New York Times News Service | This holiday season, Sears and Kmart, which merged in 2005, are pushing a single message: Buy with layaway, buy with coupons, buy now and pay later, buy with loyalty rewards points — but please, just buy.
Five years after the merger, Sears Holdings is beleaguered, with sales markedly worse than its competitors’. The company’s revenue dropped more than 10 percent from 2005 through 2009, the most recent full fiscal year. In the same time period, Wal-Mart’s sales rose almost 31 percent, Target’s more than 24 percent and Macy’s about 5 percent. Sales at J.C. Penney declined by about 6 percent.
Recently, too, as shoppers seem to be cautiously loading their carts again, Sears Holdings has not benefited. In the first three-quarters of this year, Sears Holdings’ sales are down about 1.9 percent compared to the same period last year, while the competition moved into positive territory.
Edward S. Lampert, the billionaire hedge fund manager who engineered the merger and is chairman of the company, has promised that Sears Holdings will be “unrecognizable” in 30 years. To drive sales, it is emphasizing online shopping, mobile apps and an Amazon.com-like marketplace with other vendors, along with heavy promotions in stores.
Still, its long-term strategy remains murky, analysts say. Sears Holdings is primarily a physical retailer, and many of its 2,200 stores in the United States are run-down and in undesirable locations. Among discount stores, Kmart lags Walmart and Target. Sears is trying to edge out Lowes and Home Depot in appliances on the one hand, and Macy’s and J.C. Penney in apparel on the other.
“People assume that Eddie’s got some magic formula,” said Gary Balter, an analyst with Credit Suisse. “If you’re Sears, you’ve got a problem because you’re trying to sell a product in a dilapidated building,” he said. And Kmart stores are “about a quarter the sales productivity of Walmart,” he said. “How do you compete?”
When Lampert combined Kmart and Sears in an $11.9 billion deal that went through in 2005, many of the same analysts considered it a smart move.
Lampert, who became the majority owner of Kmart after it went into bankruptcy, said then that he wanted to combine the best of both, putting brands like Kenmore and Craftsman into Kmarts, and building Sears’ presence outside of malls by turning some stand-alone Kmart stores into Sears stores. Some attractive store locations, particularly in urban areas, led analysts to believe he could sell those to competitors for premium prices.
But the sudden consumer pullback in 2008 led to lots of empty retail space, at less expensive prices than Lampert’s. Today, Balter said, Sears Holdings still has some showcase spots, in high-end, high-traffic areas like Bergen County, N.J.; South Coast Plaza in Costa Mesa, Calif.; and in Manhattan and Bridgehampton, N.Y.
But much of the remaining real estate in older, decrepit malls is a problem, Balter said. “Of the 2,000, there’s 1,500 that you don’t want to be in, that nobody’s going to buy,” he said. (It also has a growing division of about 1,600 specialty stores, like small hardware stores and outlets.) The better locations “are where Sears and Kmart are making their money — if you sell those, what are you going to be left with?” Balter said.
Lampert has also not invested much in the stores themselves, analysts said. In 2009, capital spending only amounted to 0.82 percent of sales. That is about half of Macy’s spending, at 1.51 percent of sales, and a fraction of the spending at Target, Wal-Mart, J.C. Penney and even publicly traded dollar stores, all of which are at 2 percent and above.
In an interview, David Friedman, Sears Holdings’ new senior vice president and president of marketing, played down the importance of appearance.
“The customer’s experience is made up of lots of pieces,” he said. “The in-store experience is one of those that matters a lot, and we believe that the physical plant is one piece of it, but we believe the associates and the products drive the in-store experience.”
Sears Holdings is experimenting with new layouts and fixtures and will introduce those more widely if they are shown to improve sales. And Tom Aiello, a Sears spokesman, said in an e-mail that brightness and cleanliness were priorities, and noted that customer-satisfaction scores had risen this year.
PRODUCT CHALLENGE
The stores’ products pose another challenge.
Sears has long commanded the appliance world, but Home Depot and Lowes are formidable up-and-comers. In 2009, Sears still led the group with a little more than $7.1 billion in major appliance sales, according to This Week in Consumer Electronics magazine and the Stevenson Co. But its appliance sales fell 8.2 percent that year. Lowes came in second, with $4.5 billion, up 3.8 percent, and Home Depot was in third with $3.4 billion, a 4.3 percent decline.
“That’s increased the competition for sure,” Friedman said, but he added that Sears’ employees and price-matching gave it an advantage. Sears is also now selling some exclusive brands outside its stores. Craftsman tools, for instance, are available at some Ace Hardware stores.
It is also trying to figure out apparel sales. In its high-performing stores, it has been able to sublease space to the teenage retailer Forever 21, and it is trying to lease other spaces to other brands.
New exclusive brands, like a fashion line by the Disney star Selena Gomez at Kmart, and ones by the British brands Next and French Connection, are the latest efforts to lure shoppers.
“When you have things that are more on trend,” Friedman said, “aligned with people that are more compelling, they’re more willing to take a separate trip to your store.”
But exclusives may not hold the same cachet anymore. Kmart may have signed Selena Gomez, but Target has Demi Lovato, Wal-Mart has Miley Cyrus, Kohl’s has Britney Spears and so on.
TRANSFORMATION
Transforming Sears or Kmart into fashion destinations will be difficult, said Jason Asaeda, a retail analyst at Standard & Poor’s.
Friedman said that customers were “more willing to purchase fashion at a Sears than at a mass merchant,” and described Kmart’s fashion efforts as having a “very good response.”
Aside from working on appliance and apparel, Sears seems to be putting the most weight behind its promotions and Internet efforts.
Through a program called AdYourWay, shoppers can choose an item online and direct the site to notify them when it reaches a certain price, or ask the site to recommend products. Mygofer lets people shop online for basics like eggs or bread along with tools or gifts, and pick up those items in a store the same day. Sears Holdings has several mobile applications to help people choose gifts or order items. Earlier this year, it formally announced Sears Marketplace, where more than 18 million products were available via third-party sellers. And a single login and profile can be used across all Sears Holdings sites, like LandsEnd.com or TheGreatIndoors.com.
Analysts said that while they were impressed with the company’s forays online, they did not see the websites as a cure-all. The retailer is also trying to lure shoppers with promotions. It extended its popular layaway program this year, and is also running no-interest offers on the Sears credit card and buy-now-pay-later plans with monthly payments. It began a rewards program at Kmart last year and Sears this year, offering points for buying and activities like writing reviews online. It is also offering holiday-season promotions, like offering Black Friday-level pricing on weekends beginning in October, and keeping Sears and Kmart stores open on Thanksgiving day.
For longtime shoppers like Linda Formicola, the rewards are a nice bonus, but it is Sears’ history and good discounts that bring her in.
“We’ve been shopping at Sears since I can remember,” said Formicola, 43, of Franklinville, N.J. Her husband is a mechanic, so he picks up tools there while she looks at clothes and supplies. “If stuff’s on sale, it’s pretty much the same price as you’d buy at a Walmart,” she said, adding she believed the quality was better at Sears.
VALUABLE PORTIONS
Bill Dreher, an analyst with Deutsche Bank, acknowledged that the company had maintained some loyalty among shoppers, but said he was puzzled about its future. While an asset mix including brands like Kenmore and Lands’ End, real estate holdings and the successful Sears Canada division may be valuable, retailing magic seems to be lacking in Lampert’s vision, he said.
“He’s got this huge conglomerate of retailing which is really not doing very well right now, and frankly, if it weren’t for Sears Canada, would be in a real mess,” Dreher said. “He’s focused so much on reducing costs and driving cash flow, and not focusing on sales and market share.”
Cheryl Thomas-Gorny, a mother of three in McRae, Ark., may not be concerned with Lampert’s market share strategy, but shoppers like her contribute to Sears’ diminishing popularity and sales. Although she said she sometimes shopped at Kmart, she criticized the quality of its goods, and said she often found the employees disagreeable.
“Honestly, I’d rather go to Target,” she said.
- By Stephanie Clifford
I wish Sears luck. But, appliance sales…they push those after warranty warranties and they start the day you buy the product. Why would I buy a warranty that runs in tandem with the mfr’s warranty? That makes no sense. Can get an appliance at HD, purchase an after warranty warranty and it starts the day the mfr warranty ends. Much more logical.
Facility – The Sears by me has totally inadequate ventilation. It’s about 100 degrees in the summer and cold cold cold in the winter. No windows. No air circulation. I can go to Macy’s or Penney’s in the mall and be much more comfortable. And God forbid the bathroom doors lock, and there is soap in the soap dispensers.
The K-Mart by me is dirty and it smells. Poor lighting. Parking lot is atrocious. You can have the best sales in the world and I still will chose Target over this K-Mart hands down. It’s a dump.
Personnel – The Sears I worked at….management rides their employee’s ***** constantly. Not enough credit apps. This isn’t right. That isn’t right. The district managers either never talk to the employee or they belittle the department managers. There is not a kind word from their mouths. They will list all that is wrong – well, why not find stuff that is right and help correct what is wrong. A little honey goes a long way and a little elbow grease on the DM’s part will go a long way in building better working relationships with your store personnel. And the customers aren’t dumb. They hear the chastisement. Why would you shop at a store where the employees are being belittled on the floor?
And how about a store manager who actually works?
“Edward S. Lampert, the billionaire hedge fund manager who engineered the merger and is chairman of the company, has promised that Sears Holdings will be “unrecognizable” in 30 years.”
Yeah, sort of like Montgomery Ward.
What few KMarts that are left probably are shabby, but the Sears stores look o.k. What is the problem is that Lampert is not a marketer, and nothing Sears does shows marketing ability. They don’t know whether they want to be Kohls, J.C. Penney, or Ace Hardware, and it shows.
“People assume that Eddie’s got some magic formula…” Not any more. He was supposed to know real estate, but there still are shuttered The Great Indoors and vacant lots where KMarts were leveled in my area.
I had to go to Walgreen’s to get my Christmas lights this year because my neighborhood Sears doesn’t carry Christmas decorations in the store anymore. I could not believe my ears when the sales associate told me. What has happened to holiday spirit?
Unregognizable? More like forgotten in 30 years.
The Bozo is running Sears right into the ground. He probably wanted raid the pension fund and for the real estate value.
K-Mart is consitantly dirty! One of the K-Marts I tried to shop at the cart could not go through the check out line!
I purchased some items a few years back and the ultimate result was I had to return each and every item becouse of defective products.
I refuse to go to K-Mart and will not seek out a Sears store, just not worth it.
I guess Sears & K-Mart are the next Montgomery Wards!
Sears, in the chicagoland area has become the store of choice for illegal mexicans and just walking through the store is a painful process with loud spanish yelled everywhere and rude people bumping into you in the dirty aisles. I won’t go into a sears anymore and opt for more local stores who cater to Americans and don’t have loud announcements in spanish over the pa system.
I think KMart’s biggest problem is one of perception. My local store (Oak Lawn) is always clean, new checks out opened when lines form, nice employees, actually have what’s advertised as on sale, etc. It’s across the street from a Target, but for my money, I’ll pick the KMart every time!
Had a Sears’ credit card since I was 21. It was the first CC I received. 39 years later without a late payment I had my credit amount lowered from $7000 to $300. Cannot purchase an appliance with $300 credit. I cut up my card, went to the local Sears store and gave it back to them. My wife and I will not be back.
Purchased appliances from Lowes since.
Sears
The Target stores in Chicago are complete chaotic zoos. While I think they have a better merchandise selection, I prefer to go to the Kmart in my neighborhood, because it’s much more manageable and product is in stock. If I need to buy a cooler for an upcoming picnic (for example) I don’t care if it came from Target or Kmart. I just want to get into the store, buy the cooler at a reasonable price, and get out of the store. I can do that much easier at Kmart.
I hope they can keep working the formula to find success.
Sears really needs a new logo and more modern signage. It feels like I am back in 1989 when I am shopping at their stores. They really need to renovate and improve their products too! Target seems to have the right idea, well designed products people want to buy and low prices. They are actually opening up new stores! Sears stores have harsh lighting and horrible displays. Everything about it is ugly and bland. Talk about depressing. Plus, if your product stinks, none of this will matter. They really need drastic change in order to turn this sinking ship around. My advice to Sears is to first determine who you are competing against, renovate from top to bottom, then advertise about how great the new sears stores are. Again, they need to go for a younger audience and roll out a new fresh product that people actually can feel good about. Something modern and attractive.
Sears is a dinosaur. Similar to General Motors. Once the perception is negative, it is extremely difficult to change. It is time for a garage sale and close the place down.
I haven’t been into a Kmart since college (almost 20 years), but Sears is a disaster. If anyone wants to know what’s wrong with Sears, visit their store in Oak Brook. While their store on State Street isn’t bad the Oak Brook store is a relic that is falling apart and has become completely out of place compared to the rest of the mall. On a recent Friday, Macy’s was packed and Nordstrom was pretty crowded too, but Sears was a ghost town. If you have poor merchandise in a shabby store, you’re not going to sell much of anything. Retail 101.
I stopped shopping at Sears after they gave me a major run around with repairing a washing machine. I vowed NEVER to shop at Sears again and so far I have kept that vow. Sears to me represents crappy products and terrible customer service.
FYI
I feel bad for all the people who were part of the old Sears “family” of employees. They made a good company great. Sears was all about the customer, and no decision was made that didn’t have the customer as the 1st priority. Then accountants took over. The customer was forgotten in lieu of spreadsheet data created by book-learned MBA’s who never worked one single day in a retail store. Lampert is right about one thing. Sears will be unrecognizable in 30 years because there won’t be a Sears at all in 10 years.
Sears.com might consider fixing their crappy website. JavaScript and cookies should not be **required** to browse the site (Amazon.com only requires them for placing an order).
Stupid, clueless, incompetent people were probably not the best choice for Sears to hire as executives, managers, and website developers. Oh, and having ******** work as installers for appliances was a bad move, too (I had to install my parents new stove because the jackass installers were too lazy to remove the flare fitting from the back of the old stove and install it on the new stove – they did, however, gleefully take the (needed) old fitting with them when they left, and suggested my parents call a plumber). I’ll never buy an appliance from Sears again, and I don’t imagine my parents will either.
I refuse to support a company that outsources their jobs overseas to India for IT,accounting, HR, or customer service staff. I will not purchase one thing at Sears/Kmart. Let their new “employees” from India support the stores with their cheap labor salaries. Outsourcing workers for cheap labor is more costly in the long run when you aren’t just looking at salaries. The quality is less and the time to produce anything is longer and the customer satisifaction/experience is lower.
Wrong decore, wrong selection, over crowded isles, too much inventory, bad lighting, not a welcoming store to go to, and not willing to change. Probably have the same ‘retail execs’ running the show for year after year and making the same decisions. Hire someone with fresh ideas and make real changes and focus on your strenght, then worry about being Amazon-like or Best-buy like…forget market share, stabalize, get rid of ‘bad’ stores, modernize, then worry about gaining share. Basic business 101, unless you have other motives like short term profit taking, retiring, etc. Close Kmart, its time has come and gone (you are not going to beat Walmart)..focus on Sears or like many said here, this will be another Montgomery Wards.
As a former 25 year employee, I have watch Sears (and K-mart) physically deteriorate. It’s Fast Eddie’s company and I support his doing what he wants to do, but in reality, he’s managing dollars, not people, products, or places. Reinvestments into upgrading groddy, outdated stores, is virtually non-existent, as you pointed out in your article. Fast Eddie is reaping what he is sowing. I have not been in a Sears store for 15 years, and do not have a reason to go into one that lacks cleanliness. Instead, I will go to Target and Kohls.
In the 60’s Sears was the store of choice for tools and appliances due to a quality product and good parts support. There motto was “customer satisfaction guaranteed” but that all changed by the mid 70’s. I went to a store to order a common, inexpensive but essential part for a tool and was told that they had changed suppliers so the parts were no longer available. After unsuccessfully searching other sources for the part I wrote a letter to Sears chairman explaining my disappointment in not being able to obtain parts for the many thousands of dollars in equipment I had purchased from Sears and hoped that perhaps they would at least offer me a discount to purchase a replacement tool. I received no response and have not spent a penny at Sears in the 35 years since then. Last month, on Black Friday, I was waiting for Walmart to open and decided to run into Sears for one of the promotional items that was particularly well priced but I was told that the store had none of the items in question–never did even though it was in their sales flyer. Needless to say I will not waste my time going to Sears again under any circumstances. Mine is but one of many similar stories I have heard from many people over the years. Bottom line is once you’ve ticked off so many customers so many times you’re not going to get them back regardless of the promotions or store upgrades. I imagine most Sears store clerks are more lonely than the Maytag repairman.
On the off chance that the higher ups at Sears are reading these comments, I have a suggestion. Make quality the first thing you sell. Limit anything you do by that. If there is a chance to make more by sacrificing the quality of something, don’t do it. If you find something that you’ve purchased for sale in your retail outlets is not of the best quality, send it back and don’t do business with them again. Let everyone see you do it too.
Rely on your history. Sears did more to build everything west of Ohio than Walmart, Target, Home Depot, and Lowes put together. America was damn near built by Sears (or at least using their products).
Don’t listen to these people who are telling you to modernise your stores, if anything make them look older. This is Sears, a place we grew up with. Built from solid things, not plastic and florecent lights but wood and wall sconces.
But more than anything, get rid of KMart and the tag line ‘Blue Light Special’. I on behalf of everybody in the whole freaking world want to let you in on our secret. KMart is synonomous with cheaply made unneccesary crap. With the advent of Walmart, there is already a place to go for that kind of product. If you want to continue down that road, know it will only benifit Walmart because KMart acts like a windsheild for poorly made products and the people who sell them. Without KMart we would have to point at Walmart and tell our kids that it is the place you go to buy junk.
Outsourcing customer service and delivery has taken a shoddy retailer and made it worse. When English isn’t even their second language, how is someone supposed to schedule a delivery. Product quality is marginal – I purchased a fairly expensive appliance that did not work right upon delivery. I received three calls wanting me to rate the service of the repair. I’d rather just receive a quality working product!
I like K-mart. It is much more relaxed and casual. I don’t have to dress up real nice like I do when going to Wal-Mart.
If Sears stopped outsourcing work to India and China and stopped using vendors and advertising agencies that outsourced their work as well, perhaps Americans would have enough money to spend at Sears. America is at an all time economic low because of the greed of companies like Sears. You want to sell to Americans? Hire Americans!!!
I actually think Sears’ time has come and gone. When a company aleinates long time customers there is no winning them back. There is always another company to fill the void. Sears will NOT recover and will be gone in less than 5 years. I will not miss them.
Two words for Eddie – Undercover Boss
Sears is clearly on its deathbed. Aside from the dismal low-end inventory you have clueless execs who have no idea of what the store should be. Is it clothes, appliances, car repairs? What a mess. For the best example of Sears at its very worst, visit the store on W Irving Pk/Milwaukee and go to the basement. There you’ll find a selection of power tools, fitness equipment and dusty home improvement goods that look as if they’ve been untouched on the shelves since the 1980s.
As for K-Mart? Well, if it’s cheap tat I’m after I’d rather drive the 10 miles to the WalMart on Touhy than visit the K that’s a five minute drive from my house. The harsh lighting, cluttered aisles full of crap, the disgusting people, the ever-present stench of Little Ceasar’s pizza… is there a worse retail experience than K-Mart?
Kmart pricing on most items is 20-40% higher than WalMart, but with lower quality.
With at least half of advertised items out of stock, it’s all too obvious that they do not know how to manage supply chains and control inventory– which you’d think would be “Retail 101.” Perhaps some stores are better, but the one near me has two out of twelve checkout positions open during this Christmas rush– and they’re not very busy.
As for Sears, perhaps it’s better but I just can’t think of any compelling reason to go there. I surely would not want to buy a Sears store-brand appliance, as Sears models are customized for Sears, leaving customers dependent on Sears for parts and service.
How do these stores survive??
Sears wil lose a lot of business if more people have experienced what I have when it comes to product service.I’ve had technicians not show up during the appointed time frame(window) and no call that they can’t make it or will be late.We have wasted too many days off work when no tech shows up.This has happened to me and wife on several occasions.When we call and complain,all we get is ‘we’re sorry”.They overbook their service appointments,they should hire more techs.
I have friends who have told me that they had to reschedule delivers more than once, because Sears claim they had computer problems.Outsourcing deliver and product service is not working for Sears!!!
my experiences are similar. i recently purchased christmas gifts on the sears/kmart website. the price at checkout was not as advertised. so i called the customer service line, which explained to me that although the website has xxxx listed, that’s not the actual price. i pointed out that it was not limited to one or two things, it was entire departments. they were very rude and hung up on me.
my husband recently went into kmart to make a purchase. the lady working the jewelry counter was extremely helpful, but while he was shopping, someone called her and proceeded to bawl her out and use foul language with her, even though the employee stated she was currently with a customer. the girl started crying afterwards. my husband asked to speak to a manager about it. turns out the lady who yelled was the manager. before she spoke with him, she called the customer service desk and asked his name, age, race, and how upset he looked, then told the cs that she was on the phone with another store and didn’t feel like talking with him. i guess she did not realize we could hear everything she was saying. when she finally came out, fifteen minutes later, we spoke with her about the situation and let her know how upset we were that she would embarrass her employee that way. she said it was her store, she would do what she wanted, the girl shouldn’t have spent so much time with us (around 15 min), she had other things to do. so we returned our purchase, around $300, and went to target. i know it’s small things, but i’m sure all this adds up. i can get over the bad lights, cramped checklanes, etc. if i really want to buy an item, but i’m not going to be treated poorly or watch someone else be treated poorly.
My mother answered phones for Sears nearly all of her life, appl outlet. In fact one of my Grandmothers worked in Sears accounting all of her life. My take, Sears: A store that was built when shopping was a family affair. The whole family came along, Dad got his new tool, Mom bought little Jim and Sara their new winter coats, and then treated herself to that much desired table decoration for an upcoming feast. Purchases had purpose -Today’s shopping fields a very different experience; Everyone accessorize yourself! You, you you
And Although much of us have grown or matured in this economic bubble, know that this bubble, which was made possible only by the government stimulated, then self indulgent “consumer era” (an era that Reganomics have made sure we’ll never be at a place to have again) has Burst.
The one for me and none to share ideology that Walmart, Target, and even Kmart are selling will not hold out. That era was launched with the mantra of One for every house, and evolved to One for every room & hand. -America’s Downfall
Many of us already know that the $70 shopping trips to any of these places for (lets admit it, excessive Stuff) are just no longer do able. Shiz I’m sure a few ppl reading wish they had $7 4 sqzs right let alone $70
So be prepared to take some steps back Americans:
Not just from 1 per person to 1 per family
But TO:
1 per 3to4 families to share if you’re lucky.
POINT: Someone will take Sears and hold it in the shadows, while all those other Stuff stores suffocate in the depression. Families will come back to Sears, as soon as they wake up and watch the “accessorize me” days go up in smoke.
It’s our lack of education that allowed us to be told we were the best and believe it, all while becoming slaves. So soon we’ll be in soup lines, & in the worlds next hungry nation commercial, and shooting up malls out of depression, oh wait we’re already there…
My grandfather and father (and even I) grew up trusting Sears. The “Craftsman” and “Kenmore” brand names meant QUALITY. My father bought a craftsman push mower for his yard in 1967. It cut an acre of grass every week, and finally had to be replaced in 2001. All of the tools in my fathers and my tool chests are Craftsman. Our washer/dryer and kitchen applicances were all Kenmore when I was growing up. Sears should focus on the areas where it built it’s reputation, home lawn equipment, tools, home appliances. Let the big department stores sell clothes and bath towels, Sears should re-focus on quality and growing market share of applicances/tools/lawn equipment.
I have to admit that my favorite time of year was when the Sears Wishbook came out. We didn’t have money for lots of extraneous expenditures in our house, but I had fun just looking through the book with my dad. It was through the Sears Catalog store that my dad bought me my first bb gun.
Sears needs to re-capture the brand recognition it had in the good old days.