The Sears Problem and Theory Validation

'Tis the Season for a great many things, including holiday shopping and evaluating the resulting retail profits. Some of this years' results seem to bear out the underlying philosophy of this blog.

As reported on the Dow Jones Newswire: “Sears Holdings Corp. (SHLD) plans to close as many as 120 stores and take a charge of up to $1.8 billion as the struggling retailer reported fewer sales during the all-important holiday season, again raising questions about the company's ability to regain lost momentum.” The article went on to say that the company plans to take the money saved by these store closings and re-invest it into the store facilities and in their customer loyalty program.

Investors aren't impressed.

Share prices have fallen 25% over the last 12 months, and fell by another 25% on the announcement.

SHLD owns the Sears and Kmart stores, with about 2200 locations in North America. These brand were the kings of American retail a few decades ago. So what happened?

Sears was the biggest name in department stores. They were famous for their catalog, and they were the place to go for appliances, tools, and quality clothes at reasonable prices. They competed against Montgomery Wards and JC Penny on the clothing, but nobody put the whole package together as well as Sears. Kmart was the top discounter in the nation, when the only competition was Woolco.

The competitive landscape has changed.

• I buy most of my clothes at specialty clothing stores.
• I buy tools at the big-box hardware stores.
• I can buy brand-name appliances at numerous retailers.
• If I want to shop at a discount store, I head to the big W.
• And no one but my 95-year old mother shops from a catalog anymore.

So what, one might ask, are Sears and Kmart particularly good at these days?  

NOTHING, it would seem.

Business mediocrity comes in many business forms, but the most common marketing example is the “Me Too” image. Neither of these companies do anything particularly noteworthy, and their marketing image is simply one of the many Me Too's.

Mediocre operations can survive when the competition is weak and the selling environment is strong. But when the competition is strong and the economy is weak, the mediocre have few advantages to promote. The only option left is to constantly lower prices, and they aren't well positioned to do even that. As a consequence, they often die a slow death.

Although it doesn't make the headlines, small businesses go out of business every day for exactly the same reason: They haven't figured out how to stand out, and the buying public sees them as just another “me too” operation. If your company falls into this category, NOW is the time to make some changes.

Practical Tip of the Day:

• What is your company known for in the buying community? Don't trust your analysis of this, take the time to ask your customers for their opinion.
• If the answer is “Nothing”, but your sales numbers are still OK, then your competition is in the same boat, and you still have an opportunity to succeed. Start looking for some key differentiation.
• If the answer is “Nothing”, and your sales are drifting downward, Now is the time to respond.