‘Attention Kmart – Check That – Sears’ Shoppers’

Discussion
Mar 10, 2005
George Anderson

In a filing with the Securities and Exchange Commission, Kmart Holding Corp. said it plans to convert 400 Kmart stores to Sears’ locations over the next several years. The retailer did not identify stores to be converted or what banner (Sears Essential or Sears Grand) they would operate under.


The store conversions will need to wait getting started until the Kmart/Sears merger is approved by shareholders at a meeting on March 24 at Sears’ headquarters in Hoffman Estates, Ill.


While the news was not a surprise to most of those connected to the retailing industry, it did confirm speculation that has been growing since the merger deal between the two retailers was announced last November.


George Whalin, president of Retail Management Consultants (and RetailWire BrainTrust panelist), told The Detroit News, “It’s the beginning of the end for Kmart. Kmart
is the weaker brand. … The Kmart name eventually goes away.”


Gary Ruffing, a retail consultant at BBK Ltd. and a former Kmart executive, told The Associated Press that some Kmart stores are doing well and he didn’t expect the name to disappear in the near term.


By converting the stores to a Sears’ format, Mr. Ruffing believes the retailer is looking to get out from between the competitive rock-and-a-hard-place Kmart finds itself in, that is between Wal-Mart and Target. The Sears name, he said, allows the stores to offer higher priced merchandise, something it wouldn’t be able to do if it remained under the Kmart banner.


For Tom Yake, retail analyst with Yake & Associates, the store name and format change is little more than window dressing. “The outlook is bleak long term,” he said. “You
have two flawed companies and you’re turning it into one mega-flawed company.”


Moderator’s Comment: Forget the negativity. If you’re advising Kmart/Sears management, what do you have them do to make the merger work as a retail business?

George Anderson – Moderator

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11 Comments on "‘Attention Kmart – Check That – Sears’ Shoppers’"


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Mark Hunter
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Mark Hunter
15 years 11 months ago

Smart move. Long term, the Sears name has more pull and it will help to move them away from the Wal-Mart/Target mix. Not to say the Sears name isn’t without equity problems also. By moving to Sears they can also help move the Martha Stewart and Joe Boxer lines more upstream and combine them with Lands End, Kenmore, Craftsman, etc. In less than 5 years the Kmart name will be gone, however, the long-term life of the Sears name is probably no more than 10 – 15 years at most, barring some incredible repositioning of the Sears name. (Just think of the coup Target could pull off by selling the Joe Boxer, and Lands End names in their stores long-term?)

Gene Hoffman
Guest
Gene Hoffman
15 years 11 months ago

Now that the era of organizational evisceration is over, hopefully; now that operating costs have reached spartan levels; now that Martha Stewart is out of the hoosegow and ready to stir things up innovatively; and now that Sears has been selected to be the banner company, Grand or Essential, I would suggest that the company be operated by astute retailers who will be free to focus be on selling their brand image. That’s essential! Thus I would settle for the Sears Essential banner … and wish them lots of luck.

Nikki Baird
Guest
Nikki Baird
15 years 11 months ago

It’s basic economics: in a three-player game, the one who occupies the middle is going to get creamed. Kmart tried to be in between Wal-Mart and Target. Sears tried to be in the middle of the department store set. Neither did it well, and as the other commentators have pointed out, the only thing they really have going for them now are their brands – and not really their own brand name, whether that’s Kmart or Sears. And now they’re looking to sit in between discount and department stores? I don’t know…

I think the struggle over what the new ‘Sears’ should be is indicative of a general uncertainty over what should be included under the roof of a grocery/discounter/mass merchant/department store concept – take your pick on which one to emphasize. The most important question to ask is, what’s your customer looking to buy when they show up at your store? Maybe you ought to start with that.

Luzius Muller
Guest
Luzius Muller
15 years 11 months ago

My take on Lampert’s strategy is as follows:

1. Position the new Sears on two levels – one is in soft goods against Target; the other is in hard goods against Home Depot.
2. Eliminate at least 300 Kmart/Sears stores and move as far away as possible from the mall-based model.
3. Up productivity per square foot to the Target level
4. Lean on vendors to give price concessions
5. Re-jig all systems, particularly supply-chain – and introduce RFID, pronto.

David Livingston
Guest
15 years 11 months ago

That would be like telling the captain fo the Titanic how to sail his ship after he hit the iceberg.

David Lotterer
Guest
David Lotterer
15 years 11 months ago

What is lacking in their approach is decisiveness. As long as they continue to talk in terms of converting 400 stores over several years, public opinion (including consumers, suppliers and investors) will continue to be that they don’t know what they are doing and don’t have a clear direction.

Therefore:

1. Commit to Sears Essentials as the new identity for Kmart.
2. Close all Kmarts where Geography and Demographics do not support the new format.
3. Sell off the real estate for capital.
4. Convert all remaining Kmarts to Sears Essentials within 1 year.
5. Hire the best Ad Agency they can find, and launch a campaign focused on the Sears Essentials lifestyle – quality Craftsman tools, a stylish Martha Stewart home, Lands’ End & Joe Boxer fashion, and so on.

Moving quickly, they can establish a bold new identity. In marketing, evolution is not effective; revolution attracts attention and creates excitement.

Doug Fleener
Guest
15 years 11 months ago

Personally, I would advise the executives to take Kmart down market to position it between Wal-Mart and Dollar General. Then take Sears and position it as the place for hardlines. I would then advise to spin-off Lands’ End as a stand alone chain. And then I would sell off any of my stock holdings early on.

James Tenser
Guest
15 years 11 months ago

400 stores re-bannered over three years… Well that doesn’t tell us much about the master plan for the remaining 3/4 of Kmart, does it? Seems to leave behind a somewhat smaller entity with most of the same root challenges.

Do ya think there are still a few turns to come in this escapade? I do. Maybe a real estate liquidation a la Two Guys. Maybe a re-branding/repositioning of the balance of K stores as Dollar stores catering to under-paid Wal-Mart employees? M. Stewart rehab centers for wayward corporate executives (extra fee for crochet lessons)? Halfway houses for indigent former RetailWire commentators?

Sorry to slink from the sublime to the ridiculous, but this Sears/Kmart saga has me scratching my head. Can anyone explain the customer proposition here? Oh yeah, it’s all about the shareholders …

Brian Kelly
Guest
15 years 11 months ago

I would advise Sears to go back to “all retail is local.” Be sure to understand who lives in the trading area of these 400 stores (plus the 800+) and create a retail selling model that is appropriate to those stores. Now that they are attempting to “intercept” customers formerly headed to the mall, they need to be sure to create a brand experience that is relevant on a local basis. Hopefully they have amply budgeted for integration of data to quickly get to an actionable “single view” of the customer.

vickie PASKEL1
Guest
vickie PASKEL1
15 years 11 months ago

I work for Kmart, and I, as a lot of others, have gone through some rough times, but we look forward to joining with Sears. Two heads are better than one, so if you add Kmart associates with Sears associates you can make a great company out of two failing ones. At least this is what we all are hoping for. After all, is Wal-Mart the only choice the American people want to have to shop at? I don’t think so.

Greg Shockey
Guest
Greg Shockey
15 years 11 months ago

As a manager for Sears, I can tell you that the merger has been great so far for our company. Let’s face it, Kmart has been trying to get out of the retail business for years – even for the bankruptcy. So far it looks like our brands are not going to change. But we’re only adopting very few Kmart brands. In fact, we just launched the Structure line for men’s and it’s been a hit. I don’t see us coming down a step for other brands right now.

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