Is Servicing Data (Rather Than People) an Answer for Sears?

Discussion
May 30, 2013

Recognizing the world needs less space for retail and more to store data, Sears plans to turn some of Sears and Kmart locations into data centers and disaster recovery spaces.

A new subsidiary, Ubiquity Critical Environments, will be tasked with converting some of the more than 2,500 Sears and Kmart properties to data storage facilities with servers, chillers and backup generators. It also plans to top many of its buildings with telecommunications towers.

Sean Farney, who built and managed Microsoft’s 700,000 square-foot, 120MW, Chicago data center, is leading the subsidiary. Most recently, he ran a network of low-latency services for the financial firm Interactive Data. According to Crain’s Chicago, the subsidiary’s name speaks to Sears’ reach. Seventy-one percent of the U.S. population lives within 10 miles of one of its stores.

"The big idea is that you have a technology platform laid atop a retail footprint, creating the possibility for a product with a very different look to it," Mr. Farney told Data Center Knowledge.

A 127,000-square foot Sears location on the south side of Chicago will close in June and serve as the first data center. While many business have stacks of servers jammed in back offices to store data as well as standalone facilities, "the growing sophistication, cost and power needs of the systems are driving companies into leased spaces at a breakneck pace," according to a recent report exploring "cloud factories" from The New York Times.

While likely not competing with those required for banks and airlines, Sears could provide a lower-cost option for other businesses that still promises to pay a much higher rate per square foot than the average commercial tenant.

Sears and Kmart’s many stand-alone locations are said to be optimally suited for data centers, although much depends on each site’s access to power and fiber, as well as their proximity to large data center markets.

Sears’ mall-based retail locations as well as those that have been downsized to a smaller retail footprint are seen as better options for disaster recovery facilities. While traditionally located in industrial areas, businesses are said to be looking for "sexier" locations for business continuity centers, such as one with a nearby Starbucks or other retail, according to Mr. Farney.

Finally, Sears believes that as wireless users grow, holes in coverage are being created that Sears’ rooftops could fill. Mr. Farney told Data Center Knowledge, "When malls were being built, they gravitated to the intersection of freeways and highways, and Sears got entry to all of them."

What do you think of Sears’ use of store locations for data storage and disaster recovery? Is this a viable option for other retailers with excess store space?

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21 Comments on "Is Servicing Data (Rather Than People) an Answer for Sears?"

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Dr. Stephen Needel
BrainTrust

When I think data storage and disaster recovery, Sears and Kmart are not the two organizations that either come to mind or make me feel warm and fuzzy.

Zel Bianco
BrainTrust

Given the recent article in the NY Times about how landlords are making money hand over fist on these data centers in northern NJ, this makes sense for Sears. It’s not about square footage here, it’s about re-selling power and therefore will be much more profitable than selling retail goods.

Gene Hoffman
Guest
Gene Hoffman
4 years 29 days ago

Sears and Kmart, to achieve disaster recovery, need to develop more ways to satisfy many more customers rather than concentrating on using excess store space for data storage.

A hedge manager’s mentality doesn’t a good retailer make.

Dick Seesel
BrainTrust

Kmart disaster recovery? Sears data storage? Really??

This is the latest example of Sears Holdings management floating a “big idea” to gain traction from its real estate portfolio. Most of these ideas have not turned into reality, but they serve to distract SHLD from the necessary task of investing in its actual brick-and-mortar stores. The quarterly losses and sales declines won’t stop anytime soon with this scattershot approach.

Seth McLaughlin
Guest
Seth McLaughlin
4 years 29 days ago

Will this improve the customer experience at Sears? I struggle to see how. This new subsidiary will require capital investments and resources which will divert from critical improvements in the Sears store environment and customer experience. Sears has made progress with their comprehensive loyalty program. My advice would be to stay the course and avoid the distraction.

Tom Redd
Guest

This is a smart move for Sears. They have the space, and the value of secure retail data is climbing.  Other retailers should look at their data center programs and consider the different options, including the Sears program. Note: all Sears Data Centers will carry the Craftsman label…. 🙂

Liz Crawford
BrainTrust

What a great idea! It works on many levels: socially, economically, financially, even politically. This may set them up to spin off the data centers business…opening the door to a buyer, such as Amazon or even Google.

Gene Detroyer
BrainTrust

For Sears it is all about ROI. If a data center produces a higher ROI than a Sears or Kmart retail store, then you do it. We aren’t talking about closing a Walmart or Target. This is Sears and Kmart. These are dead retailers that will not rise from the grave.

This is all about how to best utilize the real estate. That is what it has always been all about. Let’s stop pretending that there is a retailer involved here.

W. Frank Dell II
BrainTrust

Some will say real estate is just real estate and can be used for anything. Data centers are built much stronger than retail stores. Data centers require large amounts of electricity and are ideally located away from harm’s way.

From the beginning, many said the Sears and Kmart purchase was a real estate deal. After quarter after quarter of declining store sales, there is now the realization that the real estate is not worth as much as they thought. This approach is going to cost big time and likely only drive the data management cost down for the industry.

Ed Rosenbaum
BrainTrust

Data centers, security and Sears. Sure sounds like this era’s evolution of the odd company. Or maybe three’s company? Not exactly a match made in heaven, but possibly a port in a disaster avoidance plan.

Ken Lonyai
BrainTrust

If this isn’t grasping at straws, I don’t know what is. I don’t doubt that Sears will bring in very experienced people to handle the data center business, but under the umbrella of Sears Holdings, I don’t think it has much legs.

To reduce the value of a data center to its physical footprint is to miss the mark entirely. Retail consumers and data center customers are entirely different clientele with different needs and different levels of tolerance for missteps. It seems Sears has done a magnificent job of shooting itself in the foot for at least two decades in the eyes of consumers, by delivering compromised service and customer experiences. Most data centers promise (claim!) 99.9% up-time in their SLAs. Given its track record, it would be truly audacious for Sears to promise anything close to that and anything less would render them uncompetitive. What a conundrum….

gordon arnold
Guest
Bankrolling a proposition like this should not be a problem for Sears. Labor and facility costs are at very favorable levels and should remain that way for a while. Sears is also very well staffed and tooled to create and position a subsidiary like this for success. My question is, how long will this plan remain a viable solution for corporate stability and growth? Having been an Information Technology (IT) auditor with focus on security, business continuity and disaster recovery for the financial and investment markets, I am keenly aware of the opportunities for disaster recovery. Companies that need improvement in this area of operations have largely forsaken this need due to budget shortfalls. So on paper there is tremendous opportunity with in fact little or no money to be had. Many of those financially ailing companies compelled by outside influences to commit to this need will end up as slow pay with no viable recourse for Sears. There was a time not so long ago that Sears had no match in retail. Those days are gone, at least for now. Retooling for the 21st century as a global retailer of significance is a better plan simply because they have… Read more »
Roger Saunders
BrainTrust

Sears and Kmart had long-term leases or ownership positions that the Wall Street lads thought was of great value a few short years ago.

That real estate is not being used by consumers. Yet the lease payments continue to come due each month. Sears has to gain cash flow somehow to make the boxes work. This one might hold opportunity.

Lee Kent
BrainTrust

I applaud Sears for thinking outside the box and looking for ways to take advantage of owned real estate. Had they come up with something more in line with the brand itself, maybe they could have driven sales back to Sears as well. Something they know about and/or can be experts at. Using their tools, appliances, work clothes??? Something other than a data center!

Mel Kleiman
BrainTrust

It is not a question for other retailers, it is just a question of the best usage of an asset to get the greatest return.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
4 years 29 days ago

Sounds like very expensive real-estate being used for a solution that could be located in less expensive locations. That said, if you have the space and can earn more per square foot with servers than merchandise, why not?

Craig Sundstrom
Guest

“Ubiquity Critical Environments.” I LOVE the name; the concept? Well….

Like most of the people here, I find this the latest harebrained “let’s try anything” idea rather than something well thought out (and for the few enthusiasts here, I’d suggest reading the linked articles; either of them—but particularly the Crain’s story—will make short work of any optimism you might have).

As for whether/not this is an opportunity for other empty spaces: for a few of them, yes (IIRC the former Bamberger’s flagship in Newark was so converted years ago), but for the rest, dream on. The biggest opportunity there is for Caterpillar or Komatsu, or whoever is the biggest bulldozer maker.

Larry Negrich
BrainTrust

Sears should get ready for quite a bit of competition on the disaster recovery and data storage fronts. There are a number of companies that do a pretty good job in this area, and that make data center services a core competency. Desirable location characteristics for data center locations would be in secure areas with low rates of taxes, cheap utilities, and secure locations with available labor. These centers can be located just about anywhere so old store locations in metro areas may not be a competitive advantage.

Kai Clarke
BrainTrust

This is a poor use of space. You don’t need 127,000 square feet to have data, computer, and other storage. Massive amounts of computing power and information, as well as the back-up generators can easily be done in a few thousand square feet. Sear’s needs to maximize its space and think like a data storage company, not like a retailer trying to get rid of “extra” space.

Al McClain
Guest
Al McClain
4 years 28 days ago

The bottom line is Sears, a once legendary retailer, is now looking for any and all ways to get out of retailing.

Alexander Rink
BrainTrust
4 years 28 days ago

There has long been speculation in the financial community that Edward Lampert would make Sears into a real estate play, and the conversion of their locations into data centers would seem to fulfill that prophecy.

As to whether it is a viable option for retailers? The needs for physical space change over time, and it is up to each retailer to determine what is the best ROI for their excess space. It certainly stands to reason that there is a growing need for data center space, and thus it would seem to be as viable an option as any, provided that the locations meet the security, environmental and power requirements of data centers.

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