get it off the truck.
I don’t know why more consumers don’t do this, but some people do like to shop. Brick and Mortar retailers should take more advantage of the Internet by sponsoring online “shopping events.” Instead of consumers going to a store or mall, they would go to a neighbor’s media room to participate in an online apparel sale or whatever. The purchased merchandise would be sent to the neighbor and the neighbor would receive a gift certificate for future purchases. This extends the supply channel right to the consumer’s neighborhood.
Sears still has a reputation for quality with many consumers. By looking at more creative ways to reach consumers they can capitalize on this reputation. Their challenge is to distinguish themselves with younger consumers.
You have to learn to tie your shoes before you run a race and Sears has no concept of what a shoelace is. Quarter after quarter the company continues to disappoint with anemic sales and earnings based upon expense reduction and real estate value. It looks like Sears is approaching that difficult period when sales increases are needed to maintain earnings. With a management team that has no idea what direction the company should be heading and Eddie Lampert bragging about his success as Sears CEO, one wonders how the company has survived until now.
To actually think that an online strategy will be properly managed and produce stellar results is a great leap of faith. In reality, just give Sears management time. They will ruin the online business with the same expertise they applied to the bricks and mortar business.
We all know Sears would like to revamp their image and increase sales; however, they will likely not be able to for a couple of reasons:
1) The bulk of the stores they currently operate are aging mall based dinosaurs left over from the 60s and 70s. These stores have undergone minor renovation and band-aid retrofitting through the years, but the stores are no longer relevant to todays shopping experience. The multi-level large foot print is too large and does not offer a good shopping experience for the discount shopper.
2) Sears needs a cultural makeover. The end product or brand experience is a result of the forces that influence it. The culture at Sears is not one of innovation, change and positive growth. It has been one of holding on, protecting your position and trying not to rock the boat. If Sears has any chance of righting the sinking ship they need a major change in culture. This maybe the most difficult under taking of all, but anything can be accomplished if approached with the right attitude.
If Sears Holdings wants to, they can do both, improve store appearance and have a major online presence, even if mainly a portal site.
I’d really like Sears Holdings to succeed, but it will take a major effort.
Glad to read that they reached a deal with Footstar, which currently controls all of their Kmart shoe departments as leased departments. After 2008, SH will acquire them, as Footstar phases itself out, saving big bucks for SH down the road.
A wise move in what, hopefully, will be a future of wise moves.
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“Considering the low overhead and higher profit nature of the online business…”
These 2 assumptions are often wrong. Just driving traffic to a retail web site is often ruinously expensive. And picking, packing, and shipping individual orders is often quite expensive, too. Sears’ online profitability is far from automatic, and considering their convenient (for most Americans) bricks and mortar presence, it would not be surprising if cannibalization is a major consideration.
Everything Sears does is analyzed internally from a financial point of view, so if the online expansion continues for a while, it’s likely to indicate profitability. However, Sears has tested many new alternatives, so the online expansion could simply be a test.
Yes, they’re on the right track, but this could also be a self-fulfilling prophecy in that the stores themselves offer nothing of value in terms of experience…so why go?
The online sales are a tiny fraction of what Sears is going to need in terms of increases to right-size the business. They should not lose focus on their in-store experience as that’s where the real key lies.
I’d say there is a more basic problem–finding the consumer. Sears is still struggling to find its “target” shopper both for its own brick and mortar units and for Kmart. Unless they are better able to target their shopper any success is going to be hit and miss–at best.
It is clear Sears has no retail solution, vision or directions so why not go consumer direct? When Sears started, it was a way to expand sales to markets that did not justify a store. Today, you can find everything Sears offers in many stores. The last part of Sears that has any value is its Private Label brands (Kenmore, Craftsman). These they may sell well over the internet.
Large sales increases on small numbers do not a business make. Until Sears and Kmart get into the retail game, this is just a Real Estate play which may not work out as planned.
If Sears still has the physical capacity and distribution space from its catalog heritage to handle web fulfillment, it’s a sensible adjunct to their brick & mortar business. However, this must be a relatively small piece of the overall pie and there are still too many issues requiring attention in the Sears and Kmart stores for e-commerce to be a solution.
More important, Sears seems to be lacking focus on its website just as it lacks focus in its stores. By selling the same type of product as Amazon (books, music, movies) it runs the risk of being an “also-ran” instead of a top-of-mind retailer. This is the same approach that has lost Sears and Kmart market share to everyone from Kohl’s to Lowe’s to Wal-Mart over the years, and has cost the company whatever relevance it used to have.
When you are doing such low sales numbers to begin with, it’s easy to show big percentage gains. Considering Sears’ lack of commitment to turning the company around, I’m not going to buy into this. When this segment of the company fails, Kramer won’t be able to talk about the underlying value of the real estate connected with the internet sales.
Sears built its foundation on direct to consumer sales and might do well to get back into that specialty area via online marketing. At this stage, unless Sears can do so with certain aspects of specialization or differentiation, it will continue to be a dinosaur.
It is amazing how long it is taking them to react. But finally, they are getting it. Online retailing is noting more than their old traditional catalog sales business without the printing cost.
Sears needs to revamp and reload their image profile. In merchandising they do a good job they just need to get the word out and change the perception of being “old and outdated.”
There are assets that Sears/Kmart has: Martha Stewart, Craftsman, Kenmore the rich history of Lands’ End and of course, their catalog. Leveraging the internet to build these brands and beginning to eliminate real estate holdings that do not reinforce this strategy may be some first small steps. But just a first steps….
I’d say let’s fix the bricks and mortar first before investing online. And the reason for this is the average consumer connects online stores with their physical equivalent when applicable. If consumers don’t have faith in the retail operation, why would they shop the online store?
The growth they are seeing online is because the overall industry is growing and Sears.com is swept up in that. Granted their original business model is based on non store selling, the stores have become the cornerstone of Sears’ operation and the outlets cannot be ignored. By improving service, price and selection at the store level, they will be able to achieve real growth with their online ventures.
Sears problem is with its B&M stores. When I go into a Sears or Kmart, it’s still like it’s 1970. Now I am kind of nostalgic and that is ok, but it doesn’t do much for sales.
They have to step up their merchandising. Try shopping for a movie at Kmart. The department is unorganized, junky and just not shopper friendly. They need to realize that you have to do some loss leading in order to maintain a competitive edge.
They have a lot of strong assets as already mentioned, but they don’t capitalize on them enough. Lands’ End and Craftsmen are the leaders in their particular category.
I personally want them to succeed because the world doesn’t need to be Wal-Mart only.
It seems to me you always have to ask a core question when looking at ANY business. That question is “Why does this business deserve to exist?” Second question that immediately follows, “Would there be a gap in customer needs if this business DIDN’T exist?”
So if you buy that as a concept, then we can say this:
– Sears has a great line of appliances and tools.
– There likely would be a gap if those items ceased to exist.
– There are really no other lines of business Sears is in that justifies its existence. Wal-Mart does the “full service mass merchant” thing better, as does Target.
– Consumers already have plenty of places to buy the items Sears is considering adding to its assortment.
Multi-channel retailing is great…no question. And if Sears can compete on price and service, the company could acceptably perform on-line with these products. BUT…the company’s core problem is the square footage of its brick and mortar stores far outstrips the needs of its core product assortment – that which makes it “deserve to exist.”
In my view, the decision to abandon smaller footprint formats was a disastrous one because the company keeps filling up those extra square feet with products customers can get elsewhere. You can’t fix that problem by selling CDs online. it’s the retailer’s core issue. Everything else ignores the 800 pound gorilla in the room.
Reinvent the B&M stores while building online sales. Neither effort should lag or be put on hold in favor of the other. Developed in tandem, each effort can support the other. Virtual online tours of new store layouts and departments; Pick up online orders at a Sears store (and handle returns there, too); Provide in-store terminals where customers can order sizes and colors that may not be in stock locally; etc. Additionally, some effort should be devoted to asking online shoppers what could be improved in stores operated by Sears Holdings.
Let me answer George’s questions first.
1. No, the online business is NOT the saving grace of the retail entity known as Sears. It MAY be the saving grace of the financial entity known as Sears Holdings.
2. Will Sears divest it’s physical holdings to focus on the online business? They have very little to do with one another in the long term. The “focus” required to continue the current strategy doesn’t require disinvestment elsewhere. It’s a unique business.
3. What’s the right mix of channel volume? Easy answer: anything which reduces the negative comps or actually generates a gain. However, it may not be the right question. The right question might be “Is Sears actually a multi-channel retailer?” And that one, I might answer…in the long run…might be “no.”
It’s too easy to critique what’s wrong with Sears. This article discussed something which appears to be right. Let’s focus on that. The metrics by which “success” are measured in the online world are (obviously) volume and traffic. Profitability is very often a function of the cost of generating that traffic compared with the conversion rate from those visitors. Assuming that the infrastructure exists and is scaleable, the variable costs of driving volume are primarily those related to driving eyeballs to the site.
I’m not familiar with what Sears is spending to drive those eyeballs, and maybe that’s telling. If Sears was spending large amounts of money to generate additional traffic, perhaps it would be apparent to industry observers. Let’s assume that they are NOT dumping buckets of money into driving eyeballs. Yet traffic is up substantially. This is great. Online sales volume is up substantially. This too is great. Why is there anything but approval for these results?
Because they aren’t doing it elegantly. So what if Sears is trying to become a “portal” as opposed to a “retailer” in the mode of Amazon? As analysts, we want to see compelling business advantages, unique and defensible positioning, and focused strategic efforts. Well, in a way, doesn’t Sears have this for the online business? Isn’t the existing site traffic a compelling advantage? Does anyone out there know what kind of ad spend it would take to generate 20 million monthly visitors from scratch? What about the legacy of Direct business inherent in its catalog operations (however recently moribund)? Within the industry of “portals,” who has a better brand name, higher recognition, and also the physical locations to pick up the merchandise? Amazon has high recognition, but no physical locations, and one can argue, no brand identity. Sears, while a struggling concept to retail analysts, actually DOES have brand identify with a significant consumer base, and it is NOT entirely or even primarily negative for a huge chunk of those people.
So what’s wrong with becoming a “portal”? Is the marketplace so small that we need only one of those behemoths (Amazon)? Has ShopNBC or Buy.com or any of the others done so incredibly well that there are barriers to entry? The real barriers to entry are generating the eyeballs, having the scaleable infrastructure, and attracting a broad enough assortment. Sears has all of those.
In further “fairness,” the Sears site is in the upper echelon of e-commerce sites for navigation, purchase support, and ease of use. Like most sites, it needs work, and can be nitpicked to death. However, there has been investment to create a flexible, easily navigated, and moderately support-friendly site. All of which are critical to success as a portal.
Amazon generates almost $15 billion in revenue. Its market cap is over $32 billion. Profit is 3.2% of revenue. SHLD does $2.5 billion online, and the entire company has a market cap of just under $14 billion. We don’t know the net profit for the online business unit, but I’d guess it’s higher than 3.2%. Who’s to say that a Sears Online business unit, valued independently, after another year or two of 20% growth, couldn’t have a market cap all on its own of $8 billion? It’s not out of line for the industry. How much would THAT help with the salvaging of Lampert’s investment?
While it’s admirable that the online segment of Sears business shows promise, still it’s the brick and mortar that must be corrected. For some time now, Sears has struggled with an identity issue. Finding its unique niche in the sea of retail has not been easy. To help the turnaround there, executives need to be more willing to learn from the experience of others.
Also, a much more open mind could be helpful in gathering information and intel from experts in certain areas of the business where they are weakest. When a particular way has proven not to work, why continue to pursue it? Such a change in thinking is not only necessary, it is mandatory. Consumers and competitors continue to get smarter and that’s not likely to slow down.
Sears is a great American story. The company has a rich heritage in our country and it would be wonderful to for the business to be successful. However, it will take much more than sales over the web to rescue a this great American icon.
I think the last paragraph in the Trib story sums it up perfectly:
At less than 1 percent of Sears’ total annual sales of $50 billion, the online business isn’t going to provide the panacea for Sears’ chronic sales decline. And simply throwing millions of products online without direction will ultimately confuse and drive away shoppers.
I actually shopped–and bought!–something in a Sears last week, and while that may not seem like much in the way of qualifications to comment, it does (apparently) make me almost unique….my verdict: the merchandise was OK (though a @2.95 rake and a pair of 505s don’t present much of a challenge) but the presentation (crowded merchandise and cluttered fitting rooms) and lack of staffing (4 sales counters in a 200,000 sq. ft. store) are definite downers; as long as that “cut our way back to profitability” mindset remains, their only movement is likely to be backwards.
I just don’t know. Like others have pointed out, when your base is small showing huge gains is easy. Sears has strengths, especially with its product lines and experience.
One of Sears major strengths is its distribution system and buying power. This is extremely important when buying major appliances and contracting for Private label like Craftsman and DieHard. I just can’t see how these and other categories can move any advantage to the internet. Internet sales are primarily one item/one customer. This makes major appliance sales impossible unless you are buying online and picking up in store. Other brands, like Lands’ End, aren’t going to give their “mail order” business to Sears. I don’t think they can out-electronics the Best Buys, or any other category killer. I just can’t see the Sears web site being anything but a means of providing product and promotion information. If you want to order and pick up in store that’s fine. I just don’t think that there are that many people so far out in the wilderness that they would pay for Sears to deliver. If so, then I question whether they will have electricity to power up the laptop so they can place an order….
The internet marketplace has many well-established players, unlike the mass retail environment Sears entered over a century ago. Their best opportunity is likely as a niche player, which isn’t likely to generate the volume they need to change their fortunes.
I don’t recall if I wrote about it at the time, but about a year ago I bought an automobile jack from Sears online. It was one of the best shopping experiences I have had. I reviewed all the features and specifications of the various jacks online, selected the one that best met my needs, and ordered it for delivery to a nearby Sears. When it came in, I received a notice it was there along with a pickup number. When I arrived at the store, I went to a special entrance, gave them my receipt, and someone helped me load the jack into the truck. The only thing I regret is that no one drove home with me to help get it off the truck.
I don’t know why more consumers don’t do this, but some people do like to shop. Brick and Mortar retailers should take more advantage of the Internet by sponsoring online “shopping events.” Instead of consumers going to a store or mall, they would go to a neighbor’s media room to participate in an online apparel sale or whatever. The purchased merchandise would be sent to the neighbor and the neighbor would receive a gift certificate for future purchases. This extends the supply channel right to the consumer’s neighborhood.
Sears still has a reputation for quality with many consumers. By looking at more creative ways to reach consumers they can capitalize on this reputation. Their challenge is to distinguish themselves with younger consumers.
You have to learn to tie your shoes before you run a race and Sears has no concept of what a shoelace is. Quarter after quarter the company continues to disappoint with anemic sales and earnings based upon expense reduction and real estate value. It looks like Sears is approaching that difficult period when sales increases are needed to maintain earnings. With a management team that has no idea what direction the company should be heading and Eddie Lampert bragging about his success as Sears CEO, one wonders how the company has survived until now.
To actually think that an online strategy will be properly managed and produce stellar results is a great leap of faith. In reality, just give Sears management time. They will ruin the online business with the same expertise they applied to the bricks and mortar business.
We all know Sears would like to revamp their image and increase sales; however, they will likely not be able to for a couple of reasons:
1) The bulk of the stores they currently operate are aging mall based dinosaurs left over from the 60s and 70s. These stores have undergone minor renovation and band-aid retrofitting through the years, but the stores are no longer relevant to todays shopping experience. The multi-level large foot print is too large and does not offer a good shopping experience for the discount shopper.
2) Sears needs a cultural makeover. The end product or brand experience is a result of the forces that influence it. The culture at Sears is not one of innovation, change and positive growth. It has been one of holding on, protecting your position and trying not to rock the boat. If Sears has any chance of righting the sinking ship they need a major change in culture. This maybe the most difficult under taking of all, but anything can be accomplished if approached with the right attitude.
If Sears Holdings wants to, they can do both, improve store appearance and have a major online presence, even if mainly a portal site.
I’d really like Sears Holdings to succeed, but it will take a major effort.
Glad to read that they reached a deal with Footstar, which currently controls all of their Kmart shoe departments as leased departments. After 2008, SH will acquire them, as Footstar phases itself out, saving big bucks for SH down the road.
A wise move in what, hopefully, will be a future of wise moves.