The Secret to Saving Sears
(This post originally appeared on Fox Business)
My dog had her anal glands expressed last week. And it got me thinking about Sears.
So why did I think about Sears (SHLD) while all of this was happening? I’ve been reading about the bad news happening in retail of late. And I’m hearing that Sears will have more bad news for the sector when it releases earnings on Thursday.
Sears Holdings Corp’s numbers are already pretty bad. The company’s stock price is hovering near a two-year low – it was once as high as $44 a share and now trades close to $12. Its sales, margins, operating and net income have precipitously declined in each of the past three years. Current liabilities remain dangerously close to current assets, which is not a good sign for liquidity. Stockholders’ equity is now negative.
None of this is surprising to even the average consumer. A company that was once the king of retail has been defeated by Walmart (WMT), Target (TGT) and Amazon (AMZN). Sears seems like a dated brand. It is not keeping pace with its online competition. It’s stores, which the company continues to close, appear tired and out of date. Management has been struggling to find a solution to stem the losses and save the chain before it inevitably sinks into bankruptcy. Can Sears be saved?
Yes, it can. In fact, it’s already happening.
That’s because earlier this month the company announced that it would be opening a test store that would be selling appliances only. It’s just a test. The results of this one store, regardless of how successful it is, will have a meaningless impact on Sears’ results. But it’s the right thing to do. And it’s a good lesson for all merchants, regardless of size, in this age of Amazon.
Sears is not exactly the first name that comes to mind when you’re thinking about the latest fashions. It isn’t the place I would go to buy jewelry for my wife. I don’t consider it an option for sporting equipment, bedding, toys or shoes. But appliances? Bingo. For decades, Sears has sold refrigerators, ovens, air conditioners, dishwashers and dryers. With all its problems and all its failures, the company has maintained a solid reputation in this one area.
Now ask yourself this question: where would you go for a new refrigerator? Or an air conditioner? Or a dishwasher? Will you buy these things online? Would you buy these items from Walmart or Target? No, you probably wouldn’t. You will probably find what I found when I recently looked for a new refrigerator: Your choices are limited. Sure there’s Best Buy, Lowes and Home Depot. And there are also independents and local chains that sell them too. None of these choices stand out.
The appliance business is a tough business. People don’t replace them very often. Sales cycles are longer than just selling clothes. Parts and supplies can be expensive. The costs sometimes prohibit shoppers from making spur-of-the-moment purchases. There are added costs for delivery, setup and installation. And there are the ongoing costs for maintenance, repairs and upkeep. But it’s the perfect business for Sears and the opportunity comes at the perfect time.
What opportunity is that? The Internet of Things. The appliance business is a business that has no clear, identifiable leader and yet it sells products that everyone needs. And something big is coming to this industry. Aren’t we all going to need a different level of service and support once our “connected” appliances start talking to each other and to others online? Won’t the tech start-ups who are now creating these smart devices need a retail giant to partner with on-the-ground? You think this will happen on its own and that everything will seamlessly work? Not if you own a computer you don’t. Appliances will be the new computers in just a few years. Who will be the leader in that industry? Who will be the expert in selling and servicing this new generation of computers? Who will be the link between the software, hardware, devices and the consumer? Who will I go to get it all setup so that I can truly benefit from all these connected devices?
And that’s why I was thinking about Sears while my dog’s anal glands were being expressed. Doggy Style is a small, local chain of pet stores. But they have something to teach this big retailer. They do much more than just sell biscuits and water bowls. They are staffed with knowledgeable pet lovers who give advice. They adopt and sell puppies and kittens. They offer grooming, pet sitting and boarding. And yes, they express anal glands which is something no one wants to do. Just like technology. Supporting tomorrow’s connected appliances could be to Sears what my dog’s anal glands are to Doggy Style. And that could be the secret to saving this once successful retailer.