Sears, in my opinion, is in trouble. Yes, that’s right. I’m talking about the major retailer that’s been part of the American business landscape for many decades. And the reason I think they’re in trouble is that I don’t believe that any company, no matter how large it is, can survive and flourish as a 25-percenter, and be profitable for their parent company, which, in this case, is K-Mart Corporation. Let me explain.
We recently decided to replace a gas range in a rental, and, like any savvy consumer does today, we did some research on line. What we found was a suitable item at Sears, and, having had experience with purchasing appliances from them in the past for rental units, we clicked, and it was done. The next step was to go to the store to pick it up. On the way there, we decided we wanted clarification on the model we chose, so we decided to visit the appliance department just to make sure. When we showed up there, we were greeted by a salesperson, and I explained what we wanted to do and showed him the order information we had printed.
And, the first words out of his mouth once he understood what we were doing there were, “Well, we work on commission here.”
I was stunned. Did I hear that right? Did he really say that? Did I actually just walk into a store as a customer and wind up being bombarded by rhetoric that I don’t need (and should never, under any circumstances, hear about) from an employee of that store? Yes, that’s exactly what he said, but I recovered momentarily, and repled, “Yeah, I know that, but I just want get a look at the range we bought, just to make sure it’s the one we want.”
You see, over the last couple of years, we’ve purchased appliances for eight different remodel/rental projects, and the gas range we had purchased in the past for most of them was a certain model that was not bottom-of-the-line. (In one case, it was way up the line, rather than just the middle.) The bottom-of-the-line units are just not what we want. We prefer heavier grates, sealed burners, etc…and, since this particular purchase was a different price than we experienced in the past, we just wanted to clarify that we were’t going to wind up with something we didn’t want. As it turns out, the gas range line had been expanded to two “middle” models, and we didn’t know that.
Anyway, getting back to our far-less-than-professional, lousy-at-customer-service salesperson… Since my reaction was quite obvious, he did make a lame attempt at recovery from his incredibly horrible comment, and after a brief discussion, he made a hasty exit. Since there were no other customers in the area, I have to wonder just where he felt the need to disappear to, but that’s another story.
Enter salesperson number two….
The next thing that happened was that we noticed another model of gas range. It was one that we had purchased before, and, when we looked closer at it, we realized that there was no price listed on it. By this time, a second salesperson appeared, so we asked him about this particular range because we considered getting it instead. We explained that, adding that we had made an on-line purchase.
“You would have to cancel that on your own,” he said immediately with a brusque tone. “We don’t have anything at all to do with that here.”
I replied that we could handle that without a problem, and asked about the price of this particular model.
“It’s 20-percent off,” he said.
Really? Twenty-percent off of what? I showed him the blank tag and explained that there was no number to calculate 20-percent off from. So, he did a look-up and found a number, which, as it turned out was about $200 more than the model we had purchased on-line. That being the case, we decided to stay with what we had, and after telling him that, he launched into a brief tirade that made it clear that he considered our decision not to upgrade as quite stupid.
Enter salesman number three, in the bedding department….
As we were leaving the appliance department, we passed by the bedding department. Since we also had a need for a single bed for a grandson emerging who would soon be graduating from a crib, we were interested in buying a single bed and box springs. The young salesman that greeted us there was personable and knowledgeable. There was a Sealy Posturepedic set that looked good, priced at $269.00, and we were easily convinced that it would do. We asked if there was a set in stock so we could just take it with us after making the purchase.
Well, no, that’s not how it works with mattresses at Sears. The young fellow explained that Sears doesn’t stock the mattresses, but instead they are shipped directly to the customer. Oh, OK, even better…let’s arrange for a delivery and get this show on the road….except, as it turns out, since we weren’t purchasing a mattress set priced over $500, delivery was an additional $70.
When we expressed the fact that we didn’t think that was quite fair (after all, we didn’t need a $400 mattress set, we wanted a single that was, just as a matter of fact, priced less than that), he said, “Would you like me to check with my manager and find out if we can deliver it free?”
Now, that’s the spirit. A customer service focused sales professional who is willing to go the extra mile. We told him that would be fine, and he got on the phone system loudspeaker and called for a manager. In a few minutes a lady appeared about 30 feet away, and the salesman asked, “Can we honor a free delivery on this mattress set here?”, while indicating the single set we wanted.
“No.” That was it. One terse word from across the expanse of the bedding department, and she abruptly turned and hurried off, disappearing as fast as she had appeared.
Our young salesman was disappointed. He apologized, and we bid him goodbye, picked up our gas range, and left.
And, yes, Sears did still wind up selling a gas range in this case….no sense in being stupid in the middle of accomplishing an objective…. but we have also used Lowes, Home Depot, Sam’s Club and Costco in the recent past for appliance purchases, and in the future, those are the places we’ll look to for our refrigerators, ranges, and laundry equipment. Sure, I’m only one customer, and I’m virtually unnoticable when it comes to Sears’ bottom line because we didn’t (and won’t) purchase a bed or any more appliances there, but my point is that if the only way a business can turn over merchandise is via a lower price than anybody else…..which is what it comes to when any organization isn’t focused on customer service like they should be…..then eventually, they”ll be in trouble.
So, there we have it. Of the four people we dealt with regarding customer service, one of them (25%) was professional, helpful, and wanted to do a good job. The other three (75%), well, obviously not so much. Which brings me to my answer to the question in the title, which is no, I don’t believe that any company can survive as a 25-percenter, even Sears.
Learn from yesterday….Live for today….Look forward to tomorrow.
NEWS UPDATE: DECEMBER 27th, 2011….
Sears, Kmart: Beginning of the end?
As a slide in sales continues, Sears Holdings announces the pending closures of more than 100 stores. And a year from now, the outlook might be just as grim.
While many retailers remain on pins and needles about how their holiday receipts will stack up, there’s no mystery at Sears Holdings (SHLD -25.63%). The company that operates Sears and Kmart department stores has been losing customers and bleeding red ink forever, and the past few months were no exception.
So Sears wasted no time in announcing a huge cutback on its store count. Between 100 and 120 Sears and Kmart stores will be closed. The company says $140 million to $170 million will be made as inventory is shuffled out at fire-sale prices.
But more disturbing than the store closures is the context. Sears is losing money, and no profits are expected anytime soon. It makes you wonder if this really is just the beginning of the end for the once-iconic department store.
How bad is it? Well, consumers should know firsthand just by visiting their local Kmart or Sears locations. Fallen flagship brands like Craftsman tools and Kenmore appliances used to be high-quality names for many Americans but have little currency with shoppers today.
Even more damning is the tarnish on the stores themselves. Aging stores ideally could use a fresh design — and at the least need a good cleaning and some repairs.
Hedge fund manager Edward Lampert and his cronies merged Sears with Kmart in 2005. Lampert began focusing on online boondoggles such as an online marketplace in the vein of eBay (EBAY +0.34%) rather than acknowledging the power of its legacy brands at physical stores. You can’t fault the logic, since online retail is crushing brick-and-mortar sales. But the result is online efforts have failed to bear fruit yet, and existing stores present customers with a rather disappointing experience.
It’s a lose-lose situation that has cost Sears dearly.
That’s just from a taste perspective, however. The harshest reality for the company is the poor sales numbers that have plagued Sears and Kmart for some time. Sears Holdings has lost money in five of the past six quarters. Even worse: November marked a stunning 19 straight quarters of sales declines.
The icing on the cake is that Wall Street estimates for the company project consecutive quarterly losses in each period through all of fiscal 2013. That means if you’re being charitable, Sears will continue to lose money for the next year and a half.
But let’s be honest: The reality is that forecasters aren’t looking any further than 2013, because that’s too far down the road. There’s a very good chance that a year from now the outlook might be just as grim.
Sears has yet to determine which stores will be closed or how many jobs will be lost. Management is casting the store closures as an unfortunate event prompted by a bad economy, and that is indeed partly true. Many big retailers like Wal-Mart (WMT -0.42%) have struggled to find their way as consumers have cut back and are more savvy about getting the best deals. It might sound counterintuitive that the king of low-priced retail would be hurting, but Wal-Mart has suffered for a few years now as smaller discounters like Dollar General (DG +0.36%) connect with customers and sometimes even undercut pricing at the big guys.
It is indeed challenging for retailers. But Sears is in a class of its own when it comes to losing customers and losing money (it’s worth noting that some retailers are booming).
Sales at the company have dropped in every year since Lampert took over in 2005. No wonder shares are off almost 50% year to date in 2011 and almost 70% from the 2010 peak.
To be clear, bankruptcy might not be an immediate concern. Sears doesn’t have the crippling debt load that drives companies directly into bankruptcy. But it’s certainly on its way. Unless Sears can streamline its operations and find a good way to use funds from this inventory liquidation, it’s likely we will see only more store closures in the future and a race to the bottom for this once-storied retail brand.
Not everyone is bearish on Sears. Jonathan Berr thinks a new focus on licensing deals — such as a Sears partnership with the Kardashians — can help the company.
But it’s going to take more than star power to right this sinking ship.
Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace