Sears and the Departmental Reality

I remember when growing up that Sears was a completely different place than it is now. It was actually a decent place to shop, was competitive in price, generous in return policy and was the leader in appliances and tool sales. A few articles have popped up in recent weeks about ailing department store Sears and its corporate sister Kmart. We all know the troubled stores are on life support and offer very little value to a rapidly changing brick and mortar reality across the retail landscape, but the news of Sears (and Macy's) subdividing some of their existing stores is cause for concern in a company that has been shrinking for years. Even more, last week Forbes reported Sears announced a restructuring plan that includes making $1 Billion in cuts (much of it in real estate) and hiring a real estate marketing firm. 

I can't believe I'm talking about the 5th largest retailer by sales in the United States. Unprepared for and unwanted by the millennial generation, the company is no doubt in trouble along with most other department store chains. I wonder if Sears even has a single millennial in it's upper management?? How do they know what we want? Who is consulting them, old graying men and women with no connection with the clientele they're trying to market to?

The last time I went into a Sears the store was in such disarray, with clothes everywhere, poor selection, poor lighting, outdated buildings (with super low ceilings!), no help to be found anywhere, and even dated retail music over the loudspeaker (it sounded like I was in a funhouse). The store was empty and I felt like a ghost of shoppers past. Apparently others feel the same way. While I cannot remember exactly what I went into Sears to buy (this is a circa 2011 story), I ended up walking out empty handed. I'll add that it was a Sears Essentials store which were a failed "discount store" spinoff of the main stores. I have a regular Sears less than a two miles from my house and I've never been inside and don't plan on going in there for anything when there are much cleaner department stores and big box chains even closer.

The most alarming fact is that retailers shifting to online sales to shore up profits is a cannibalizing strategy for their very own brick and mortar locations. The more online sales that are made on their .com sites, the least amount of sales are generated in physical locations, threatening their profits further. A quick look on Sears.com shows overpriced clothes and housewares that can be found much cheaper elsewhere, namely Amazon.com.

 Sears Watchung, NJ. Image courtesy of TAPinto Watchung

Sears Watchung, NJ. Image courtesy of TAPinto Watchung

With Sears Holdings (Sears parent company) announcement that they wish to monetize their assets in the new restructuring plan, the company has expressed interest in selling off, re-leasing, and subdividing their stores to save money. The plan comes hot on the heals of a poorer than expected holiday sales season in December 2016 with profits down 8% from last year, which were already down from the year before. The plan is ambitious and certainly can be considered trying something new, but I wonder what small stores would actually go on the inside of these newly subdivided locations.

Department stores need to stand out. They sell too much of the same stuff. If you blindfold someone and send them into a Sears, JC Penney and Macy's, it's hard for one to know which store you're in. Macy's does a better job in attracting millennials but overall it's been clear for years that millennials like small specialized retailers that concentrate on doing one thing good instead of everything badly. It's estimated that department stores have a 40% overlap in merchandise. What made these retailers successful was their ability to pull in shoppers because they offered something that nobody else had. This concept went out the window with the popularity of online shopping, but it seems they have overcompensated by selling the same merchandise and concentrating too much on price matching their competitors than offering an experience. What this has created is poor sales, excess square feet and excessive corporate footprint.

They haven't even began to fix the real problem. Sears needs to be somebody. Do something drastically different to bring in millennial shoppers and engage their customers. What's the point of cutting real estate in underperforming stores if the demographic age of shoppers have not changed in the surrounding area most of the time?? It clearly spells that the shoppers have gone elsewhere. Sears can still recapture those customers. But it all starts with acknowledging the reality that standing out as a department store is the key to success. It's widely known that millennials are all about an experience when they visit places, where they live, the car they buy, where they shop and the like. They want to have a good time wherever they are. The truth is, when Sears finds out what people like is when success will come.