BrainTrust Query: We Have Met Retail’s Future, and it is Sears
Commentary by Carol Spieckerman, President, Newmarketbuilders
Through a special arrangement,
presented here for discussion is a summary of a current article from Newmarketbuilders’
Blog.
Sears is quietly incubating and activating the business models and platforms
that will transform retail’s future, even as it appears to lose at the
ones everyone watches now.
Chairman Eddie Lampert amassed his fortune by monetizing
what is hidden in plain sight, so it follows that judging Sears based on its
tattered window dressing should be beside the point. Pull back the curtains,
though, and an ingenious outside-in strategy is unfolding. If Sears isn’t the
most distinguished retailer operating on terra firma (and it isn’t), it’s surely
poised to become one of the most influential everywhere else.
These are the
stealthy game-changers that have my attention:
1. Marketplace at Sears.com – Sears
isn’t just integrating a million or so web-unique items, they are branding
the effort and doing the full Amazon by actively courting brands that want
to leverage their platform.
Also, rather than portraying the Marketplace as
a velvet rope brand vetting, Sears is encouraging participation and making
the process as easy as one, two, three via its “seller portal.” Walmart
has expanded its offerings through selective brand alliances; Target and others’
online SKU explosions create an “endless aisle.” Sears has done
all of that and created a platform that generates passive revenue.
2. MyGofer – Site-to-store
is one thing; MyGofer is quite another. Through MyGofer, shoppers can create
lists and shop, then have items pulled and waiting at select Kmart stores.
Mygofer’s front page is contemporary, clean and intuitive, with products organized
by usage and need states, and the site is supported by live chat. Once again,
outside merchants and local businesses are encouraged to sell their wares on
MyGofer.
Localization? Solved! Multi-channel shopper insights? Solved! Personal
attention and service? Solved! Passive revenue for Sears? Solved (again)!
3.
Sears the Licensor – The $1.8 billion entity that houses the
Sears’ Craftsman, DieHard, and Kenmore brand triumvirate promises to spread
its tentacles far and wide through additional licensing agreements. So, while
J.C. Penney, Kohl’s, and Macy’s obsess on bringing exclusive brands into their
stores — and as Best Buy explodes
its private portfolio in categories once reserved for national brands —
Sears is dusting off the brands it already has and counting the royalty checks.
Creating new brands is so 2009!
When asked recently whether brick-and-mortar
stores would even be necessary going forward, Mr. Lampert replied, “It’s
hard to believe that the stores won’t be important for a long period.”
Gee,
couldn’t he have been a bit more emphatic?
I can see Sears and Kmart stores
(at least some of them) morphing into dedicated pick-up hubs, pure service
or demo plays and temporary pop-ups that will become as flexible as virtual
space already is. I don’t think Eddie Lampert would have it any other way.
And won’t it be fascinating to see what happens when his attention finally
swings back to the stores … you know, the ones that will support all that
other stuff?
Discussion Questions: What’s going right at Sears? Of the three “game-changers” noted
in the article, which do you think holds the most promise for Sears or even for
other retailers?
There is value in licensing–but as distribution increases–the Sears “brands” will (a) have to return to past quality standards (Craftsman, for example, has really slipped) and (b) may steal some sales away from Sears.
As to MyGofer–remind me why you wouldn’t want something shipped to your house but would, instead, prefer to make that trip to a store you were hoping to avoid in the first place.
Finally it may be a little late in the game to pursue a portal strategy–unless it’s one great portal strategy AND execution.
That said–Bon Chance, Sears!
Fixing the retail brand might be a better place to start.
Sears may have lost some relevance over time, but the company has set out in a new direction to regain some of the great market share it used to command. The store has a long retail history. They are now recognizing the new multi-channel competitive environment, taking a new approach, and reinvigorating a brand that so many people still trust.
Walking through my local Sears store just the other day, I was unfortunately (but not surprisingly) underwhelmed. It’s not that it’s terrible…it’s just that it’s so predictable, average and uninspiring.
So, reading about what’s going on behind the scenes at least gives me hope that they can breathe life back into the business model. The challenge at the brick and mortar level for Sears and most every other department store is that they are being ‘out retailed’ by pretty much every other specialty and big box business. Better and more unique product selection, better store design, better events, better pricing and better service. The model itself is stagnant and irrelevant for most consumers. That’s a bit of a shame because some of the brightest retail minds I know are working for department stores.
Here’s wishing Sears good luck with their initiatives! It would be nice to see them win back a sizable customer base.
These are not original ideas and if they are incubating in Sears’ laboratories they are probably picking up a lot of retail bacteria and they will mutate in unpredictable ways. What have they done in the last ten years to indicate that they will execute these ideas even half as well as the people (i.e Amazon) who they are copying?
Experimenting with new formats, distribution processes, and tactics is definitely the route to go. Whether these particular strategies work is less important than the fact that there is major experimentation going on. Now, if Sears has really finally begun to understand its consumers–most valuable consumers–and the lifetime value of its consumers and is using this information to create market tests, this is an excellent sign.
As much as I respect Carol’s perspective, I’m having a hard time understanding how deploying capital on new ventures while milking the assets it already has is a winning formula for Sears.
Sears.com is of a functionality and content that is no different from their stores, which are failing. I tried MyGofer and balked at the requirement of putting myself on their mailing list which blocked my entry into even seeing what it was about. As far as licensing out the three brands they have, they will no doubt make some incremental revenue, but most, if not all, of that revenue will come out of their 4-wall revenue and further reduce their store traffic and revenue. It’s also kind of amusing that they are licensing Kenmore, which is a private label produced for Sears by the major brands.
Mr. Lampert has indeed amassed a fortune, but not as a retailer. If he had, he would understand that, ultimately, it is great merchants and merchandise content that makes a retailer successful, not complex deals and strategies.
Sears has noted brainiacs in its leadership roster, but you have to wonder how they’ll succeed given some of the company’s offbeat strategies. Chief among them is the decision to beef up the softer side–who buys clothes at Sears?
I hadn’t been to a Sears store in years. However, just recently I needed a lawn mower. I compared prices at homedepot.com to lowes.com and finally to sears.com. I needed the lawn mower that day so I ultimately decided to go to Sears to pick it up. But when I got there, they didn’t have the model I wanted. I figured I would let the grass grow a bit longer and I placed my order online. I saved money by buying it online but I still picked it up at the store to save on shipping.
So to address the question as to whether someone would want to buy something online and then pick it up, the answer is a resounding YES. If consumers are looking for ways to save money online, they won’t mind picking it up to save on shipping. This is potentially the ONLY model for large products that would be cost prohibitive to ship directly to customers’ homes.
In fact, I expect that this is part of Sears’s strategic direction–this could finally be the marketplace for large items.
Finally, my company sells on the Sears marketplace. The results are lackluster at this point but I’m optimistic that we’ll figure out how to increase sales on sears.com but it could just be a matter of time as customers start to shop on Sears’ portal. There are only a few companies that have enough resources and brand recognition to be able to start a major marketplace. They just need to overcome their brand problems. Many people view them as an out-dated, boring, welfare-driven store. With time, they should be able to change that similar to what Black and Decker did with their Dewalt brand.
Sears seems to be the last of the big box retailers to “get it” when it comes to consumers browsing the aisles searching for something they did not know they wanted. When it comes to something needed, Sears can be a viable destination IF it is one of the three major brands.
I am hopeful they can make this work. Most impressive is they are doing something different to make change happen. I applaud them for this effort. It shows they are not continuing to sit back and raise the banners shouting to deaf ears about how good they used to be. They have lost the former power and influence once held with the consumer market. Unfortunately, they stood by watching it happen, thinking it would not be long lived. Buyers are not the same today as they were when Sears was who they used to be. (Actually, they still are who they used to be. It is us, the consumer who has become wiser and more astute in choosing where to get the best value.)
My eyes tell me there’s a lot going on at Sears. My gut tells me it might not amount to a strategy. The elephant under the table is the brand and until such time as they either reposition or dispose of it, I can’t see how all these incremental efforts can save them.
Some things weren’t meant to last forever.
The online marketplace is highly overrated for general merchandisers. I believe it to be a more effective sales channel for specialty retail.
The personal shopper is the right idea, but is it matched up with the right customer profile that Sears owns? Target found that even a highly promoted smart card with lots of value on board wasn’t successful because (in part) busy shoppers wanted to get in and out of the store rather than stop by the kiosk to check for special offers.
As long as the quality of the brands mentioned stays true to established reputation, the licensing of the Big 3 brands may pay greatest dividends.
I said in another RetailWire comment today: The most important way to significantly increase sales (in our programs–20% to 100% sales lift) is interesting, informative Reasons to Buy messages where and when shoppers make their actual buying decisions while concurrently insuring 90%-100% of messages are installed. This alone doubles sales lift.
This is equally relevant to Sears.
There stores aren’t worth a second look, or even a first. The only viable remnant is to license the couple of brand value names they have that hold a remaining–but slight–relevance in the market. Beyond that, they own some real estate that in itself is rapidly losing its demographic and market value.
It’s not so much the elephant under the table but the elephant in the room. Remember this is Sears we are talking about. All hat and no cattle, or in other words, all press release and no customers.
I am a little late to today’s discussion, but it really doesn’t matter. The very first comment by Ryan Matthews says it all. So with Ryan’s permission:
“There is value in licensing–but as distribution increases–the Sears “brands” will (a) have to return to past quality standards (Craftsman, for example, has really slipped) and (b) may steal some sales away from Sears.
“As to MyGofer–remind me why you wouldn’t want something shipped to your house but would, instead, prefer to make that trip to a store you were hoping to avoid in the first place. (except if your grass is growing)
“Finally it may be a little late in the game to pursue a portal strategy–unless it’s one great portal strategy AND execution.”
Eddie Lampert is not a retailer. He did not even get in this business to be a retailer. His play was all real estate. What he knows how to do is make money on assets. The internet and licensing is a way to make some money on the assets he has in hand. It may be his only way currently. Be assured that as soon as he finds a better value in the real estate he is holding (and that may be in many, many years) he will close a store and reap the reward.
And, before we put too much meaning in the great Sears brand name, remember Woolworth once had a great brand name.
At this point, I think everyone needs to get on the same page when we discuss terms like “transform,” “success” and “future”: if in ten or twenty years Sears’ cavernous store spaces have been “transformed” into pickup spots where the few remaining employees hand over products bearing someone else’s brand(s), then has Sears “evolved”? Is it “successful”? Not in my book; to me, success means remaining–or perhaps we should say “returning to”–a major presence in people’s shopping habits, not simply making sure expenses slip even faster than revenues, as the brand slips into irrelevance. (And I haven’t even gotten to Kmart, which I guess ends up as a chain of laundromats in small college towns.)
How does this relate to the 39% drop they just experienced? Looks like “The Future” better happen pretty quick!
With all due respect, I would like to see some evidence that these directions are driving revenue and profit growth. Just as a glowing case could be made for each, I think legitimate questions remain, particularly before branding them the “future” of retailing.
1. Marketplace: This is an Amazon clone. While the tools Sears created do make it simple and easy to participate, in the end, any destination portal is only as strong as its ability to consolidate traffic. What are the numbers for Marketplace? How does the consumer access it? Is it simply an extended aspect of the Sears.com site? How will this increase unique monthly visitors? Or has it significantly improved conversion because of the expanded offering?
Where’s the proof?
2. MyGofer: This isn’t that new, and when tried in the past, has proven to be a very difficult to sustain model from a cost perspective. The issues are really straightforward; it only works if you can leverage a fixed labor cost which otherwise has unutilized time. Really? Do we really buy that Kmart or Sears stores have unutilized labor waiting to be maximized? Seriously? Why is it critical to leverage an existing expense? Because the ability of this service to drive incremental sales has never been proven. Or have I missed something? And the nature of MyGofer eliminates the ROI aspect of Ship-to-Store which drives the consumer in-store where presumably they can and will buy more stuff.
3. Sears the licensor: where, exactly, are these brands available NOW outside of Sears, Kmart and their own ecom pages? I just did a search for Craftsman tools. Nothing other than Sears Holdings sites and Amazon came up. The search for Kenmore Appliances only added Yahoo Shopping. While expanding distribution may or may not prove a wise decision, where, exactly, is this expanded presence?
Sorry…while these efforts may or may not be incrementally useful to the Sears Holdings bottom line, I am far from convinced that they are anywhere near the future of retail, or that they are finding profits hidden in plain site.
Don, to answer your question regarding where Sears’ brands are being sold outside of Sears (this information was included in my original blog posting but not in the edited version on Retail Wire), as of this writing, Sears has inked a deal with Schumacher Electric to sell DieHard power accessories in the U.S. and parts of Latin America and Ace Hardware will launch Craftsman products in 100 of its stores beginning this month. That program is expected to roll out as a cornerstone of Ace’s new push to be the hub for small home projects.
To their credit, Sears has been consistently thinking out of the box over the past several years, and has come up with some interesting initiatives, but little of what they are doing seems to truly make their core businesses any more relevant in the marketplace. If you can call Sears a niche retailer, they have their niche, it doesn’t appear to be really growing, and they continue to struggle to attract new customers. They continue to be a retailer that if they went away tomorrow, you wonder how many consumers truly miss them.
I believe of the three “stealthy game-changers”: “Sears the Licensor” can be the most immediately profitable plan. Basically, there is very little digital infrastructure investment required. The portals to the consumers are already in place and operated by other retailers.
An additional plus is the fact that Sears will be forced to better the quality of their tools offerings which in turn will increase sales at the bricks n’ mortar locations…Win, Win! I can only hope they truly follow through with this plan and become a new international retail standard. Go for it!