Sears Canada 2.0: The re-engineering begins
A broad slate of initiatives unveiled by Sears Canada are intended to transition the company from a business stabilization phase in 2015 to a re-engineering phase designed to restore growth.
Sears Canada operates a network of 159 corporate stores, 125 Hometown stores, more than 1,200 catalog and online merchandise pick-up locations, 84 Sears Travel offices and a nationwide repair and service network. Revenues from the enterprise declined 8.7% to $887.6 million (Canadian dollars) due to some store closures and a 1.6% decline in same store sales, much better than the 9.1% comp decline in the fourth quarter the prior year. The company reported an operating loss adjusted to exclude non-recurring gains and expenses of $1.2 million compared to a prior year loss of $28.8 million.
Full year sales of $3.145 billion reflected a comp decline of 2.3%, a less severe drop than the prior year decrease of 8.3%.
During 2015, Sears Canada said it focused on the three key business stabilization initiatives of increasing revenue, operating profitably and maintaining a strong balance sheet. For example, Sears store in Canada are rolling out a concept called “shop-in-shops,” essentially branded departments within the store. During the fourth quarter, 51 additional shop-in-shops were installed, bringing the total shop-in-shops completed in 2015 to 191 shops from national brands, plus another 25 shop-in-shops supporting Sears Canada's private brands.
The merchandising effort is yielding results with the top performing brands boosting sales per square foot as much as 36% with a 19% improvement in gross margins and 92% better inventory turns, when compared to the overall merchandise category averages across the company.
In the media planning and marketing area, Sear Canada said it employed a more data driven approach during the holidays and given its success the approach will be expanded this year.
The retailer also began a new in-store merchandising initiative called "Pinball," which focuses on setting stronger merchandise presentation standards. Pinball was implemented in selected areas of women's apparel in a handful of test stores and drove an increase in excess of 10% compared to a control group of stores.
During 2016, Sears Canada said plans to undertake a complete re-engineering of its business. Among other potential areas, the re-engineering will include:
• Integration of the more data-driven media planning and marketing strategies to the full-year marketing programs.
• Restructured assortment architecture with more focus on the integrity of Sears Canada's price to value design, and simplified choices.
• Shift in the balance of sale in a large group of stores to be more relevant to a broader segment of the Canadian population, with a subset of these stores iterating forward to pilot a Sears Canada 2.0 concept that will highlight the new assortment architecture as well as innovative real estate development ideas
• Execution of a new store operations playbook focused on the execution of operating tactics to drive four key performance indicators of sales per square foot, margins, labor costs, and inventory turns.
• Conversion programs to drive Home Store customers to full-line stores, and catalog customers online.
• Re-engineering of Sears Canada's catalog to include a focus on key items, upgraded paper, modernized photography, and layouts that will follow merchandise presentation standards similar to "Pinball".
• The enabling of financing capabilities for Sears Canada customers purchasing large ticket items, through a new agreement with easyfinancial Services Inc.
SPECS Exclusive: A new day for physical stores
Photo: Amazon Dash
If you want to know how to design a modern store experience, look to Amazon.com for inspiration.
This was the somewhat counter-intuitive, but highly relevant underlying message of the presentation “Amazon Can’t Do That” at Chain Store Age’s SPECS 2016 conference in Dallas, March 13 -15 at the Hilton Anatole in Dallas. Presenter Lee Peterson, executive VP of brand, strategy and design of WD Partners, explained how e-commerce retailers such as Amazon have fundamentally changed consumer expectations for the store.
“Physical stores as we knew them are over,” declared Peterson. “The days of stack it high, let it fly are over. It’s not retail – it’s customer experience.”
As a result of the ubiquity of e-commerce, Peterson said the burden of fulfillment has shifted from consumer to retailer.
“In the old model, the customer would figure out they were out of things, get in the car, go to the store, find things, and put them in a big shopping cart,” said Peterson. “Nobody helped them and the checkout clerk didn’t look at them. The consumer did all the work.”
Now, however, customers no longer have to visit a physical store to get the products they need.
“We have stores in our pockets,” said Peterson. “Amazon gets it. Amazon Dash will tell you when you run out of something and ship it to your home. If you ask Amazon Echo where to find the best price on an item in a local store, it will show you where to get a better discount at a place called Amazon.”
Peterson credited Amazon for its “save, set and forget” subscription model of online shopping.
“Amazon is branding your home,” said Peterson.
To illustrate the changing shopping landscape, Peterson shared some WD Partners statistics. Physical shopper visits have fallen at least 5% per month for the past 30 months. The number of stores a consumer visits in their average twice-a-week shopping trip fell from 4.5 in 2007 to three in 2014. Yet thanks to e-commerce, overall retail sales have risen every month since January 2014.
Fortunately, all hope is not lost for brick-and-mortar stores. Peterson said that physical stores can essentially serve as fulfillment centers for e-commerce. Amazon itself plans to open 100 physical pickup locations for grocery orders, according to Peterson.
“We asked consumers what technology they want to see in stores,” said Peterson. “Eighty-six percent of 2,500 people across the U.S. ranked buy online pickup in store as a top technology.”
Leading reasons consumers gave for favoring buy online pickup in store included no delivery fee, convenience, speed of fulfillment, and the avoidance of having to enter the store if curbside pickup.
“Technology should enhance the customer experience, not replace it,” said Peterson. “Customers don’t have the patience to wait for a delivery and also don’t want to go in the store.”
While buy online pick up in store will build sales volume, Peterson cautioned it will not increase basket size. He also said retailers need to realize customers do not want to have to enter the store when they pick up online orders.
“You need to be creative,” said Peterson. “Offer features like pickup lockers.”
Peterson said WD Partners data also shows that the younger a consumer is, the more receptive they are to buy online pickup in store offerings. Sixty-five percent of millennial consumers and 57% of overall consumers are receptive to drive-through pickup, while 59% of millennials and 48% of overall consumers are interested in a single pickup point for multiple retailer orders.
Similar differences apply to millennial and overall consumer favorability toward front-of-store pickup (48% and 44%), parking lot pickup (39% and 29%), and even the unpopular back-of-store pickup (32% and 25%).
Peterson also said retailers need to offer an entertaining and engaging in-store experience that goes beyond simply offering products for sale. He quoted Staples CEO Ron Sargent on the parameters of success for a modern store.
“Stores have to earn the right to stay open,” said Peterson.
Report: Baltimore CVS reconnects to local community
The CVS/pharmacy destroyed by fire during riots last year in Baltimore has re-opened earlier this month, the Association of Health Care Journalists reported Friday. The initial closure of the CVS/pharmacy highlighted the important role pharmacies play across inner-city communities. "During last year's riots, 13 pharmacies closed, leaving city health officials scrambling for alternate ways to get their medicines to residents, especially older patients and those with chronic conditions," the AHCJ reported. (Association of Health Care Journalists)