The changing face of Sears

Once perhaps America’s most dominant retailer of paints, hand tools, appliances and automobile batteries — with an enviable market share in each, Sears today is scrambling to hold onto its dwindling market shares in each of those categories.

For more than 100 years, Sears has reigned as one of America’s most successful retailers, from its beginning as a mail order catalogue business and its evolution into some 800 large department-store units in enclosed shopping malls, plus 2,000 smaller mail order outlets in small cities throughout America. For many hardware stores and lumber dealers, it was a feared competitor. How times have changed!

Today Sears is struggling, not only in hardlines but in other aspects of its business as well.

Today the company is struggling, not only in hardlines but in other aspects of its business as well. Shopping malls, where it is concentrated, are suffering. Mall traffic is down all around America. Attempts to give it a stronger soft goods presence failed. Discounters keep chipping away at it on most lines, and home centres like Depot and Lowe’s assault its hardlines offerings.

Different challenges
The last two decades have been very tough times for the venerable retailer. It still owns one of the most respected American brand names, Kenmore, but has seen its appliance market share, once more than 45%, drop to 38.5%.

Lowe’s and, more recently, Home Depot and Menards, are carving out larger market shares while Sears’ share shrinks. Lowes’ share jumped from 10.9% to 14% and Depot, which doesn’t even have appliances in all 1,500 stores now owns 5.7%, up from 4.2% in the last year.

In tools, even though it added national brands to its well respected Craftsman name more than a decade ago, its tool share continues to shrink as Home Depot, Lowes and Menards grow at a fast pace.

Sears’ tool share continues to shrink as Home Depot, Lowes and Menards continues to grow at a fast pace.

The same problem affects its Weatherbeater paint line. Depot, with over 1,500 stores and Lowes with more than 850 units, are much more accessible to consumers with far more numerous locations. And Depot particularly is upgrading its paint department presentation with computerised kiosks enabling customers to test out colour decorating ideas, far larger colour chips and top name brands.

Only in outdoor power equipment does the company appear to be holding its own with its Craftsman products. But even here, Home Depot is aligning itself with John Deere, a powerful brand name to offset the Craftsman appeal.

Over the past two decades, it has tried numerous strategies. Recognising the threat of Home Depot’s fast growth after its first five years, the company opened a small Sears Paint & Hardware store as a stand-alone unit in 1983, thinking it could bring Craftsman and Weatherbeater closer to consumers with stores approximating the size of many independent retailers. It didn’t pan out, and it wasn’t until 1990 that it finally changed strategy to open a 20,000 sq. ft. store whose size gave adequate space to key categories such as power tools, power equipment and paint.

One contributor to its declining impact in American retailing was its decision in 1993 to abandon its catalogue stores when it closed 2,000 locations across small-town America. It substituted Sears “Authorized Retail Dealers”, but never attained the store numbers of its catalogue locations. It even added tools to these stores’ inventory.

It was back in 1989 that the company first admitted it needed to supplement its strong private tool brand, Craftsman, with some national brands, and added Makita, Ryobi, Skil and Black& Decker. Since then, many other respected national tool brands have been added, as well as strong brands in other categories. Sears today is no longer primarily a private brand marketer, but it has none of the dominance today of either Depot or Lowe’s in hardware or of Wal*Mart or Target in general lines.

Sears today is no longer primarily a private brand marketer, but it has none of the dominance today of either Depot or Lowe’s in hardware or of Wal*Mart or Target in general lines.

Seven years ago (1996) it made its most aggressive move to rebuild its fading hardlines image by buying Orchard Supply Hardware, at the time a highly successful 61-unit chain of large hardware stores in California. Even here, the company’s direction has zigged and zagged. It renamed some of its Midwestern Sears hardware stores Orchard Supply. When that did not prove successful, it changed them back to Sears. Another failed strategy.

Now it is testing a plan to incorporate major appliances in some of its hardware stores in order to bring these products closer to consumers. To gain the added space (about 5,000 sq. ft.), some other “typical” hardware-store categories are being downsized, such as electrical, plumbing and hardware itself.

This places the Sears hardware stores at a further disadvantage against home centres, which carry substantial broader inventories. What Sears might have gained as a “convenience” alternative to a big-box, it appears to be losing by narrowing its assortments.

Its most successful marketing strategy appears to have been expanding the tool and hardware departments in its 800+ mall stores and renaming them “Sears Tool Territory,” now featuring more than 72 additional national brands.

In the last few years, Sears continues to experiment, opening a 55,000 sq. ft. store in Pennsylvania, but no others. That store is the size of some of the Orchard stores on the west coast. Apparently sales did not meet expectations.

Overall, Sears hardware stores have had little impact on the industry and independent retailers do not consider them a major competitor. In fact, the company did close some 30 underperforming hardware stores several years ago, and observers think there may be even more closures in the future.

Even the roll-out of its heralded Great Indoors stores, fashion-oriented home décor big-boxes, has slowed because of flat sales. And the introduction of a lower-priced version of Great Indoors also is being postponed.

In a comprehensive analysis of Sears recently, US-based hardware magazine, Do It Yourself Retailing, did price-checks against other major competitors and found that Sears Hardware stores invariably were higher priced except on some very price-sensitive items. Overall, however, Sears always charged more for a typical assortment of basic products.

What’s ahead for Sears? Who knows? The company is reportedly ready to put its 75-unit Orchard Supply division up for sale, along with its National Tire & Battery chain, while it begins experimentation with Sears Grand, a sprawling one-story big-box similar to Wal*Mart, Target and Kmart units.

If the Orchard sale takes place, Sears will be left with less than 200 stand-alone hardware stores. And with consumers foregoing malls, Sears’ major problem is what to do about its 800+ mall locations.

Bob Vereen,
Hardware Journal’s US Correspondent