LEARNING FROM JCPENNEY AND SAVING SEARS

It’s no secret that retail is in a tailspin. The leaders of that tailspin are companies like Sears and JCPenney.

To illustrate my point, at the beginning of 2016, Sears Holdings operated 941 Kmart stores and 705 full-line Sears stores. By the end of the year, they had downsized to 735 Kmarts and 670 full-line Sears stores. In one year, they closed a total of 241 stores across two brands. JCPenney isn’t doing much better.

If I can reminisce for a moment, I’ll take you back to the days when the Sears catalogue was known as the “Consumer’s Bible.” The Sears catalogue was so famous and revered, it has been written about in American novels and was part of the fabric of American consumer history. JCPenney was another leader in the catalogue world, and notably one of the first companies to begin online selling through a Viewtron videotex service. They were basically Amazon before Amazon existed. Throughout their histories, these companies have been pioneers in the consumer retail industry, yet today, their futures appear to be very, very grim.

So, here’s where things started to go terribly wrong…

A few years ago, back in 2012 when JCPenney could see the writing on the wall but things weren’t terrible yet, they hired Ron Johnson. Ron is the man responsible for the creation and success of Apple retail stores. The Genius Bar within them? His idea too. Figuring no one would know the modern consumer marketplace better than him, JCPenney brought him in to come and shake things up…and shake things up, he did. Johnson comes up with a lofty new transformational vision, but it did not go well. In fact, Johnson’s execution was widely considered one of the most unsuccessful tenures in retail history. The exact things that make an Apple Store so successful, alienated the JCPenney customers and deterred them from coming in to shop. The modern customer-base was not looking for a well-designed, cool place to hang out. They were interested in highly-discounted items and a simple shopping experience. So while Johnson was trying to change JCPenney into Apple, it only pushed them further into the ditch. They weren’t chasing the sale or the value proposition, they were chasing the redefinition of a 100+ year old brand, and this proved to be a very costly mistake.

What I don’t understand even more is that Sears has been in a free-fall and hasn’t done anything dramatic at all! At least JCPenney gave it the old college try…

Now, I’m going to tell you how I’d fix the Sears mess. Not long ago, Sears was THE place for electronics and had the best catalogue business to ever exist. How they didn’t transfer their catalogue business online is beyond me. Beyond me. They had the infrastructure, they had the SKUs, they had everything they needed to succeed, but Amazon snuck up right behind them and stole the market away. Amazon started out in an entirely different business, but Sears offered up their share of the market through its failure to adapt, and Amazon was innovative enough to snatch it.

This is my direct advice to Eddie Lampert, CEO of Sears Holdings.

Get yourself on an airplane headed to Seattle, hop in a car and go straight to Amazon’s corporate HQ with the full intention of not leaving until you can make a deal. Collectively, you will open a store and go back into the catalogue business. Your storefront will be Amazon and you can use your own infrastructure. Start releasing the cool, online catalogues that made Sears a household name and use Amazon as your front. You don’t need all the brick and mortar operations that you currently have. Close half your stores and start focusing on the customers. You have lost your place in the retail industry, so the best you can do is to ride the success of the company who is currently dominating it.

For the record, last time I was at Sears I couldn’t find anyone to help me and when I did they didn’t know what was going on. This was not a one time occurrence. They don’t have enough quality employees in the stores to handle the customers that are coming through. Without the sufficient revenue to hire and maintain a qualified workforce, the shopping experience has continued to regress. However, if Sears closed half the stores and put the top-performing employees in the stores that remained, they’d be able to assist the customers properly, and not have shoppers leave with the feeling that they’d never like to return.

Sears Holdings Co. Stock

Now that you’ve made your deal with Jeff and Amazon, Mr. Lampert, you’re going to initiate a relentless effort to modernize your product offering. Go out and find some hip designers and make some deals with electronic companies like LG so that you have special product lines, only available in your stores. Get Kanye to design some jeans and create some Sears-only products that people want to come in and buy. I don’t understand the Kathy Ireland thing — it’s so 30 years ago. You’re better off having Kevin Durant design your kitchen wear rather than Martha Stewart. Get someone exciting like Kim Kardashian and let her make some pots and pans. She’s the model of a great housewife these days, whether we like it or not.

But more importantly, these celebrity’s products sell. Sales for Kevin Durant’s Nike Signature sneakers jumped 400% from $35 mil to $175 mil last year. Just imagine what his kitchenware would do! Nike sold $300 million dollars worth of Lebron James signature sneakers last year alone, and less than three hours after Kim Kardashian’s makeup kits went on sale, she announced that all 300,000 kits had sold out, bringing in an estimated $14.4 million.

And, don’t just roll over and blame it on the millennials, because I go over to the Target in DTLA and it’s packed.

To summarize…first, change how you’re doing business online because it’s the only thing that’s going to save you. If you can’t beat Amazon, join them. Second, go out and make some big acquisitions of designs from influential people that millennials care about and create products that people want. They say brands don’t matter but this could not be less true. They need brands and flock to products aligned with the names that dominate headlines, day in and day out. You need to get some of these celebrities that are selling lifestyle. Sears is selling lifestyle products, but can no longer sell the Sears lifestyle.Partnering with the best-fit lifestyle brands is a must.

It seems to me that Sears is locked into their old ideas and not leveraging the things they do have. If a business and culture shift is not imminent, they will soon join the ranks of Circuit City and Blockbuster as companies who lost their stronghold on an entire industry, and now cease to exist.

So, the question is, what are you, Mr. Lampert, going to do to save Sears before it’s too late?

For more on Sears, JCPenney and the booming + busting industries of the modern world, be sure to check out Episode 09 of Chris Collins Unleashed, available now on Apple PodcastsStitcherGoogle PlayYouTube or at chriscollinsunleashed.com

Think I’m onto something? Disagree entirely? Reach out to me on Twitter at @bulldogcollins. I’d love to know what you think.

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