Sears Centralizes Merchandising Functions
By George Anderson
There’s more changes going on at Sears Holdings.
The company announced it is combining the merchandising divisions of its Sears and Kmart businesses under a single unit with the heads of those areas reporting directly to chairman Edward Lampert, until a chief merchandising officer is named.
Dan Laughlin has been named senior vice president of merchandising for Sears Holdings. He will be in charge of leading hardlines across the company’s business and will oversee merchandising for Sears’ stores.
Peter Whitsett, senior vice president and Kmart merchandising officer, has been put in charge of general merchandising businesses across Sears Holdings and will continue to oversee merchandising for Kmart.
“By centralizing our merchandising teams under these two talented and experienced merchants, we are able to create a structure that capitalizes on the strength of this combined organization. It allows us to better focus on providing our customers with quality services, products and solutions,” said Mr. Lampert in a released statement. “By building and aligning these teams, we’ll take a more integrated approach to how we interact with our customers and how we go to market.”
Gwen Manto, executive vice president for Sears’ softlines business, has resigned to become evp and chief merchandising officer at Dick’s Sporting Goods. Sears Holdings said Messrs. Laughlin and Whitsett will share responsibility for the apparel function until the company is able to find a replacement for Ms. Manto.
Roger Detter, senior vice president of hardlines for Sears, is retiring at the end of the month.
Moderator’s Comment: Will centralizing the merchandising functions at Sears Holdings create a more integrated and customer-focused approach for the various
retail businesses the company operates? –
George Anderson – Moderator
Poll Question:
I agree with Mark Tesler’s comments. Succinctly put, there are legitimate reasons to support this action, and they probably have very little to do with capitalizing on a better understanding of the consumer.
It is my belief that “understanding the consumer” in some sort of intangible, talent-driven way is anachronistic. Local market assortments, which derive value by inherently meeting the differing needs of localized groups of consumers, can seldom be consistently “intuited.” Rather, they can be deduced from sophisticated analysis of sku level sales performance, cross referenced against consumer behavior.
Please don’t get me wrong. I am not stating that talent and intuition have no place in today’s retail environment. They do. But they need to be guided by, reinforced with, and supported by analytical thought.
Sorry, off topic. The consolidation of merchandising was inevitable at Sears. All indications were toward the development of a single retail banner. The synergies, cost efficiencies, and temporary EBITDA improvement that the current owners need have to be driven by moves of this kind. Let’s not be surprised…nor critical.
As retail observers, we’d like to see a successful Sears Holdings, something new and exciting on the retail scene. We’d like to be witness to the type of turnaround no one really thinks is possible. Secretly, many of us would like to contribute in some way to that turnaround…which leads us to criticize the strategy clearly in effect at Prairie Stone. No, we cry, don’t make these intelligent and well thought through steps to generate a sizeable return on investment! Instead, struggle valiantly against insurmountable odds for the privilege of making a very modest return on investment, over a very long time horizon!
Centralizing the merchandising function really has nothing to do with whether the company’s merchandising becomes more customer focused. What information do the people in merchandising have about the consumers? Are the consumers the same for each store? Do the consumers vary more by location or by store? How? Centralizing the merchandising function has the possibility of greater efficiency only if it is accompanied by consumer data, knowledge, and insight.
How will the merchandising staff be incentivized? When companies merge, people have a tendency to focus on what they know best. Will the staff be appropriately incentivized to serve Sears and Kmart customers in a “separate but equal” fashion? Or will the former Sears people treat Kmart customers as an afterthought and vice-versa? Does the merchandising staff have a clear picture of who the target (no pun intended) customers are for each brand?
We do not know what top management’s true objectives are here. If it is to reduce costs and streamline the organization in advance of dismantling and selling off the real estate it makes sense. If it is to create efficiencies and to keep only the best people it makes sense. If it is to reduce bureaucracy and waste and make the company younger and more nimble in the marketplace it makes sense, If it is to please Wall Street by giving them the cost cutting measures which unfortunately seem to be the only thing they understand or want then it makes sense. To think however that an attempt to understand and please consumers is even on the radar screen of any Sears/Kmart executive is the most unlikely scenario possible and would make no sense based on their combined recent (the last 15 years) histories of not doing the right thing.
Centralizing the merchandising for the Sears/Kmart business is a good idea – except for those employees who will lose their jobs. The biggest issue that needs to be addressed is the Brand equity of the stores themselves.
Sears is looked at as a middle of the road Mass Merchandiser with superior hardlines and hardware products. Kmart is basically bargain-basement. Concentrating on standardizing the merchandise will not decrease the perception gap of the two retailer’s image. Something radical is needed or failure is eminent.
I don’t think so. To me, this looks like more musical chair games to give the public the impression that Sears/Kmart is going to remain in retail. This reminds me of those fly-by-night penny stock companies that put out a new press release every day but never actually do anything.
Two different businesses have, more than likely, different shoppers, and, therefore, different positioning needs. Hey, where is the marketing thinking, and what makes Sears different from its competitors? And, for that matter probably, Kmart.
Maybe I should ask: Please explain to me why I should shop at either place? Price. Everyone is using price as a tactic.
Next question. Hmmmmm
Let’s look at this from a customer’s point of view. Do I (customer) really care how what I want to buy gets to the store? – NO! I just want what I want at a good price, at a customer friendly store that will also take care of me after the sale. This is the very thing that Sears was built on. Sad to say but Sears has veered too far away from what made it great and has lost too much of the younger market to make a comeback. If you look at the average age of customers, all Sears has left is the older generation. And forget about the after the sale care issue! That also has turned into nothing but a profit issue as well. Where Sears service use to be back up for retail to take care of the customer, it’s now set up for profit only. In conclusion, Sears has got a lot more problems than just figuring out where to ship the mdse. from!
How the question is written tips off the answer. The combining of two disparate variables into the proposed question creates likelihood that the result will not be favorable. The challenge of creating an integrated merchandising function will require the buy in and proactive support from every other function in the business…and that sort of organizational change is not for the weak of heart! The internal and external functions of the organization will require new business rules and special training to become the supportive culture that successful merchandising centralization will require. If that were not enough challenge, now add the monumental task of taking an organization that has dominated during mass marketing’s reign and turn it upside down in its marketing approach to become customer focused. With enough time and money many proposals can be successfully implemented. Making Sears more customer focused and merchandising centralized are two very different and difficult challenges. The proposal is highly unlikely to make Sears more integrated or customer-focused.
This company is trying to move forward and I give them credit. There has been marked improvement in many facets of their stores and that is the first step to getting customers back and also attracting younger customers. What good is it to have the customers in the store if nothing at store level has changed? Making moves to get more efficient will lead to better store level execution and then the challenge will be to get the consumers in the store. I would think the stores need to be right before they focus on getting people in there to shop. Sounds pretty basic but probably where these 2 companies took their eye off the ball which lead them to their current situation. Making moves to streamline and improve is a good step toward putting the pieces together in the retail puzzle.
Sears/KMart has a genuine opportunity to do something very different in the retail world. However, it is going to mean strategically marketing Sears and KMart toward different demographics and niche markets.
Lampert & Co. need to recognize that the general public does not perceive Sears to be a shopping destination for clothing, shoes, and jewelry. They need to eliminate these product lines from their stores and concentrate on their hardline products. Sears must become a destination for shoppers looking for tools, appliances, consumer electronics, lawn & garden, and home fashions. These are products Sears is known for. They should capitalize on this fact. If Sears were to concentrate on this market, they could be a dominant competitor against Best Buy, Home Depot, and Wal-Mart in these areas.
Next, Sears needs to stop monkeying around with consumer goods. People don’t go to Sears to buy food and drugs. These products should stay in KMart only. In addition Sears could help Kmart by transferring all of their clothing brands there to improve Kmart’s product lines. Lands’ End should be sold to a more upscale clothing chain and the money used to improve the core businesses.
Sears must be the more dominant of the two brands. Sears hardline stores must be the core business. Kmart should merely serve as an outlet for Sears products in lower income areas. Premium locations must be converted into Sears stores. Expand the “Sears Inside” concept at all existing and new Kmart locations. Phase out Sears Essentials and Sears Grand. Divest all non-core retailing businesses such as Orchard Supply, The Great Indoors, and Lands’ End. Concentrate on marketing the Sears name alone as something special.
Finally, all of the Sears and Kmart stores need to be extensively remodeled. Part of the image problem for the two chains stems from their ugly outdated stores. Sears stores should resemble a Best Buy and Kmart stores should look like a Target.
If Sears plays its cards right, it could be around for another 100 years.