You have probably heard that Sears and KMart are merging. Or more accurately, that KMart is buying Sears. This is all the more remarkable when you remember that 18 months ago, pundits were wondering if KMart would survive bankruptcy, and Sears was finalizing the purchase of catalog retailer Lands End. The merger will created the nation’s third biggest retailer (behind WalMart and Target, if you are curious). Although the company will be called Sears Holding Company, the retailers will still be run as two different brands. Wall Street is pleased.
Some pundits are skeptical that two struggling retailers can make one healthy company. They point out — and rightly so — that part of KMart’s journey to profitability involved selling off a bunch of stores, some of them to Sears! Others point out that KMart is run by a very smart man, who already owned 14% of Sears, who managed to get KMart from bankruptcy to profit.
In short, if anybody can make this thing work, it’s Eddie Lampbert.
Don’t think that this deal will mean you can buy Kenmore Appliances or Craftsman Tools at KMart; the KMart shopper is looking for $5 sets of screwdrivers, not $5 screwdrivers. Nor should you expect to see KMart brands at Sears. You don’t expect to see Marshall Field’s brands at Target, do you? Sure, there will be economies of scale for certain items, particularly in the IT department. And have no fear, Martha Stewart will get her cut. Instead of a cross-marketing frenzy, I think it is reasonable to expect a streamlined parallel strategy.
On the Sears side, the endless remodels should stop. Yet more paint and paper and “excuse our mess” signs don’t move product nobody wants. All the stores are pretty recently remodeled, and really should focus on merchandise. Another thing that costs money and doesn’t move merchandise is the Sears game of musical managers. Maybe if one team stayed in place long enough to understand their particular store, improvements would come about. Finally, stop undercutting themselves on Lands End products. There is no reason that I should pay a lower price and no shipping if the product I want happens to be in Sears.
On the KMart side…. well make people like me want to go into a KMart for some reason, any reason. The time may well have come for advertising. It made sense not to pay for a bunch of ads when they were emerging from bankruptcy, but now the company is profitable. You can’t sell things if you have no customers.
Although KMart has already addressed the issue of closing underperforming stores and “unlocking value” by selling unused property, the day will come when Sears stores will have to look carefully at its own underperforming stores. Sure, give management a chance to make things work, but some stores will just have to go. Maybe some of these would make better KMarts. Indeed, maybe a few KMarts will become Sears.
Of course these are just my ideas. Mr. Lampbert surely has plenty of ideas of his own.
Oh, and as a follow-up, Alan Greenspan is concerned about the Budget Deficit, the Trade Deficit, and the lows on the Dollar.