Note to Sears: Nobody Needs More Stuff

Sears Holdings (SHLD) announces earnings today; turns out their second-quarter loss is $94 million, or 79 cents a share, with revenue falling to $10.55 billion from $11.76 billion.

I could have guessed it going into their Westfield Sarasota Square store last weekend. On our visit, the clerks were friendly. The store maintenance and upkeep was good. The promotional banners were sharp, and well-designed. It felt upbeat. New brands like Cannon (CAJ) were livening up the approach, and the revivals of old Sears private brands like Toughskins were well displayed.

But something was missing. Store shelves, by design, are slightly empty. Merchandise is thin. The perfume and cologne section had probably one or two of each brand of cologne; the space behind the first row was empty. It had the feel of a bit of a facade, and that made me pause. School is only two weeks away; eeek. It should have been busier than that on a Saturday.

It got me thinking; what if buying patterns have changed permanently? Not only do Americans not want so much stuff, but even if we did, we won't be able to afford it. That means retailers like Sears have to revisit how they survived that certain period in the 1930s. Certainly clever advertising is important, and store merchandising is critical, but to survive, Sears has to adapt.

We don't need that much more stuff.

Frankly, Sears, and the rest of American retail, has too much square footage for demand. We aren't buying as much. The party is over, and we have plenty of leftovers, for a good long time. While the economy has to recover, spending patterns are shifting.

Sears is going to have to reinvent itself. Yet again. Just as it has done dozens of times before.

What are options?

1. Franchised departments: At the Sarasota store, there is a leased garden shop that took over the outdoor garden store. As curious as I am about retail, I have not gone in. It needs some oomph. Perhaps Sears could develop a live garden and florist brand, and sell a franchise in each store. Sears gets franchise fees and a percentage; the local struggling florist gets a place to call home with a brand and foot traffic. There could be more franchised departments inside stores. This could add to the profits, merchandise mix and excitement of a Sears store, while not adding to overhead. Remember: Sears has excellent experience with its rural catalog operators; its stores help to expand the Sears brand while bringing in incremental revenue.
2. A Kenmore School? Etsy? The other week, my wife saw a quilt she liked in a catalog from Pottery Barn. Not wanting to spend on it, she pulled out her Sears Kenmore sewing machine, drove over to JoAnn Fabrics (NYSE: JAS), and got started. Here's the problem for Sears; they sold her a machine (good) but at a very modest, low-margin price. They then didn't sell her anything else. What if Sears had classes at the store, hosting sewing groups, and sold materials, etc. This also goes to other departments; hardware could do workshops on woodworking and garden shops might host the Extension Agent. They do this sort of thing intermittently; what if they rolled it out as an official brand, in partnership with or by purchasing Etsy, that hip crafts-selling website. The goal? Sears as the hub of doing not just buying.
3. Where's Ted Williams? The Ted Williams sporting goods brand was fantastic; over the years Sears lost their market in small boating and sports. They need to get back to this market; in a recession, people have time. In Sarasota, people are fishing. The kids are organizing soccer games on the beach. They need to re-establish this connection to sports. Perhaps the Land's End brand could be extended to boating? Or the Sears Yachtsman brand revived? And can other retail chains be persuaded to open boutiques in Sears on a rent/percentage basis?
4. Education: Land's End has an ace-in-the-hole. It's school uniforms. They have relationships with thousands of American schools to sell branded merchandise for uniforms. They need to take this to the next level, and become de-facto school stores. The schools get a small cut, and Land's End gets the traffic.
5. Grocery: Is a leased food concession focused on value-priced groceries a possibility? Can Sears do like the U.K.'s Marks & Spencer and sell groceries? I am tired of the marked up food courts at malls. And mall workers are feeling the squeeze. These days, the American consumer is doing cinnamon toast at home, not $2.50 Cinnabon.
6. Mall customers: If your actual customers are down, what do the workers in the malls need? Not only food (see #5) but other services like banks.
7. Scouting and other non-profits. At one time, Sears was the place where you bought Boy Scout uniforms. As scouting declined, it became less of a great thing. What are the other associations that Sears needs to rekindle to build regular traffic?
8. Home renovations: Sears lends its brand name to all sorts of things; cabinet refacing? Ick. But they have a crack staff of repair trucks. What other renovations could they brand? Sears was one-time in the home business; you could ship a whole Sears house and have it assembled. Are there variations of this today? Noted architect Andres Duany of Duany Plater Zyberk has just unveiled his inexpensive 770-square-foot Katrina Cottage, basically a really nice looking Southern shotgun shack. Partner with him, not Ty Pennington; he's the Martha Stewart of home and neighborhoods. For the price of a Social Security check, Americans could buy one on credit to put in-laws in the backyard.

Comments

[dixie:]

Wake-up and smell the coffee, folks.
The day of the big home and oversized vehicle will be but a memory.
People have come to realize there is nothing to be gained with a big house (and big mortgage with high taxes) to warehouse "stuff."

Ravenous materialism is coming to a fitting end.

Aug 20 09:56 AM

[Ted Hurlbut:]

Retailers in every discretionary tier and sector are facing the same challenge. Discretionary sales have nose-dived and there's good evidence that those sales aren't coming back anytime soon. Stores are left with half-empty racks and shelves and square footage that's turned into zombie space. Apparel, in particular, appears to be in trouble. Shopping fashion apparel today is to witness what looks like the aftermath of a bubble bursting. I've written more about these issues here
and here.
.

Aug 20 10:17 AM

[Ted Hurlbut:]

My links didn't post, unfortunately. You can read more about these issues on my blog, Retail Perspectives, at www.hurlbutassociates/.... The two posts I tried to reference above are "Zombie Stores and Zombie Space" and "Has A Fashion Apparel Bubble Burst".

Aug 20 10:21 AM

[Irina:]

Brilliant ideas for Sears. I especially like the sewing machine and related courses. And of course, the smaller homes. Andres Duany is a client of mine and he partnered with Marianne Cusato to do the cottages. The plans are being sold through Lowe's. They have a new house called the New Economy Home -- more can be seen at neweconomyhome.com

Aug 20 11:10 AM

[notsosmart:]

almost everyone has too much stuff.how much stuff do you need? i havent been to a mall in over a year.i buy very little on line(pool supplies that are used up).except for everyday needs as auto service,drugs & food,how long could you go without "shopping"?a while i think.my friends have everything & for gifts we give restaurant certificates or a good wine for those that appreciate it. my family has instructions-no stuff for me @ holiday or birthday time.

Aug 20 11:21 AM

[TeresaE:]

Your "blueprint" for Sears could be blown out across multiple retailers, but really, Sears (Kmart too) is yet one more of the losses that the eradication of the middle class is bringing to our landscape.

I find it interesting that clothing sales have dropped in light of the (stealth & unreported) increases in their base prices.

Yes, people are getting great deals if they look, but the scary thing is the year over year increase in retail prices in the middle of a downturn.

Reason? Simple really. China/Asia OWNS us in clothing. Quick name FIVE brands that produce clothes that the common buys in America. Just FIVE with factories here.

Even the last holdouts like Levi's and Carhartt have given up the ghost and opened foreign factories.

Everything that China has the lock on, such as OTC drugs & clothes is going up in price and down in value. No one is noticing.

As goes our jobs and factories, so goes our retailers and country.

Aug 20 01:53 PM