Kmart Buys Sears; Will Dump Kmart
American Mind
Ed Lampert sees the future of retail. It includes Sears but not Kmart. That's the conclusion I've come to after thinking about the Sears-Kmart merger announced today.
Kmart ran smack-dab into the retail hurricane that is Wal-Mart and got blown away driving the company into bankruptcy. Lampert got the company out of its problems, not by boosting sales, but by closing stores. That effort has worked. Now, Lampert sees the Kmart brand as something of little value. They can't out Wal-Mart Sam Walton's creation. That was tried. Other than the Martha Stewart line, the store chain isn't known for style so it would be hard to battle Target on its turf. Just being the store with the Blue Light Special won't cut it.
Sears is in the position of being a hardware store and an appliance store and an apparel store in an age when customers think of Home Depot, Best Buy, and The Gap. Being all things to all people may work, but just not as shopping mall anchor stores where specialization is the word, and stores like Barnes & Noble become new anchors.
Sears Holdings gets Kmart's non-mall real estate plus Sears staid but reliable sensibility. More importantly the new company loses Kmart's bad reputation. There will be places where Kmart will survive, but expect most of the old Kmarts to become new Sears.
Don't think Kmart is doomed? The 50 stores Sears just bought from Kmart will still be turned into Sears. The old Sears CEO and CFO will hold the same titles in Neo-Sears. At least one "industry consultant" (whatever that means), George Whalin, agrees with me:
This is more a real estate deal than anything else. I would be very surprised if Kmart doesn't completely go away in the two to three years, or become something completely different.
Merging two stores loaded with great real estate and some proprietary brands won't be enough to produce a Wal-Mart or Target killer. Stephen Karlson poo-poos the merger as a mediocre combination of mediocre parts. The new Sears, now dubbed "Neo-Sears," will have to find some aspect of the shopping experience that neither Wal-Mart of Target satisfy and deliver on it in a cost effective way.
Wal-Mart wins on price, and Target wins on style. Neo-Sears should try to win on customer service. Neither of the two competitors offer much of it, but that doesn't stop customers from buying from them. Customers may be willing to pay a little more to get more than a greeting from an elderly person and fast check out. It will mean putting a customer service desk in the open instead of tucked away in a corner. It also means hiring and training employees to do more than find a product for the customer. They'll have to suggest complementary items. In essence Neo-Sears should have Marshall Fields' (or another high-end department store) service at value prices. Exclusive brands can get bodies into stores, but great customer service can additional incremental sales.
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