Going Beyond Value

Late last year, I wrote about value becoming tablestakes. The upshot was that consumers were about to be bombarded with promotions screaming value, putting retailers in most categories at a disadvantage relative to Walmart.

Some value retailers have been caught flat-footed, like Sears, whose Q4 2008 profits were down 55% from their 2007 levels and whose comps dropped 8% for the year. As Fortune reported late last month, “analysts are predicting profits will fall even further in 2009, and one even suggests Sears may disappear altogether.”

Meanwhile, Family Dollar has been busy adjusting its assortment and promotions strategy to better fit the times. CEO Howard Levine told attendees at a February Deutsche Bank Small and Mid Cap Conference that the 6,600-plus unit neighborhood discount chain is “working to increase relevancy to the customer by reinforcing more promotionally priced offerings and expanding the assortment of key consumables, such as food.”

What exactly have they been doing? The company added sales generating SKUs of food, health and beauty aids, and laundry and cleaners – all items that people buy regularly and frequently, so they come into the store more often. In addition, the company directly confronted the downturn in the home category by launching a Home Remodel event featuring inexpensive home décor ideas. And it took a page from Merchandise Optimization 101, promoting average ticket-increasing merchandise in in-store circulars and end-aisle displays. In another smart merchandising move, the company is using seasonal buys to freshen the selection.

The strategy appears to be working. According to a Dow Jones Newswire from March 5, Family Dollar’s second quarter comps store sales were up over 6%, and the company raised its earnings guidance ten cents to $0.61 a share. And the stock is up 60% vs. year ago levels.

From all appearances, Family Dollar seems to be getting back to retailing basics in ways that consumers, as well as shareholders, clearly approve of.

The Problem(s) with Sears

I’ve always liked Sears but have never bought anything there. I bought a lot from Lands’ End before it was acquired by Sears (when my kids were younger), but nothing since. It’s not that I actively avoid Sears. When we bought our house it had a Kenmore washer and dryer, and we looked there for appliances when we remodeled, but bought elsewhere.

What’s wrong with Sears?

According to Sandra Jones' story in Tuesday’s Chicago Tribune, “as Americans worry about their jobs, debt and homes, they are buying less of the goods Sears sells: appliances, tools, tires and clothing.” The economy is hurting all retail, and at least the first three categories are particularly affected. But I think there’s more than the economy that’s undermining Sears.

Sears has a super portfolio of brands in the hard and soft goods categories – Craftsman, Kenmore, Lands’ End. Not being familiar with the rest of their assortment, I went to the website.

Once on the site, I went to check out their Juniors department with my 16-year-old daughter in mind. The Juniors department makes it easy to shop by brand. Why didn’t I know they carried Levi’s? Because of the strength of Craftsman and Kenmore, I think of Sears as essentially or at least primarily carrying its own brands in all departments. Years go, Mervyn’s tagline was “We’ve got the brands.” I guess that made me think that other moderately priced stores (like Sears) didn’t.

Problem #1: People don't know Sears carries major brands.

The top of the Juniors landing page features 3 ads promoting different sales. Below that is the “Shop These Popular Items” section featuring…socks. Not just socks, but a package of white tube socks, an Adidas 3-pack of white below-the-ankle sports socks, and 2 different SKUS of Support Therapy socks. Support Hose for Juniors! What are they thinking? Even if these items are good sellers to Juniors (which seems hard to believe) they deposition the rest of the assortment as seriously not on trend, and reinforces my image of Sears as frumpy.

Problem #2: Sears' (web) merchandising needs help.

Realizing that I might have found a replacement for the soon-to-be dearly departed Mervyn's where I buy my teenage son’s Levi’s (he wears 539’s), I clicked on Young Men’s next. No easy search by brand here. In my experience, guys are as brand conscious as girls, if not more so. They shop by brand, and so do the women who shop for them, but the Sears site seems not to acknowledge this.Once I found the Levi’s, I saw a very limited assortment and no 539’s. When I entered “Levi’s” in the search bar, I came to a Levi’s branded landing page that allowed me to select by customer type, and then by type of clothing – this worked great. But why not have a search by brand option or a Levi’s tab or link instead of relying on customers to use the search bar?

Problem #3: Sears doesn't understand how its customers shop (or at least doesn't show it does).

Beyond the web experience, I wonder if the assortment is just too broad to be represented by a single brand. I do find the juxtaposition of flat screen TVs and bicycles with wine, laundry soap, just-released hardback books and specially promoted few apparel items all under one roof at Costco to be like a treasure hunt. Power tools, washing machines and tires just don’t do it for me.

I’ve always suspected that Kenmore and Craftsman would do better with more distance from the Sears brand, and vice versa. It’s great they have their own websites, which don’t even mention Sears. Do they really belong on the Sears homepage? In the Sears circulars? Maybe the quickest way to make Sears relevant is to cut the chord and make the softer side of Sears more credible.

The Uber Problem? Sears' hardgoods brands overshadow the rest of the Sears offering and customer experience.

Meanwhile, I worry that the story Danielle Novy, reporter for BNET wrote recently may be right – Sears may be on thin ice…that's about to crack, and it won't be due to global warming!