There’s on old Seinfeld episode in which Elaine hosts a baby shower for a woman she’s trying to impress; and when things go wrong the unimpressed woman says, “Elaine, who catered this…Sears?”
That “Sears” had become a one-word punch-line in a popular sitcom pretty much sums up the problem Sears Holdings has with efforts to rejuvenate its brand—especially under the Eddie Lampert regime.
Lampert, whose track record in finding value in public companies—notably AutoZone—is among the best ever, shmooshed K-Mart together with Sears to create a retailing giant whose customer base is either dying off or increasingly shopping elsewhere.
That’s not mere opinion: sales at the combined Sears and K-Mart stores declined nearly 4% last quarter. Happily for Sears’ shareholders, however, margins were up—illustrating the major theme of the Lampert-engineered business model, which is to sacrifice unprofitable sales (something retailers hate to do) for the sake of fatter margins and excess cash flows (something shareholders love).
Wall Street’s Finest have been slow to embrace the Lampert makeover, mainly because they suspect that Lampert is starving the Sears/K-Mart store base of necessary capital. Unlike, say, natural gas pipelines, retail brands require intensive care and feeding every year to maintain their cash flows, because a fickle shopper has many alternatives.
Nevertheless, Lampert’s strategy worked wonders at AutoZone, the ubiquitous auto supply store, and Lampert appears to see no reason it can’t work at Sears/K-Mart.
But there is good reason it may not work at Sears/K-Mart—mainly that, unlike Sears and K-Mart, AutoZone is a convenience-based supplier of mostly specialty parts selling to mechanics and car-guys who couldn’t care less about a crack in the floor tile or whether they could find the same product cheaper in another store a half hour away.
To paraphrase Jim Morrison, they want that timing belt and they want it now.
Blue jeans, laundry detergent, diapers and washing machines are a different story. So Sears/K-Mart runs the very real risk that traffic continues to decline store by store until the business loses its customers and its cash flow.
To quote the Lizard King, “When the music’s over, turn out the lights.”
Still, Sears is not doing nothing. A recent story in the New York Times touted the company’s online efforts to market to college students for the all-important back-to-school season.
To whit: Sears Holdings… has gone further than most other online retailers in appealing to college students this year by creating a Web site, SimplySearsCollege.com. Like other online executives, Lorna Sargent, director of e-commerce content for Sears Holdings, struggled to explain why retailers chose this year to pursue college students with such zeal. “Everyone just kind of realized there was this untapped market out there,” Ms. Sargent said. This sounds pretty good, as does the site description: Perhaps fittingly, the site is designed for visitors who might like to relax a bit, browse articles and interact with various features, rather than rushing through the purchase process. Visitors are greeted with background music ranging from retro rock to contemporary metal, and a screen that bristles with features like idea lists and articles and videos about surviving freshman year. Unfortunately, as with so many other recent attempts to recharge the Sears shopping experience (Lands’ End being one; Sears Essentials being another), this one has that Seinfeld feel to it. “Today’s specials” highlighted on the first page include a “3 Shelf Bookcase” for $49.99, a “Manchester City Convertible Sofa”—whatever that is—for $299.99, and a “Back 2 School TXL Mattress Pad”—whatever “TXL” means—for $12.99.
(Hint to Sears: not many college students are looking for bookcases these days.)
For the record, I am not deliberately picking the least desirable stuff to show how dull the site is. I have even less time to bother with this than a college student trying to fill his apartment with—as the site calls it—“The Gear.”
For comparison’s sake, Sears’ laundry selection for the college-bound contains 8 items, 5 of which are laundry hampers ranging in price from $20 to $50. I am not making that up.
I don’t know about you but my college experience did not involve a major emphasis on laundry hampers. Nor would I have spent fifty bucks for the “Supreme Laundry Sorter” offered by Sears, or even twenty bucks for the “Collapsible Hamper.”
For one thing, the “Supreme Laundry Sorter” would have occupied most of the available free space in our cramped room. For another, if you asked a nineteen year old male what he would do if he had fifty bucks, the first thing he would not say is, “I’d buy a Supreme Laundry Sorter.”
He would probably say, “I could play foosball at Smuggler’s Tavern for the rest of my life or as long as I don’t flunk out of school,” not that I spent much time playing “foosball” at “Smuggler’s Tavern” when I was nineteen. (I was actually twenty at the time.)
And in fact, given the space issues in our dorm room by which only one of us could be standing at a given time, plus the finance issues, my laundry solution was a cheap old cloth laundry bag I could stuff under the bunk bed that probably cost five bucks.
For comparison’s sake, I checked out Bed Bath and Beyond’s web site—to take a real growing retailer, not a cash-cow being milked for all it’s worth—which has a college tab with actual products that a nineteen year old might need, at great prices. Including, by the way, laundry bags for five bucks.
New York Times puff-pieces aside, SearsSimplyCollege or SimplySearsCollege or SearsSimplyNotHappening or whatever the heck it is appears to be a cobbled-together effort to market existing Sears merchandise on the cheap, and in fact the company spokeswoman admitted as much.
Ms. Sargent said SimplySearsCollege.com, which was introduced late last month … represents another first for the company, in that Sears Holdings has never before integrated products from Lands’ End, Kmart and Sears on one site. “Sears has generally approached back-to-school from a school-kid age demographic,” she said. “So this is a new demographic for us.” Any college students out there buying it?
Jeff Matthews I Am Not Making This Up
© 2006 Jeff Matthews
The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.