Sears tries a new way to reach customers and success
According to a feature in Wall Street Journal, Sears CEO Edward Lampert lined out where he sees Sears heading
Lampert stated: “We are proactively transforming out business to a member-centric integrated retailer”. Lampert is an important stakeholder in the company together with his hedge fund. He made clear that Sears is “transitioning from a business that has historically focused on running a store , in home or through digital devices”.
Sears stores have be notoriously unproductive, sales per square foot are less than half those of a typical Wal-Mart. Now the company wants to be pushing more merchandise via various online purchases and sales are to be boosted further through its membership program, labelled “Shop Your Way”, allowing special deals and points when customer buy. Like local coffee shop punch cars or free Shipping Amazon.com gives its Prime members the idea to get people to tap Sears for more of their purchases.
The company has reached some successes, its online sales (excluding its Lands’ End and Sears Canada sites) have increased better than 15 % annual growth rates over the past two years. In its fiscal quarter ending November 2, 2013, shoppers in its membership programme accounted for 70 % of sales. Sears was only expecting 50 % from that channel. However, online sales are not substantial enough to offset the big declines Sears has witnessed elsewhere, nor does the membership programme to provide much excitement for shoppers.
People making bigger ticket item purchases are signing up to get a discount, but not necessarily coming back. The programme has cost Sears USD 75 million in the third quarter. Thus it will be decisive if Sears can realistically make its strategy work quickly enough to offset hefty losses, otherwise the company might run out of cash sometime in 2015, despite the fact that the majority of Sear’s debt will not mature until 2018, it seems almost certain that Sears will have to get rid of more assets. In this respect the company has stated already that it is considering spinning off its Lands’ End brand to shareholders and weighing strategic alternatives for its auto centres. Also alternatives for its warranty business are evoked. In addition, the company has already sold some of its most profitable stores since last year and is likely to continue to dispose of further real estate. This leads to the fact, that Sears has less capacity to make profits the old fashioned way, therefore the newly pursued strategy might not work.