Making Sense of Sears’ Strategy

Discussion
Dec 11, 2009
George Anderson

By George Anderson

Communication is not Sears Holdings’ strong suit, according
to William Dreher, an analyst at Deutsche Bank AG. The problem with Sears’
secrecy is that no one — not customers, analysts nor other stakeholders —
seems to have a clue how it intends to reverse the annual sales slide that
has been dragging down the business.

"Their strategy is not traditional,” Mr.
Dreher told Medill
Reports
. “They make little to no effort to communicate
what that strategy is."

According to Medill, Sears saw
sales decline 3.1 percent in 2006, 4.5 percent in 2007 and 11 percent last
year. At the same time, the company has seen its margins remain in a holding
pattern between 23.36 and 28.66 percent. These margin percentages are below
comparable chains in the department store sector.

While Sears is trying some
new things, there are signs that Mr. Dreher and others find worrying. He pointed
to a lack of new designer lines in Sears’ locations and online, a failure to
invest in the business and the long empty CEO position at the company.

Not having new lines
coming into the store has lead Mr. Dreher to conclude that “brands don’t
want to do business with Sears." He also believes the company is
"all focused around assets and not around operations."

Not all subscribe to
the theory that Sears is not differentiating in the market. Ayat Shukairy,
managing partner of Invesp Consulting, told Medill, "They
are trying to position themselves as a retailer that is the one-stop shop for
all the family needs. Although Target and Wal-Mart still provide the grocery
element, Sears has also carved the niche of providing large appliances in addition
to toys, clothing, electronics, etc. That’s a big distinction that sets the
companies apart."

Discussion Questions: What, do you think, is Sears’ strategy? Is it
enough to differentiate itself from competitors and grow its business at the
same time?

Please practice The RetailWire Golden Rule when submitting your comments.

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18 Comments on "Making Sense of Sears’ Strategy"


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Kevin Graff
Guest
11 years 4 months ago

Here in Canada, it looks like it’s nothing more than ‘business as usual’ in the Sears stores. Is doing nothing different really an effective strategy? C’mon!

Department stores have, for the most part, become irrelevant in the minds of consumers. You can find better product selection, more unique products, better pricing (higher and lower), better store design, better service…better everything at the specialty chains. Quite simply, department stores are being out-retailed in every area.

Bob Phibbs
Guest
11 years 4 months ago

IF someone cared enough at Sears to be successful, it would be a wholesale review of what a quintessential ’50s and ’60s brand–much like Neiman’s and Saks–is doing in 2010. Anything less than a candid review of what the marketplace wants means they will limp along until buzzards pick at whatever is left. I wrote about their glory days here.

Max Goldberg
Guest
11 years 4 months ago

Sears seems to be emphasizing its electronics, clothing and toys, but will it be enough? Is Sears giving consumers enough reasons to shop at its stores? If Walmart owns the moniker of lowest prices and Target owns affordable luxury, where does that leave Sears? There are definitely more questions than answers.

Nikki Baird
Guest
Nikki Baird
11 years 4 months ago

Sears just makes me sad. A great, iconic brand wasting away to nothing. To me, it just demonstrates how badly you can miss with a “me too” strategy in the age of customer centricity. JCP added designer brands and exclusives, but at prices targeted to more price-conscious consumers. Sears dropped a Lands’ End store-within-a-store inside their operations–which only underscored how badly the rest of the store looked, and cheapened the Lands’ End brand.

You have to understand what your customers want. They may want something different from you than what they want from your competitors. And you can’t figure that out by looking at the P&L statement.

Susan Rider
Guest
Susan Rider
11 years 4 months ago

Yes, they do have a clear differentiation but the problem is they don’t communicate that either. With other retailers reducing their number of SKUs and pinpointing the higher margin ones while dropping the variety, Sears still has houseware and hardware covered. Men love Sears for the Craftsmen tools and handyman accessories.

The issue and their inherent problem is perception and getting the consumer to recognize them as the place to go for all your family needs, like the old Sears catalog. They need a new branding and marketing strategy and then to communicate their value to the consumer.

David Biernbaum
Guest
11 years 4 months ago

In my opinion, Sears Holdings continues to be an enigma for some CPG suppliers, the same as when doing trying to do business with Kmart for the past several years and more. For example, in certain HBC categories, it remains expensive to do business with this retailer and yet, the results pale in comparison with comparable retail chains.

Candidly, I think Sears Holdings has become a very low priority account for some suppliers.

Anne Bieler
Guest
Anne Bieler
11 years 4 months ago

Sears seems to hope that shoppers will remember what a great store Sears was–well made, well priced merchandise. Hard to know what their shopper strategy is, with sale flyers and weekend promotions designed to get you in the store, but can’t really tell what to expect once you get there. In the store, the selection is confusing, trying to appeal to all, but difficult to shop.

Sears was the place for appliances and furniture, with a sales/service network to trust, but there have been missteps in quality and service there as well. Shoppers need a reason to come through the doors, but they are still searching right now.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
11 years 4 months ago
Sears has a huge opportunity to differentiate itself from Walmart and Target, its two major competitors. Growing up, Sears was known for being the trusted source in my family. My father and all my uncles shopped at Sears because they knew Craftsman & Kenmore were brands they could trust and depend on. Over the last 10 years, Sears tried to compete with Walmart on price but at the cost of quality and ultimately, trust. The big opportunity for Sears:1) Get back to what they do best – Trusted source for everything a family needs and the quality they expect. How can Sears do this?1) Start manufacturing Craftsman tools in America or in countries that can meet the standards their customers expect/deserve. Yes, the tools will cost more than the ones at Home Depot and Walmart, but customers will soon realize that quality is worth paying for. Once they make this move and earn the customers’ trust again, they can focus on other departments like clothing, appliances and home goods.2) Create advertising and tag lines that… Read more »
Marge Laney
Guest
11 years 4 months ago

Actually, I have been hearing a lot about Sears lately; getting back into toys, cosmetics, and hair salons. I think the operative words here are “getting back.” They have been attempting to get back to the basics which they believe were the reasons for their success. This is a good move, but the real reason for their success in days gone by was their people and their service. Until they go “all in” and make the Sears “satisfaction guaranteed” more than a slogan on a break room poster, they may as well forget it.

Carol Spieckerman
Guest
11 years 4 months ago

I’ve been waiting for Mr. Lampert to make a move with KDC IP (Kenmore, DieHard, Craftsman Intellectual Property), the $1.8 billion entity that he created back in 2007 which was called the largest securitization of intellectual property in history by analysts and a “separate, wholly owned, bankruptcy-remote subsidiary” by Sears. Lots of options for major monetizing, including licensing those brands to other retailers. Mr. Lampert is an expert in finding value hidden from plain view, so focusing on the condition of the stores and designer dearth is probably missing the point.

Mark Burr
Guest
11 years 4 months ago
Just because we don’t know what their strategy is doesn’t mean that they don’t have one. Even if it’s to do nothing, that is a strategy. By their sales declines, the consumers know their strategy. While many department-type stores experienced an increase during the last period, Sears apparently did not. As I have noted recently, Sears is still here. Figuring out why that is could be interesting, however, I am not sure it’s worth the brain power. Nevertheless, I am intrigued, even just a small amount, by their staying power. Predictions of their demise have consistently been premature and exaggerated. I also don’t necessarily buy the argument of the value of their assets. That may have once been true, however, the market and demographic shifts have likely all but diminished their value. That in itself may be part of the reason for their continued existance. Their exit strategy may have disappeared with the dramatic slide in real estate values. Limping along until there is enough of a shift in that regard may be their strategy.… Read more »
Cathy Hotka
Guest
11 years 4 months ago

The theme that runs through all these comments is the love for the formerly iconic brand, and the almost desperate desire for the folks in the corner office to get a clue about what Sears has meant to America. We want Sears to embrace the Wish Book, the Craftsman tools, DieHard, and Kenmore. We’re pulling for you, Sears….

Jonathan Sapp
Guest
Jonathan Sapp
11 years 4 months ago

Sears has a strategy? No, I think not. They have been vacillating for years and don’t seem to know what they want to be or do.

Actually, what they should do is to capitalize on their few strengths–real estate and iconic brands.

1. My suggestion starts with them closing their stores and become landlords. Neither Sears nor Kmart are relevant today, and can’t compete with their competitors.

2. OSH has potential, but only if it expands nationwide. They should take appropriate locations and convert them to make it a national retailer. Then run it like a real competitor. They are not Home Depot or Lowe’s, but they aren’t Ace no True Value either. The middle ground is wide open for them.

3. The rest of the stores should be subleased. As they have great locations and cost bases, they could be a real cash cow.

4. Craftsman, Kenmore, and Lands’ End are strong brands and should be exploited by being retailed by others.

Joe Mullin
Guest
Joe Mullin
11 years 4 months ago
By comparing Sears to perceived competitors, the author should note he is stating an opinion (not fact) and that would also indicate the depth of his understanding. Simple statements stating we don’t know their strategy demonstrates a superficial look at the situation. What value does this have to the readers of RetailWire? Sears is a bit old or dated perhaps. TOO tired? No way. Is Target, or Walmart? No. Over the past 5 years, what have Target and Walmart done to their balance sheets? How much debt have they taken on–and passed on to customers in the form of higher prices while they make the stores (somewhat) attractive for the general population? Consider-Mr. Lambert formulated and executed a strategy when he bought Kmart while in bankruptcy. He later formulated and executed a strategy to buy Sears, a respected American icon via the cash flow from a former bankrupt entity. Wow. What have they accomplished since then? They have pared debt, they have funded tens of millions of dollars in unpaid pension obligations, they re-purchased Sears… Read more »
Ted Hurlbut
Guest
Ted Hurlbut
11 years 4 months ago

Sears is clearly trying to build a coalition of customers around the strength of their core brands; Kenmore, Craftsmen, DieHard, and Lands’ End. They are trying to draw in additional customers through other programs like layaway and their plunge into toys.

The problem is that retailing isn’t like politics. This isn’t a strategy as much as it’s a series of tactics. Sears still lacks a coherent compelling position in the marketplace. For all the things they’re doing, it’s hard to see them re-establishing a position of relevance in the retail marketplace.

David Livingston
Guest
11 years 4 months ago

We’ve been waiting for years only to see things get from bad to worse. No one is going to tell King Eddie he has no clothes on. Look for wholesale liquidation of real estate. Sears/Kmart cannot continue to operate as the lowest sales per square foot, big-box operator forever.

Craig Sundstrom
Guest
11 years 4 months ago

“Just because we don’t know what their strategy is doesn’t mean that they don’t have one. Even if it’s to do nothing, that is a strategy” – Scanner

But are they doing nothing well or poorly? I’m not sure. As for the observation that people are pulling for Sears, I think many (most?) people are of two minds: they want Sears itself to survive, but they would be quite happy to see Mr. Lambert fail…obviously as long as the two are connected, the conflict will continue.

Steven Collinsworth
Guest
11 years 4 months ago
Even with the divergent opinions and facts stated here, it is apparent to me, with a few exceptions, we are all stating the same things. SHC cannot continue this path indefinitely (maintaining margins, continually declining sales, virtually “$0” investment in the stores to update them, etc.). What I question is the leadership of the company. The highest positions in the company are one of two things. Either it’s a revolving door for the position, or it’s staying empty indefinitely. This speaks volumes to me as an experienced associate in the CPG industry (25+ years). There is a total lack of understanding and acceptance of differing points of view at the top of the house. Whether it’s the business of retail which is complicated by the number of channels, consumers and markets, or it’s a dictatorship run from the upper levels. If Mr. Lambert’s strategy was all about the real estate, he has effectively destroyed his foundation of value, by SHC’s lack of focus and communication of Sears and Kmart’s message to the consumer. I really… Read more »
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