Sears Goes (Costco) Clubbing with Craftsman Tools

Discussion
Sep 01, 2011

Carol Spieckerman, president of newmarketbuilders, wrote in a 2010 RetailWire BrainTrust Query that Sears was “quietly incubating and activating the business models and platforms that will transform retail’s future.”

Among the reasons for Ms. Spieckerman’s optimism about Sears’ future was the company’s decision to license its Craftsman, DieHard and Kenmore brands for sale in other outlets.

Ms. Spieckerman wrote, “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!”

Sears as a brand marketer rather than a retailer may have gotten its biggest boost to date with the revelation that Costco will begin selling Craftsman tools in its clubs across the country as early as this weekend.

“As we externalize the brand, we’re trying to be thoughtful about reaching shoppers we aren’t reaching at Sears today,” Kris Malkoski, vice president and general manager of the Craftsman brand at Sears Holdings, told the Chicago Tribune. “It’s an opportunity to bring the equity of this product to households that aren’t going to Sears.”

Costco is not the first retailer outside of Sears Holdings to sell Craftsman products. Ace Hardware began selling the brand last year and will have Craftsman tools in roughly 1,000 stores by the end of this month. Menards, a DIY chain, is also testing sales of Craftsman tools in stores throughout the Midwest.

“The Sears retail format is one that is substantially challenged by competitors and too much square footage,” Michael Dart, a retail strategist at Kurt Salmon, told the Trib. “Separating the brands outside of Sears recognizes there is probably a lot more value in the brand names than in the destination of Sears.”

Discussion Questions: What will the Crafstman deal mean for Costco and Sears as retailing entities? What will it mean for the Craftsman brand?

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23 Comments on "Sears Goes (Costco) Clubbing with Craftsman Tools"


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Steve Montgomery
Guest
9 years 8 months ago

Like many people, I have been buying Craftsman tools from Sears for many years. It was (and will likely remain) my main reason for going to Sears. That being said, I agree that there are likely many people who shop in Costco that don’t shop at Sears and are likely to become new Craftsman buyers or at a minimum exposed to the brand. The impact on Sear as a destination for the tool buyer will likely not be impacted because the tools at Costco will be uniquely bundled.

While the article didn’t mention it, I assume the Craftsman guarantee will remain in place, meaning should anything occur with a tool purchased at Costco, Kmart or Ace, the buyer will still have to go to Sears for replacements.

Doron Levy
Guest
Doron Levy
9 years 8 months ago

What can I say? Sears may have a an uphill battle on the store front, but their brands are well recognized and have a high degree of consumer loyalty. Craftsman at Costco? Great idea and I think it will be a barn burner for them. You will now open up Craftsman to a whole new group of shoppers that may not have even set foot in a Sears. Kenmore has to be next. Another great brand with solid credentials.

Dick Seesel
Guest
9 years 8 months ago

On the surface, this looks like a big win for both Sears and Costco. It gives Sears a chance to continue leveraging its best brands (Kenmore and Craftsman) outside its own stores, and it gives Costco a very credible tool brand to sell in its stores, strengthening a category that needs better merchandise.

A couple of cautionary questions: Will Costco’s everyday-low pricing strategy undercut Sears’s ability to make margins on Craftsman products in its own stores? And how long does Sears intend to maintain the charade that it’s interested in bricks-and-mortar, anyway?

Cathy Hotka
Guest
9 years 8 months ago

Frankly, I don’t understand anything that Sears has done since Eddie Lampert turned it over. By licensing Crafstman to others (will Kenmore be next?) Sears gives consumers another reason to avoid its stores. This may be a good move in the short term but a boneheaded move in the long term.

W. Frank Dell II, CMC
Guest
9 years 8 months ago

Craftsman, like 8 O’Clock Coffee, is a private label brand that has moved successfully into national brand status. Costco will do great with Craftsman. What this really points out is Sears has no retail strategy, vision or plan.

Gene Detroyer
Guest
9 years 8 months ago

This is a smart, smart move. Costco will sell more Craftsman than Sears ever imagined. And, when Sears is gone–yes it will be gone–the brands will live on. The company will be making money without the need of stores, labor and associated expenses. This strategy fits right into the future of the company. Sears the company is not stuck being a retailer, but understands what its valuable assets are.

Jerome Schindler
Guest
9 years 8 months ago

Remember “Zenith” – their slogan since 1927 was “The quality goes in before the name goes on.” Today the game plan is license the name, grab the royalties and don’t be concerned about the quality. Craftsman quality isn’t what it used to be, but this is probably the best way to maximize profits – at least in the sort run, and the short run may be the only run Kmart/Sears has open.

Charles P. Walsh
Guest
Charles P. Walsh
9 years 8 months ago
I’ve followed this development with a great deal of interest over the last few years and quite frankly can find little in it that makes sense to me. Sears as as company has seen its sales decline every year since its merger with Kmart in 2005. It turned in decreases in the first and second quarters of 2011. So Sears ain’t doing particularly well as a retailer. Operationally they are substandard, spending little on store retrofitting and upgrades and relying on promotions and discounts rather than improved assortments and customer service. I cannot find any benefit in licensing their Craftsman and Kenmore brands which they have developed over time into a premier, high quality and trusted brands. They are products that are associated most closely with Sears and made their reputation. Either Sears should be a retailer, leveraging their core strengths and investing in their customers while seeking new customers, or they should quit the retail business altogether and become a brand marketer. I see no value in doing both and in fact doing both… Read more »
Bob Vereen
Guest
Bob Vereen
9 years 8 months ago

Since Costco sells at a lower margin than traditional retailers, what do you think Ace Hardware dealers will think of this move?

Roy White
Guest
Roy White
9 years 8 months ago

Marketing someone else’s private label is not necessarily new. Even in the supermarket industry, it has occurred (Gristede’s carried Shop Rite brand for example). It certainly can be a win-win situation. Costco has the opportunity to carry what has become over the decades a well-known and trusted brand. Sears, which apparently no longer attracts as wide range of shoppers to its stores as it did in times past, has created an opportunity to leverage the equity of one of its brands.

Anne Howe
Guest
9 years 8 months ago

I’m assuming Costco will bundle Craftsman tools into sets, and have an edited merchandising strategy that could indeed get Craftsman tools into the homes of many younger Gen X families that haven’t ever set foot in a Sears store. On that basis, it’s really a nice distribution strategy to help extend a national brand into a new consumer segment.

Sears may be struggling as a retailer in and of itself, but leveraging its core brands into the marketplace as national brands with more targeted distribution strategies is not a bad move. They’re doing what any good brand steward should do with brands (including Kenmore) that have meaning and value in consumer’s minds.

Ed Rosenbaum
Guest
9 years 8 months ago

This is a win/win for both Sears and Costco. Certainly there is no question about the recognizability of the Craftsman brand connection. This will increase sales to those who frequently shop at Costco; while also increasing Sears’ numbers. I like the program. Maybe others should be thinking along the same lines.

Bob Phibbs
Guest
9 years 8 months ago

Sears: devolution to a commodity, as in taking their namesake brands with them.

Carol Spieckerman
Guest
9 years 8 months ago

“Owned brand” has come into favor with retailers as the next evolution of private label for a reason and Sears’ latest brand alliances have set an important trajectory in motion in that regard. Eddie Lampert looks at Kenmore, Craftsman and DieHard, not simply as margin-building private labels, but as assets with equity, and that changes everything. Loblaw and Safeway may have dabbled in these waters but Sears is looking at monetizing brand equity more holistically through its wholesale and retail alliances. Mr. Lampert’s simple but powerful statement that Sears’ brands are bigger than the Sears customer says it all and soon, more retailers will no doubt follow as the value of their owned brand portfolios escalates. I’ll say it again, Sears may not win, but in the meantime, they will disrupt.

Dan Frechtling
Guest
9 years 8 months ago

Sears needs to experiment, and this includes maximizing own label as well as its traditional retail business.

1. Craftsman is a wasting asset if sold only through Sears. Its share is high but dropped 2 points over the past year as fewer shoppers visit Sears.
2. While Craftsman draws shoppers into Sears stores, it’s not clear that it draws cross-purchases in other departments (“Honey, can I pick up some shoes for you while I’m at Sears getting that hammer?”).
3. While Costco adds doors to the brand, Sears previously benefited from testing and learning from Kmart, Ace and even Menards.

While some see Sears as a retailer and would say taking the focus off store operations is an unwelcome distraction, I see moves in own label and e-commerce as worthwhile experiments for a company that needs to rethink its business model and corporate structure. The real indication isn’t just what happens with Costco but also what happens next with Kenmore.

Doug Garnett
Guest
Doug Garnett
9 years 8 months ago

Sears gives us the appearance of cashing in (and destroying in the process) its only viable brand asset. It was a surprise to see Craftsman at Ace.

But the move to Costco gives full glory to telling consumers that the Craftsman brand has lost its meaning.

A sad day.

John Bell
Guest
John Bell
9 years 8 months ago

Good for Costco, good for the Craftsman brand. This sure isn’t strategically conventional. In my mind it demonstrates the strength of the brand, the weakness of Sears and the confidence of the competitors choosing to sell it.

Ted Hurlbut
Guest
Ted Hurlbut
9 years 8 months ago

I think there’s an assumption that retailing its brands and licensing them are mutually exclusive strategies for Sears. I don’t think that’s the case.

Sears’ brands are probably their most significant asset within their stores. It only makes sense to market them more widely. Sears has been unable to grow retail sales. It’s very likely that with a careful licensing strategy that they’ll generate more income from the brands by licensing than by not, even if there is sales dilution that impacts the stores.

Sears’ stores will survive or not survive based on their ability to find some way to be relevant again to consumers. I don’t see brand exclusivity as essential to that.

Craig Sundstrom
Guest
9 years 8 months ago

And perhaps coming soon to a 7-Eleven near you, but not Walmart…yet, as many have noted, this latest fumb…er, tactical retreat helpfully brings Craftsman within reach of ever more millions of people — who apparently can no longer be counted on to find their way to Sears’ own stores — but at the expense of existing partners (OSH, ACE) who are slowing — rapidly? — seeing their exclusivity disappear. The only question is whether or not this is a carefully thought out de-evolution strategy, or (yet another) throw stuff into the water and see what floats idea. So far, this blind squirrel is nutless.

Adrian Weidmann
Guest
9 years 8 months ago

I thought Craftsmen (Sears) was headed in the right direction with their opening of their experience store in Chicago even though it was a five foot jump across an eight foot wide gap. It would have been validating if they developed that concept further but this latest deal shows that Wall street and the short-term revenue seems to trump vision and brand innovation once again. So much for another attempt at “Good to great!”

Mark Burr
Guest
9 years 8 months ago

This is good for Costco, good for Sears, and good for the Craftsman brand. It also means that I would never have to go to Sears again. Hmmm, wait a minute, that might not be so good for Sears.

Dave Wendland
Guest
9 years 8 months ago

Well, I must agree with others that this is certainly not a Sears brick-and-mortar strategy (Costco shoppers will now have even less reason to even know that Sears exists).

For the brand, Craftsman, this will generate many new sale opportunities and strengthen its visibility among tool users. I have to believe that the Kenmore brand will follow shortly hereafter.

Ed Dennis
Guest
Ed Dennis
9 years 8 months ago

Sears is a damned fine retailer with zero cachet! They should own the major appliance business and do a great job with hardware. But their niche was finance and 30 years ago MasterCard and Visa started to erode their finance business and allowed their loyal base to move elsewhere. Sears has some great brands and they have some dogs.

I see a great long term future for Sears as a branded marketer. I can see a retail future for them as a Best Buy competitor. They have deep relationships with a number of appliance and electronic manufacturers. They should quit fooling around with soft goods and focus like a laser on their strength in appliances and electronics. License Craftsman and DieHard, get rid of soft goods, rent as much of their floor space as possible to anyone – get a car dealer in there – anything to attract traffic.

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