On paper, the merger between Kmart and Sears looked almost fool-proof. Investors were confident that hedge fund manager Eddie Lampert had the midas touch, and that Sears’ real estate holdings were worth more than $150 on their own. Sears’ well-regarded brands would be paired with Kmart’s convenient locations—and everyone would make tons of money.
Now it’s looking more and more like both Sears and Kmart are doomed. Customers are “staying away from Sears stores in droves,” says the New York Times. The stores themselves, rather than serving as a marriage between great brands and good prices, are (to be perfectly frank), ugly overpriced sh*tholes.
From the NYT:
The Sears Essentials strategy, now called Sears Grand, offers a case in point. This was a plan by Mr. Lampert to compete with the new breed of smaller strip shopping centers, anchored by stores like Best Buy, Home Depot and Target. Sears stores, found mostly in enclosed malls, were losing prized customers to the smaller centers. But by converting Kmart stores, which were near the smaller centers, into Sears Essentials, the company hoped to lure shoppers back to buy Kenmore washers, Craftsman tools and Diehard car batteries.
“I have always believed that Kmart customers had the inclination to buy more valuable products at Kmart if presented with the right value offerings,” Mr. Lampert wrote in a letter to shareholders in late 2005.
But Sears Essentials flopped. It was not because Kmart shoppers rejected Sears products, but because the experiment seemed to consist only of tossing Kenmore stoves and Craftsman hammers into an old Kmart store, rather than creating a vibrant new shopping experience.
The former Kmart in Parsippany, N.J., is typical. Three years ago, it was converted into a Sears Essentials store. By all accounts, the store could have been a success; it sits in a bustling suburban shopping center, surrounded by popular retailers like a ShopRite grocery store and a Bed Bath and Beyond.
But beyond introducing new brands, Sears invested little money in the store. In November, a visitor found mismatched floor tiles in the lobby, Reagan-era beige shelves in the food aisles and a ragged brown carpet in the clothing department.
Near a customer service desk, a broken pipe dripped water from the ceiling into a garbage pail. Workers said the pail, intended as a quick fix, had been in place for two weeks while they awaited repairs. They also said business in the store was terrible.
Burt Flickinger, a longtime retail consultant, said: “Eddie has cut costs and raised prices for two years. But shoppers are not stupid. They figure it out and shop someplace else.”
A Sears spokesman disputed that the stores were down at the heels but acknowledged that the company must work to “improve the customer experience.” He said the company has improved the profitability of the Sears Grand stores and still considers the original concept valid.
The article goes on to speculate what Lampert’s exit strategy might be, considering that most of the value of Sears is in its real estate… and perhaps you’ve heard that the real estate market isn’t exactly hot right now.
The NYT doesn’t mention other causes for concern besides slumping sales. For example, Sears’ recent privacy dust-ups suggest that they’re not especially concerned with protecting their customer’s personal information—a mistake that can come with a costly lesson. Just ask TJX. And then there’s the repair devision, about which Consumerist receives endless complaints and no resolutions.
As one analyst mentioned in the Times article put it: “We just can’t avoid the cliché ‘rearranging the deck chairs on the Titanic’ when considering the proposed new operating structure for Sears.”
Saving Sears Doesn’t Look Easy Anymore [NYT] (Thanks, Craig!)
(Photo:Allan Ferguson)
(Photo:Getty)
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it’s a shame, but we won’t shop at sears now…it seems like k-mart dragged sears down to their level instead of the other way around
This is yet another shining example of trying to push shareholder value and profit over customers.
To quote the immortal Kosh Naranek: “They are alone. They are a dying race. We should let them pass”.
My hometown Sears didn’t change much. It’s overpriced and understaffed as always. They offer no incentive to shop there. 10% off of merchandise that’s 20% overpriced is no bargain. Then to have something shipped to the store from their online site has an outrageous price tag. Horrible employee attitude.As for K-Mart the only difference is better tools. Same old K-Mart problems….nothing is priced, on the merchandise or shelves. No selection. Poor stock. Insane merchandising and only one checkout line. Maybe 2 at Christmas.
I went to the Sears in our mall maybe half a year ago, and I was appalled. It looked like a Goodwill going out of business. The place was disgusting. I was desperate for some cheap shirts for work though and bought a couple – one of them ended up being worthless within the month. Never shopping there again.
The Sears by me is actually not that bad surprisingly. They re-did it maybe 5 years ago, so it still seems pretty nice. The KMart nearby is another story. It also reminds me of a goodwill going out of business, except everything isn’t a good deal.
My local mall has both a KMart and a Sears as it’s anchor stores. It’s really depressing. Also, did you mean to say the Sears locations are worth $150 million, or just $150? The second one sounds about right.
Death of the old guard – first Montgomery Ward, now (or soon to be Sears) is JCPenny next? (haven’t been in one in years – have no idea whether it’s a good shopping experience or not.) One semi local store I’m amazed is still in business is Mervyn’s – still can’t figure out how they stay in business.
What the Sears/K-Mart brain trust needs to do is a hostile takeover of Best Buy. How screwed up would that make all 3!!!
It used to be such a good place. “Satisfaction guaranteed or your money back” was written all over everything and they meant it. I was once talking with a tool salesman about a Craftsman table saw that didn’t cut quite square and he arranged for a replacement without a hitch.
The past few years service has been so bad there’s not much incentive to even want to go back.
Thought I’d miss the old reliable Craftsman tools, but then they aren’t what they used to be either.
Was good when it was good….
Seems like the only time I go to Sears now is when I am entering a mall. Their portion of the parking lot is always empty.
K-Mart and Sears both have that “about to go out of business” feel. Especially K-Mart where I often see empty shelving and mis-placed merchandise (something you never see at a Wal-Mart.
It’s too bad. We were a “Sears Family” when I was growing up. There was never any question of where we were going to buy our TV’s, washing machines, car batteries, bicycles, school clothes etc. My first computer and the first tv I ever bought myself were from Sears. We even had our family photos taken there.
I’m not sure why or when I stopped going.
I think they counted on a synergy effect. And they got it. It just wasn’t the synergy effect that they were looking for. It was a synergy of LOSE and FAIL.
Who would have thought that that two crappy things put together would equal one crappy thing, and not a good thing?
They shut down the one large busy and semi decent Kmart in our city. Then they left the two small ones in the bad parts of town and let them rot. I was in one last month and it did have the feeling of a Goodwill store going out of business. The place was in serious disrepair.
I have ventured into Sears twice in the last year. Yes it is depressing and ours still had the same store decor it had in the 80′s. I looked at their in store Land’s End display. They had a poor quality polar fleece pull over for $75. I could have gotten the same quality level at Target for $15. I could have gotten a top quality one at Eddie Bauer for less than $50.
The last time I was at Sears I bought a pack of wrenches that were really overpriced but I needed to get them and get back to fixing our car. I got more hassle about personal information and various upselling of credit cards and crap at Sears than I have ever gotten at Radio Shack. Between that experience and their recent customer data issue I would not use anything but cash for a transaction at Kmart or Sears in the future.
I miss having Mervyns. Wish they would put one in here.
K-Mart has been way behind the eight ball since Wal-Mart came onto the scene. Then they tried to evolve by opening Big K-Mart; this did not work out so well either. We were in a Big K yesterday around Glassboro, NJ and you actually leave feeling dirty. Anything by Sears is hidden deep beyond overpriced Martha Stewart items. Probably would have been wiser to shutter the K-Marts and quietly moved any quality brands, if any, over to Sears. At least Sears was known for tools. Now with both bleeding money it’s so much easier for Target, Wal-Mart, Home Depot and Lowes to continue to run them out of town.
I will say that I had to get my battery replaced this weekend. I took it in to Sears around 10 am on Saturday and had it replaced in about 15 minutes. I knew what I wanted before hand, they had it in stock, and were very professional about it.
The clothing sections do leave much to be desired, but maybe if the whole retro 80′s thing takes off much more beyond the ugly long striped sweaters with leggings, Sears will be the cool place to shop again.
I like my local K-Mart. It’s clean and well-lit. It also has employees who look like they enjoy working there. Everything that the Wal-Mart next door isn’t. As for the local Sears, all they have is tools and appliances. I normally like Craftsman tools but the local Sears sucks. It’s dirty and dark and the employees seem like they couldn’t even get a job at Wal-Mart.
Is it really possible to not do something in “droves”? I join the droves of people not smoking every day!
Sears’ clothing and shoes are absolutely appalling when it comes to quality. The only things I saw remotely worth buying were from Liz Claiborne’s Sears-only downscale line and some Columbia brand parkas, and even the Liz line looked noticeably cheesy compared to Liz’s non-Sears stuff.
If it weren’t for the Lands End store within our local Sears and the optical shop, I would never SET* foot in that place.
*(The preceding is a friendly reminder that here in Comsumerist-land, we do not use the phrase “step foot”.)
However, we do try to spell “Consumerist” correctly! (blush)
I worked at the Sears HQ when the KMart merger took place. We used to joke about how *bad* it sounded on paper. Two retail dinosaurs hooking up just can’t be a great idea.
But Lampert was Wall Street’s darling, so whatever he touched was going to turn to gold, according to them. But if you look at how he revived KMart, it wasn’t by introducing a great new shopping experience. It was by recognizing the valuable real estate that the company held and selling off a ton of it and retaining the most profitable stores.
At the end of a day, a retail store needs to be successful at retail, not real estate…
We actually stopped in at K-Mart over the weekend. I realized that I hadn’t set foot in a K-Mart in a very long time.
I now know why.
The store was messy, overall selection was low, and the prices were more then what I’m used to pay at Wal-Mart or even Target.
I noticed they now carry a large assortment of Craftsman tools. If nothing else, the merger allowed Sears to take their only respectable products (their tools) and turn it into a K-Mart brand. Yea!!
I recently purchased a washer and dyer ($299 ea.) and they told me at the great indoors that I’d qualify for their “free” delivery. Actually, it was a rebate. So, I played their game and now I get this letter telling me that because each item wasn’t $399 and up I don’t qualify. But, I have the paperwork signed by the salesman (who now btw is “on vacation”). So, any advice?
Thanks.
J
Can I get a good laugh? Kmart was the slimy place before Walmart became that, and then only got worse.
Now, Sears went that way, too.
Rather than write a letter after managing some hedge funds, why didn’t he take some of all this money he had, and use it to travel the country and actually check out the stores he was planning to change? I guess, to put it another way, is or was he a Kmart customer, and if not, why was he allowed to make decisions for it (I know the answers, it’s more of a statement, before someone goes off on that rant)?
Lampert thought he could chain two drunks together and create a great brand. As others have commented, he seems to have combined the worst aspects of the two brands rather than the positive. He’s invested almost no money in upgrading the stores or doing real rebranding. He’s an operations guy, so he’s trying to do everything on the cheap and profit by cutting costs. The problem is that there’s only so much you can cut. Also, when you have two tarnished brands, you need to invest a fair amount of money to get them to shine again, and Lampert hasn’t.
One important thing to note, my understanding is that K-Sears is still profitable. So, we can rip on them all we want, but they’re still eeking a profit. Now, if they can maintain that in the near or long term is another matter.
We ordered a washer and dryer from Sears a few years ago. They were delivered to the house by truck. Both the washer and dryer arrived slightly dented.
The truck driver told us that the loading of trucks was contracted out and the contractor was paid by the amount of units loaded. So they would use a pinching type forklift to pinch three units at a time, not one unit. This technique would often dent the appliances.
The driver called it in and we got a $125 refund. The driver seemed well used to making the call to HQ.
This is not how to run a business.
Merging Sears and Kmart was dumb; Sears was overpriced but at least clean, Kmart was trashy but is practically within walking distance of everyone. I haven’t been to either in years because both bore me to death. Just a dumb move, and both are going to be gone in five years unless they do some MAJOR revamping.
JCPenney might find themselves in a downward spiral soon, if they already aren’t, unless they do some major distribution changes. I don’t know how other branches are doing, but the one I worked at was losing money from avirex and jnco brands- they are severely overpriced and only a small percentage or sold at suggested retail. Most items are sold when they go on item removal clearance (80% off), while a good quarter of the item stock leaves the store without ever being purchased.
A few months ago the alternator on my Jetta died and we went to the local Sears for the first time in many years to get it fixed. After telling us they could fix it, and us limping it over there on its last bit of battery, they took one look at the car and said “oh wait, we can’t fix it after all.” Had to call for a tow truck to get it to a real mechanic. Thanks, Sears.
crappy store + crappy store = shit sandwich.
Poor Kmart- in retail disorganization. However I do enjoy them for discounted toys. Of the three or so close Kmarts to me one even had toys still on clearance during Christmas!!! And still back in the corner rather than upfront as a “special purchase”. The Kmart closest to me has the childrens bicycles by sporting goods not by toys. They seem to not understand product mix and store flow. The main reason I like to shop Kmart is to avoid the hoards at Walmarts. About the only time to not be crowded at Walmart is to go at about 11pm on a Tuesday night. Even then I am appalled at seeing the children in the store with their parents (alot of illegals and some lower class citizens). Problem with the close by Kmart is that it closes at about 9pm every freakin’ night!!!
Reminds me of Clover (regional PA stores) just before when they went out of business. A Friday night visit had me and two other people shopping the entire store. Same night at Walmart was hopping crowded…
I once heard a K-mart cashier offer a Sears credit card to someone that was buying $0.50 worth of clothes hangers.
Like most of the others here, the K-mart near me is simply disgusting. It is only 3-4 minutes from my house, but I would rather drive the 20 minutes that it takes to go elsewhere.
I went to the the Kmart in Charlottesville, VA. I purchased a couple sweaters. They fell apart (literally unraveled in the machine!). Disgusted, I tossed out the yarn and headed out to Target. I bought an armload of sweaters that have held up perfectly through the wash and dryer.
I’ll never go to a Kmart again. The store itself was dirty and signs we’re in spanish first, english second. Very unusual.
Blah
I’m not quite sure what is going on with Sears. I got a washer/dryer set and had to wait for it to be delivered to the store. I got the automated call, and I called the store to double check it was there. Took time out of work, went down to get it, and it wasn’t there! What a pain in the ass!
Thankfully, they discounted it, but it took me months and many calls to actually get it. Definitely an annoyance that should never have happened. Don’t waste people’s time, Sears!
@HRHKingFriday: Funny though, the original value proposition of the merger was more like:
crappy store + crappy store + “unlock the hidden value of the merger” = sky high profits
I still can’t believe that investors bought into this crap.
All the K-marts in my area are still in the same disgusting, ghettoesque, unorganized and ravaged states they were before the merger.
Sears still has pushy annoying salespeople who make me sprint my way through a planned shopping trip, and avoid the casual browsing that would ever lead to me spend some impulse dollars there.
I do a majority of my shopping with Sears through their website and only stop in when there’s a specific item I want to buy that isn’t available elsewhere.
Kmart I avoid altogether, because it’s like browsing downtown Baghdad, complete with threats of violence at every turn.
They need to scrap their entire sales model and focus on the consumer. It’s pretty bad when I’d take browsing at a car dealership before I’d willingly shop at Sears or Kmart.
A local K-Mart (Oshkosh, WI) was converted into a Sears Grand near where I live. Overall, it did not change much.
- They repainted and reworked the entire front of the building. I have to say it looks good.
- They renovated the frontmost part of the store (around the registers).
That is about all they did to make the store better, but it still has the following problems:
- Cavernous is the only way I can think to explain what the inside feels like.
- Disorganized, messy shelving (think Walmart in the ghetto but worse)
- Poorly laid out floorplan.
Given this, I can’t imagine that sales increased noticeably.
@econobiker: I think its interesting that we base some of our shopping choices on who frequents the store (ie illegals and “lower classes”). I guess it works the other way too, everyone wants to go to the greatland target to be part of the upper-middle class soccer mom crowd.
Just sayin…
I went in my local K-Mart the other day and was the ONLY customer.
There are usually less than 10 cars in the huge parking lot, and there were less that that this day.
Walked into Sears for the first time in ten years this month. Got fooled when they told me “another store” had the item I wanted. Other store didn’t, told me to go to Circuit City.
If Sears is around in another ten years, maybe I’ll forget and try to shop with them again.
To be honest, I really don’t care how ghetto the store is, especially if they aren’t making any money. K-Mart is a victim of Wal-Mart. Remember that their every day low prices have to cost someone.
What I do care about is crowds and annoying bright lights and the intercom shouting things that should be said over walkee-talkees. Wal-Mart definitely has that experience.
I used to always buy Craftsman, my parents still have their tools they bought some 20 years ago that work. What’s wrong with that?
Guys, you’re all looking at this the wrong way. Seriously. K-Mart has been around for a long time, they really need help.
@HRHKingFriday: Absolutely. Many shop based on our “aspirational class.” That’s part of the reason we have a negative savings rate, we’re trying to keep up with the Johnsons when we simply don’t have the financials to do so. K-Mart/Sears are viewed as “lower class” brands often because they are in urban/suburban areas where there are other options and more economic diversity (rich and poor). Wal-Mart has some of this stigma. But often they’re the only major store in town or they’re in areas where its economically homogenous (e.g. all middle class), so there’s a certain amount of acceptance.
@NotATool: Sounds like you don’t work there anymore…I feel bad for a good friend of mine who just accepted a job with their HQ…he doesn’t know if his job/the company will be there in 6 months when he is supposed to start…
Am I the only one that takes pleasure when the established giants fall? I think that’s actually good for the consumer.
@ARP: I think that’s a big part of the “FAIL” of KMart. They’re still trying to compete with the Targets and Gaps of the world, but haven’t figured out that they’re really the dollar stores. Its kind of like when GAP and Old Navy lowered their prices in the past 5-10 years- all of the sudden their identity was unclear, so people (by default) labeled them as for lower classes. I also think its interesting that things are becoming more black or white, rich or poor when it comes to consumer identity.
I took my 14yo daughter shopping this Sunday. As she started to go into Sears, I asked her why would she want to go in there. I told her it was dieing. She told me I just hated Sears cause I worked there one. She looked at the clothes and then checked prices, and said “Why would anyone shop here. They are even more expensive than Hot Topic, but the clothes are ugly.” I think that review from a 14 year old sums up all you need to know about Sears today.
Sears has good tools and appliances, but how many times in your life
are you going to buy a washing machine or a hammer? No wonder many
people posting here just visit the store every 10 years or so.
Awww, I don’t want to see anything happen to K-mart.
There is one extremely close to my apartment, if it goes I’ll have to drive a lot farther when I just need to buy something quick.
Not to mention its the only place I even know of with a Little Caesars Pizza.
Say what you will, $5 for a medium pizza is an attractive price, and it tastes good to me.
@Joafu: I think JCPenny as a brand is still in much better shape than Sears or K-Mart. The JCPenny store near me isn’t exciting, but it isn’t dirty or off-putting and unlike Sears, I do find myself shopping there from time to time – mostly for pants it seems, they have a pretty good selection of jeans, Dockers, and Docker-type pants.
@riverstyxxx:
“K-Mart is a victim of Wal-Mart. Remember that their every day low prices have to cost someone.”
Goddamit ! Kmart is a victim of KMart! A lot of us would LOVE to have another alternative to WalMart,but the dumb bastards that run KMart have done their level best to chase us away.Nothing on the shelves. Dirty stores. Clueless slacker employees. They’re not the fucking victims,we are.
@TWinter: I agree with you; the stores themselves are tidy and emphasis is put on employees to clean up the selling floor every day. But I’m worried that some of their recent retailing choices are going to start losing them money. I still shop them for pants as well.
One of the attractions of Sears used to be the guaranteed for life Craftsman tools and the availability of parts for their Kenmore line of appliances. The hand tools (screwdrivers, wrenches, etc.) are no longer the polished vanadium steel and not worth the premium price, and they no longer keep a decent selection of parts in stock. I just tried to get a thermostat for a refrigerator, a common replacement item, and the parts store would have to order it for me, and I get to pay shipping. $48 for the part (overpriced) and $10 shipping (outrageous) plus tax. Why bother sticking with Sears if I have to order parts myself b/c they don’t keep anything in stock anymore? “Satisfaction guaranteed or your money back” used to be their motto. I’ll be satisfied when they close their doors forever.
I found this headline to be from the DEPARTMENT OF THE OBVIOUS.
If you have been to a Sears lately, you know why!