By Lynn Hinderaker, firstname.lastname@example.org
The future is knocking on the door of hedge fund manager and owner of Sears, Eddie Lampert. His decision to split off Lands’ End and Sears Auto Center from the core Sears brand would have been a good decision in 2004, one year after he purchased the deteriorating retail brand. Today, given the monumental shift in online purchasing behavior that has changed all of retailing, Lampert’s move is akin to rearranging the deck chairs on the Titanic.
Now is not the time for incremental tweaks in the Sears formula. Instead of focusing on “finding value,” Lampert and his team in Chicago should look at the broadest possible scenario and ask themselves two questions:
1. “Who in the retail world is winning and losing...and why?”
2. “How can we change the rules of the entire game by really understanding today’s retail ecosystem?”
After such inquiry, they will arrive at two conclusions:
Amazon and Wal-Mart are winning the digital and analogue retail game, respectively. They offer superior selection, price and convenience. Their highly efficiencies merchandising systems are supported by state of the art technology.
Sears cannot win on those fronts, although it has invested admirably in online infrastructure, massive data mining systems and sophisticated credit card operations. They also are masters at using digital algorithms to cross –sell.
These are the very skills and assets that another type of local retailer — the small, family-run specialty store — doesn’t have. About 500,000 small retailers (art supplies outlets, fitness equipment stores, jeans stores, auto specialty shops, tobacco shops and occupational apparel retailers) are having a difficult time surviving because their ecommerce efforts are inefficient and their pricing is non-competitive. Their product selection is not as unique as it once was and their one strength — hands- on, customized service — is becoming ignored by today’s here-today-gone-tomorrow-smart-phone-based shopper.
The suggestion that follows would have once been unthinkable; however, when the resources, skills and overall scale of Sears are combined — one market at a time — with the passion and imagination of family-owned specialty retailers and boutique owners, something miraculous could happen.
Amazon and Wal-Mart could face a formidable, hybrid competitor with a local service-after-the-sale advantage.
The core strategy is for Sears to recreate itself — market by market — as an aggregator of specialty items that are sold by local retailers. Local retailers would work with Sears representatives to get their product inventories — in combination with a some of Sears’ products — up on a super-functional web site that acts like a local mall. Most of Sears stores would be sold as soon as possible (yes, there are complications with real estate and employee pensions, but they are manageable) as Sears would come to be known as the “big-daddy-rescuer” of local retailers.
Of course, there are challenges that would seem too messy for a wheeler-dealer like Eddie Lampert. The Sears workforce would have to be trained to approach and assist the beleaguered specialty retailers themselves. They would have to provide some technology at no charge that would enable the retailers to keep track of inventory SKUs. Store owners would require some training. Retailers in the new Sears ecosystem might have to switch over to a new credit card processing supplier.
The Sears merchandising reps would be deployed similarly to the local reps that are used by Constant Contact — only there would be many more of them. These “boots-on-the-ground” advisors would, over time, save many a small store from being shuttered.
The small store owners will turn their inventory much faster because Sears will by motivated; they will collect a commission on every item sold. Store owners will control the pricing of the items on the Sears local ecommerce platform.
Small retailers’ revenues will grow, profits will grow and they will be connected to a high tech site, complete with shopper metrics and QVC-style video.
Sears will benefit because their site’s product selection will rival Amazon and Wal-Mart. They will cleverly bundle their Lands End or Kenmore items with items normally sold at Ken’s Championship Catfish Poles just across town; through collaboration, both Ken and Sears will generate new revenue neither would have ever known.
Despite predictable convulsions, this cooperative arrangement is the only way for both Sears and America’s specialty retailers to survive. If the system is set up right, the consumer will support this newly defined local retail ecosystem.
Note: the potential of the cooperative relationship discussed in this essay is being confirmed by a recent announcement from Amazon. The online retailer just announced a new program, Amazon Source, that would enable local bookstore owners to resell its Kindle reading devices, then receive a commission on all e-books sold to that Kindle owner thereafter. The proposed relationship, above, between Sears and specialty retailers is broader and more “synergistic.”
Lynn Hinderaker is a speaker, marketing consultant and expert in change management. He spearheaded one of the most dramatic turnarounds in the history of fast food for Taco Bell in the late eighties, introducing the first Value Menu. His “local” video website is Wowbiztv.com. He can be reached at email@example.com.