Did Amazon just send Sears a life line with their Kenmore deal?

Discussion
Photos: Kenmore
Jul 21, 2017
George Anderson

If you can’t beat ‘em, join them. That appears to be the thinking behind an announcement yesterday by Sears Holdings that its Kenmore brand will now be sold on Amazon.com.

The deal between the two companies calls for Amazon to own the inventory, but Sears will ship orders to customers from its warehouses. Innovel Solutions, a Sears business unit, will deliver and install the appliances.

Selling on Amazon will help boost the e-tailer’s efforts to become a force in the appliance category. Sears is hoping that having Kenmore available on Amazon will help the brand regain lost market share. Kenmore, as reported by The Wall Street Journal, has seen its share of the category fall from 16.7 percent to 10.3 percent over the past four years.

“Working with Amazon is perfectly aligned with our omnichannel strategy to unleash the power and service of Kenmore and support the brand’s growth,” said Tom Park, president of Kenmore, Craftsman and DieHard brands at Sears Holdings, in a statement. “This collaboration is the first of its kind for Kenmore, broadening its accessibility to the next generation of American families outside of Sears branded retail channels.”

Sears Holdings also announced yesterday that Amazon’s Alexa voice-activated technology will be integrated into its full line of Kenmore Smart appliances.

“Voice is a natural interface for the smart home, so we’re thrilled that customers can now simply ask Alexa to interact with their Kenmore Smart appliances,” said Charlie Kindel, director of Alexa Smart Home. “We’re excited that Kenmore has added Alexa functionality to these products and we think customers will love the convenience of cooling their home, starting their laundry, and more, using only their voice.”

While analysts don’t see the Amazon/Kenmore deal having a major effect on Sears Holdings’ top or bottom line performance, it does provide some positive press for the struggling company. Shares of Sears stock increased 11 percent in trading yesterday to close at $9.60 while Amazon’s stock closed at an all-time high of $1.028.70. Shares of Home Depot, Lowe’s and Whirlpool were all down on the Amazon/Sears news.

DISCUSSION QUESTIONS: What impact will Amazon’s deal to sell Kenmore appliances have on Sears Holdings and other retailers and manufacturers in the category? Does Amazon or Kenmore stand to benefit more from the deal?

Braintrust
"Perhaps this is a precursor to a formal play by Amazon to acquire Sears’ distribution and service assets/capabilities."
"A damaged brand attached to damaged brand in a cutting-edge marketplace does not delay the inevitable for this zombie retailer."
"It will be interesting to see how Amazon interacts with other struggling legacy department stores. A Macy’s/Amazon Thanksgiving Day parade..."

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25 Comments on "Did Amazon just send Sears a life line with their Kenmore deal?"

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Dick Seesel
BrainTrust

If Sears’ goal now is to monetize its assets then the decision to sell its Kenmore brand through Amazon was a good one. Kenmore, after all, is the strongest brand left in the Sears toolbox. And the Alexa tie-in is smart, too, no matter whether it originated with Amazon or Sears (or its appliance suppliers).

But the move raises a white flag, too: It signals that Sears’ own physical and online footprint is barely relevant anymore. If you can buy a Kenmore dishwasher from Amazon (including delivery, installation and warranty service), why would you bother finding a Sears store as it continues to shrink its store count?

David Livingston
Guest
1 month 20 minutes ago

If you have a good product you want to sell it where people can see it. Nearly everyone has access to Amazon. However most have forgotten about Sears and have assumed their stores are all closed. The ones still open look like an attic of random products tossed about. Not very inviting. The last place Sears should consider selling products is in their own stores.

Mark Ryski
BrainTrust

This deal may move a few more Kenmore appliances but, when cannibalization is factored in, it won’t move the needle much for Sears. Picking up Kenmore and expanding their appliance business is all upside for Amazon. Managing delivery, setup and service are key in the appliance category and the deal with Sears enhances Amazon’s ability to do this. Perhaps this is a precursor to a formal play by Amazon to acquire Sears’ distribution and service assets/capabilities.

Dick Seesel
BrainTrust

Your last thought is really interesting. Could there be another Whole Foods-type of transaction in the future? Could Amazon eventually be the owner/operator of Sears Home Services (with the added business of selling appliances, etc.) and let Sears finally throw in the towel on its actual stores?

Max Goldberg
BrainTrust

The Amazon/Kenmore deal is good news for Sears, but it won’t reverse the overall declining fortunes of the company. Sears has too many problems and the company is leveraged to the hilt through a string of real estate deals. This is simply another step by Sears to try to save itself through making its three key brands available to other companies which, in the long run, will further diminish the viability of Sears stores.

Bob Phibbs
BrainTrust

If Kenmore still meant something this could be good but, like apparel, most people want to come in and see for themselves about appliances before they buy which is why J.C. Penney added them. A damaged brand attached to damaged brand in a cutting-edge marketplace does not delay the inevitable for this zombie retailer.

Gene Detroyer
BrainTrust

Certainly one person is not a good sample, but a person with rising income and growing family might say something. My son just bought a new dishwasher online. Never saw it until it was delivered and installed. Is this the future, even for appliances?

Art Suriano
BrainTrust

I think this is a smart move for Sears. I don’t know if Sears will see big sales, but it begins a relationship between both companies with positive benefits that can lead to other opportunities as well. Today there are so many options of where and how to shop, and this provides consumers with another alternative. The press is good for Sears and partnering with Amazon may help Sears reach a different audience. Incorporating Amazon’s Alexa technology is another good move, one that may also help Sears sell more product. So overall, I see this as a win-win.

Frank Riso
BrainTrust

Sears was at one time the leader in catalog sales across the U.S. I see this as the beginning of the return to yesteryear! Sears’ only route to improvement must be online, and who better to help than Amazon? We will see more of Sears go online and also with Amazon. Kenmore and Craftsman will keep Sears going and with additional product lines even get profitable. It may not reach the levels of the past but with a decrease in costs by closing stores Sears will endure. Kenmore will do very well with the help of Amazon’s free delivery service, too!

Chris Petersen, PhD.
BrainTrust

Amazon did not throw a lifeline to Sears … it just created major disruption
in yet another category and further extended the Alexa ecosystem.

In fact Amazon got a sweetheart deal — selling major appliances which have significant gross margin dollars using the Sears warehouses distribution system so that the large bulky items don’t clog Amazon’s system. Top that with service and installation and Amazon is suddenly in the business of disrupting prices and distribution of every other major appliance retailer.

While the deal may save the Kenmore brand, it is another nail in the coffin for Sears retail stores.

Phil Rubin
BrainTrust
1 month 1 hour ago

Sears has been pretty clear about re-inventing its business, raising cash via asset sales and the importance of Shop Your Way. Regardless of what it wants to do with Kenmore as a brand, i.e., “love it or list it,” this is a very smart move for Sears and it follows Nike’s playbook that it’s better to join Amazon than fight. It will put pressure on J.C. Penney (and less directly but not insignificantly, Best Buy and Walmart) and might set the stage for more collaboration.

Don’t discount the value of how large Shop Your Way is and Amazon’s interest in expanding the penetration it has with affluents to a more mass-market customer base (not that it doesn’t already have one).

This is the second big and positive Sears story this week and those who are and have been quick to write them off as dead or zombie-like might ultimately be surprised. Sears has a long way to go and a lot of uncertainty remains but it cannot be said they’ve collapsed and death is imminent.

Lyle Bunn (Ph.D. Hon)
BrainTrust

This is big news for two reasons. First, it reflects the Kenmore, Craftsman and DieHard brands at Sears Holdings as product producers administering their brand equity, as we will continue see happen in other categories. Second, the vast network of installers and support for these brands can now be turned to the in-home support for other products. Appliances and tools have more rapid refresh cycles than any time in history and are the in-home platform for IoT. I’ll look forward to more news as this operationalizes.

Jerry Gelsomino
BrainTrust

Besides the obvious impact on the future design of Kenmore products, it’s exciting to think about the injection of innovative thinking that will now be available to Sears. The merchandisers and retail-savvy crowd within Sears now have a new source of support.

Robert DiPietro
BrainTrust

Another reason for customers never to step foot in a Sears store. The exciting thing here for Amazon is the tie in to service/install what you sell. I’m thinking other retailers make more off the install/service contract than they do selling the appliance.

Richard J. George, Ph.D.
BrainTrust

Absolutely. Recall that Sears is where America used to shop. Sears gets a large lifeline while Amazon gets the benefit of offering a line of appliances, namely Kenmore, that still resonates with many Americans.

This is still only a tourniquet for a company that is hemorrhaging. Sears still needs to develop a viable strategy if it wishes to survive.

Gene Detroyer
BrainTrust

This will do absolutely nothing for Sears, the retailer. It will help Sears Holdings in getting value for their assets. And if they can show some volume with Kenmore, maybe they can sell off that business.

For Amazon, selling appliances will be no big deal. Delivering, installing, etc. will be a much bigger deal than selling books. But I am confident that they will figure it out.

Ben Ball
BrainTrust

Sears signaled their strategy to act as “brand marketers” when they set up Park’s division with their three strongest consumer franchises under it: Craftsman; DieHard and Kenmore. The Craftsman brand has gotten the most retail expansion action to date — but most of that has been brick-and-mortar alliances such as Ace Hardware. Pretty standard stuff. But this link to Amazon carries incremental advantage by adding the smart home link to Alexa. The downside is that Amazon has never shown any tendency to create brand exclusive alliances for its technology. Other appliance brands will be sporting Alexa connectivity as well. Any competitive advantage Kenmore gains with Kenmore Smart and Amazon distribution will quickly disappear.

Jasmine Glasheen
BrainTrust

I’m more interested in how the deal with Sears will impact Amazon, namely the public’s perception of Amazon as the great retail destroyer. Giving a failing (but well known and loved) brand like Sears a lifeline is a great marketing move for Amazon to improve its reputation. It will be interesting to see how Amazon interacts with other struggling legacy department stores as retail evolves. A Macy’s/Amazon Thanksgiving Day parade is not outside the realm of possibilities.

gordon arnold
Guest

Consumers purchase appliances when they purchase their first home and when they must be replaced. Price is the third place priority for either of these two conditions yielding to delivery and availability. The phrase “show me what you can deliver on this date at this time” is a part of almost every transaction along with “can I get this delivered today?”

The consumer service issues for this market make it very difficult to control costs and losses. Things like scratches, dimples, dings, wrong color and the ever popular “this isn’t working or what I ordered” will show Amazon a whole new meaning to customer service in the land of big ticket consumer sales. I admire the Bezos empire for their courage in selecting the wounded, Sears & Whole Foods, as their partners it these recent market efforts. But I just can’t stop wondering what are they are thinking. On top of this, they will be taking on some serious competition like Walmart, Home Depot and Lowe’s with what looks like both hands tied behind their back. This stuff may be a lot of fun to watch.

Brian Kelly
Guest
30 days 23 hours ago

Kenmore gets revenue, Sears Repair gets merchandise agreement revenue and Amazon gets customer purchase data plus some rev.

When Kenmore gets spun off, the new owner will decide the Amazon relationship going forward. Total revenue from this channel is not sufficient to keep Sears afloat. Impact upon the industry is negligible as all the top players have ecom sorted and most have better transaction experience.

Amazon learns a new category and big ticket goods buying behavior. The company that owns Amazon oversized item fulfillment wins! This is new money.

Kiri Masters
BrainTrust

It will be a lifeline if two scenarios transpire together: 1) Sears is able to develop, manufacture and fulfill enough new products to essentially become a major Amazon-first brand (e.g. Anker) to offset its losses elsewhere; and 2) Amazon chooses to not cannibalize this category with their own Private Label brand(s).

Both seem unlikely in the long term.

Craig Sundstrom
Guest

One less reason to visit Sears. And one more reason to visit Amazon. (I think I see a pattern here.)

Vahe Katros
Guest

Alexa: “Vahe, based on your purchases and habits, we’ll give you 40% off on a refrigerator, it will also reduce the number of food shipments and help us save money too!

Vahe: Whatever, ok…

Min-Jee Hwang
BrainTrust

Amazon’s deal to sell Kenmore appliances seems like it will have positive mutual benefits for both Sears and Amazon. Sears made a smart move to expand to a new channel where consumers can purchase its appliances. With the closing of many stores, customers may have begun to shop elsewhere. Sears can now attract online and loyal Kenmore shoppers once again. Similarly, Amazon has expanded their product assortment, attracting a different consumer. Other retailers and manufacturers in the category need to ensure they can provide their products on multiple channels to be able to compete.

Jennie Gilbert
Guest

This will be interesting to watch for sure. Sears has announced already this year they will be closing 265 locations. And while appliances are definitely purchased online (to the tune of over $4 billion worth each year) the purchase path still often involves a physical interaction at some point during consumers’ research. Kenmore brand products can’t be seen anywhere other than Sears and the number of Sears stores available to visit is shrinking rapidly. It will be interesting to see if and how online sales of Kenmore appliances are affected by the decreasing ability to physically interact with the products in retail locations before completing an online purchase.

wpDiscuz
Braintrust
"Perhaps this is a precursor to a formal play by Amazon to acquire Sears’ distribution and service assets/capabilities."
"A damaged brand attached to damaged brand in a cutting-edge marketplace does not delay the inevitable for this zombie retailer."
"It will be interesting to see how Amazon interacts with other struggling legacy department stores. A Macy’s/Amazon Thanksgiving Day parade..."

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