October 31, 2011

Case Study: 10 keys to survival for Sears Holdings Corp.

Today we are featuring a special guest commentary spot. It's an article written by Pseudo3D about the 10 things he thinks Sears Holdings Corp. needs to do to survive.

1. Kill Sears Essentials
Sears Essentials was started in 2005 under the idea that Kmart was the weaker brand of the two (Sears and Kmart). Unfortunately, Sears Essentials is a disaster and has undermined consumer confidence in Sears as a whole. Today, many of these Sears Essentials stores are being converted back to Kmart locations. A casualty of this is Sears Grand, which has basically fallen by the wayside after the Sears Essentials debacle.

Sears Essentials location that is closing.
2. Change the logo again and stick with it
For whatever reason, Sears changed their logo to a full lower-case affair. Seeming as part of a last-ditch effort that just makes the name appear less important and less bold than it used to be. It's a sorry way to go for one of America's most well-known names. Sears needs to quit redesigning their logo and go back to one of their older ones, the bold mid-1980s logo, the script logo of the 1960s, or even the art deco logo.

Sears current lowercase logo.
3. Give Kmart the gift of food
Eddie Lampert seems to be against food in general, closing the K-Cafés, neglecting the Pantry department, and phasing out Super Kmart's. What Kmart needs to do is embrace food and follow the examples of Target and Walmart in offering a larger food selection. Both Walmart and Target have essentially stopped adding 'Super' when it comes to food. Target now offers an expanded selection of food via the 'P-Fresh' format. While Walmart internally having full groceries in some stores, no longer puts "Supercenter" on its stores. On smaller stores, Walmart puts in an expanded food section. To achieve this, Kmart should reopen the 'Super' part of the stores that it closed off and lease out the K-Cafés to other operators. The Kmart name should replace both Big Kmart and Super Kmart.

4. Stop offering Sears brands in other stores

The strength of Sears has been in its brands: Craftsman, DieHard, Kenmore. By out-sourcing those brands, it gives customers less reason to go to a Sear store and erodes the brand quality. Cutting the sponsorship and pushing the brands at Sears and ONLY Sears would be better for the company as a whole.

5. Differentiate Sears and Kmart stores
Almost from day one of the merger and continuing today, Sears and Kmart started to share brands and become more similar to each other. What needs to be done is create a full division. Sears and Kmart should offer different brands and departments from each other. If a Sears and Kmart were to co-exist in a mall, they should survive by not cross-contaminating each other, at least not by much.

6. Enter new markets
Kmart left a lot of markets open in its 2002-2003 bankruptcy retraction, leaving some stores in odd places (a single Kmart left in Killeen, Texas for instance). If done right, a Kmart in a new market could steal customers who would normally go to a Target or Wal-Mart, as well as taking up vacant space in light of recent bankruptcies from other companies.

Kmart's mass closings of 2002-2003.
7. Don't to be too quick on leasing
Sears is trying to lease out store space to other retailers, with the offer open for nearly every Sears and Kmart. Unfortunately, Sears Holdings Corp. is more interested in just 'whatever it can get' rather than a good fix for the store. For example, a Cupertino, California Sears store is leasing out some of its space to a health club! More troubling is that the strategy resembles what Montgomery Ward did in the late 1980s and early 1990s, and we know what happened to them. Service Merchandise also similarly downsized store space. A Greensboro, North Carolina Sears store is sub-leasing part of its store to Whole Foods Market, which seems like a wonderful idea until you realize the Whole Foods is not going to be connected to Sears itself. What Sears and Kmart should be doing is leasing space that will actually open up to the inside, and complement the store. In the 1960s, the Canoga Park, California store included a Vendome store-within-a-store, which sold wine and spirits (by the way, Vendome is still around, but no longer offers brick-and-mortar retail space.) Another great way for Sears to 'rent out' space would be to convert some space to a Kmart, instead of having the aforementioned bad combinations.

8. Rediscover the Past
Sears and Kmart both have a storied past. What they need to do is look for past inspirations to help them find a niche today. I don't know why the Duluth, GA concept was never pushed forward but Sears needs to be classier. You don't have to have exclusively softlines to be 'classy'  but Sears needs to be "I'm a store that harkens back to the golden days of department stores, where there was something for everyone, Explore me!" This includes the fact that Sears should restore some of its older locations. A Sears store in inner Houston, TX and visible from the highway got a nasty exterior remodeling in the 1960s hiding its art deco. After Hurricane Ike, a piece of missing metal siding revealed the art deco exterior underneath, yet Sears hasn't gone ahead with any restoration of this building. Meanwhile, Kmart shouldn't imitate Walmart and Target and go for "low prices" or "affordable fashions" too much, it should just be a no-frills mid-line discount store, like it always was. Perhaps Kmart should revive the Kmart Chef name for its in-store restaurants with an improved menu and décor.

Sears Duluth, GA retro concept store.
9. Invest in Remodeling
Sears and Kmart stores are woefully out of date. Even the new-style Kmart logo on the '70s arches store is a bit painful to look at. While blue seems to work for Sears (it's kind of iconic, after all), the new brown and orange is a kind of unappealing look for Kmart. Why Kmart abandoned the green and grey concept of 2002 is beyond me. Clean up the stores and make them truly attractive places to shop again.

One of Kmart's green and grey concept stores.
10. Get new leadership
Kmart's Chuck Conaway led them into bankruptcy while frittering away the company's money on personal luxuries illegally. Lampert hasn't done much if any to improve Kmart's standings as a viable competitor to Walmart and Target. Even holding them back, all the while giving himself a large salary as CEO and bleeding the two brands to their death. Some suspect he's devaluing them deliberately and just using the company for it's real estate. 

And there you have it, Pseudo3D definitely makes some very good points in the article. The main point to take away is Sears Holdings needs to do something different to right the ship, because its sinking quick, fast, and in a hurry. I think investing money in the stores for remodels and improved product assortment is the single most important and biggest thing they can do at this point to help the company.

What are some things you think Sears Holdings Corp. needs to do to improve the company overall? Post a comment below to sound off your thoughts.