question archive CASE 1-4 SEARS: A DYING COMPANY? Written by Dr
CASE 1-4 SEARS: A DYING COMPANY? Written by Dr
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CASE 1-4 SEARS: A DYING COMPANY?
Written by Dr. Venessa Funches, Auburn University, Montgomery
Ashley is on her way to her local mall. She pulls up to the mall and finds a great parking spot close to the Sears entrance. She walks briskly through tools, lawn, and garden, as well as kids apparel, noticing nothing. In fact, no one seems to notice her either. She is not approached or greeted by any salespeople. What a relief! The store seems empty. Ashley is a little concerned. She came to hang out with friends, but this place seems pretty dead. Just as she rounds the corner through the women’s department, a shirt catches her attention. As she glances at the price tag, she decides she can get it cheaper elsewhere. Just then her cell phone rings. It’s her friend; everyone is waiting for her at Aéropostale near the food court. She picks up the pace as she rushes through men’s apparel, jewelry, and finally bedding. She is relieved as she catches a glimpse of her friends through the crowd in the interior of the mall. She is looking forward to a good time shopping with her friends. As she nears the food court, she is distracted by all the cool outfits displayed in the windows of stores like American Eagle, Abercrombie & Fitch, and Buckle.
Ashley represents many of today’s shoppers, who hurry on about their business—shunning department stores like Sears and its competitors. The entire department store category has been experiencing a decline in recent years.
Sears has a rich history spanning over 100 years. In the past, Sears was a retail force to be reckoned with. According to the Sears Archives website (www.searsarchives.com), from the 1950s to the 1980s Sears was the largest U.S. retailer. The Sears catalog could be found in virtually every home in America.
Sears has been serving the American consumer since the turn of the century. The firm began in 1886 as a watch company, founded by Richard W. Sears. At that time most Americans lived as farmers in rural areas with limited access to the products they needed. As a result, the local general store served as the farmers’ primary retail establishment. Due to the limited availability of products, price gouging was rampant. Richard W. Sears and Alvah Roebuck teamed up to form their own mail-order company. They began by selling only jewelry and watches but quickly added other products in order to meet the need in the marketplace. The catalog business flourished and grew quickly.
It was not until the 1920s that the firm’s management saw the need to alter their business model. The country was changing, and many people were now moving to city centers. As a result, new chain retailers were gaining popularity. Sears joined the fray by opening its own retail locations and expanding vigorously. Sears experienced great success and kept on expanding well into the 1970s. In 1973, Sears built a new headquarters located in Chicago called Sears Tower. At that time it was the tallest building in the world. By the 1980s Sears was not only expanding but also diversifying into different businesses like Allstate car insurance, Dean Witter financial services, and Discover credit cards.
Today, Sears offers a broad array of products and services. Its offerings include appliances, consumer electronics, tools, sporting goods, outdoor living, lawn, and garden equipment, certain automotive services and products, home fashion products, as well as apparel, footwear, jewelry, and accessories for the whole family. Sears offers proprietary brands like Kenmore, Craftsman, DieHard, Lands’ End, Covington, Apostrophe, and Canyon River Blues. These brands are important to the company because they signify quality and drive consumer traffic. Despite the strong brands, many consumers find Sears’ selection bland, unattractive, or too costly. Instead, they opt for specialty stores like Home Depot, Best Buy, or discounters like Target or Walmart.
The tide has shifted and Sears is struggling. Over the past two decades, Sears has ended its catalog services and closed numerous store locations.* In addition, the company has gone through multiple restructurings and divestitures of Dean Witter and Allstate in an effort to refocus and strengthen the business.
In 2005, Kmart bought Sears. The newly formed company became the nation’s third-largest retailer behind Walmart and Home Depot. The hope was that the combined firm would allow for greater cost savings and result in lower prices to consumers. Many questioned the deal, and a lot of the proposed benefits never fully materialized and the K-mart division is deeply troubled.
Sears asked the Kardashian sisters, Kim, Kourtney, and Khloé, to develop their own product line. Sears management hoped to use the Kardashians’ success and popularity to create excitement, especially among younger consumers. The advertising campaign has tried to capitalize on the sexy Kardashian image. The ad campaign has showcased Kim, Kourtney, and Khloé in seductive lingerie and topless in a denim jean ad. The product line, which includes denim jeans, dresses, shoes, jewelry, handbags, intimates, belts, and sunglasses, has thus far been disappointing and unsuccessful. Despite management’s efforts, sales continue to plummet.
Sears has been generally unprofitable for years. The causes of Sears’ problems are multifaceted. Sears’ business model has failed to keep step with changing consumer tastes. Many of its locations are out of date and need remodeling. Competitors have outspent Sears in terms of modernizing their locations by a wide margin. Second, many of its stores are located in malls that are decreasing in popularity and expensive to rent. Third, today’s consumer has a vast number of shopping options. Many consumers are opting for convenient one-stop shopping at open-air shopping centers rather than enclosed malls, or avoiding them altogether for discount retailers. Finally, Sears’ traditional mid-range pricing strategy has left them stranded, unable to compete with the low prices of discount stores or the broad selections of specialty stores.
Sears is down but not out of the game. The remaining stores and brands are still valuable assets. The company’s management has a daunting task ahead. Can Sears refocus and find a new way to deliver value to its customers?
QUESTIONS
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Describe how some of the trends mentioned in the textbook are affecting Sears.
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Describe the external and situational influences that steer shoppers like Ashley away from Sears.
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Compare and contrast the total value concept for Sears and your favorite retailer.
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What types of utilitarian and hedonic value does Sears presently provide to its customers?
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Can Sears be revived? If so what should their new value equation be? If not, explain.
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Answer:
1.
Describe how some of the trends mentioned in the textbook are affecting Sears.
From the case study, one trend that seems to be affecting Sears is product differentiation. The reason for this is because the products at Sears are not being looked at in the same light as products made by their competitors. Sears offers high quality brands such as Kenmore and Craftsman. The brands at Sears are meant to create customer traffic, but the case study mentioned that customers rather take their business to places that are not Sears. Customers prefer to go to speciality stores such as Best Buy and Home Depot. They also prefer to go to discounters such as Target and Walmart. Therefore, Sears may be offering high quality brands but their products are resulting in customers to go somewhere else. Customers do not appear to be attracted to products from Sears. Sear's marketing tactics also seem to be affecting the company. In particular, Sear's choices of influencers were something that affected the company badly. Sears decided to ask the Kardashian's to create a line that they could put in their stores .With the Kardashian's sister's popularity, the company expected this to create excitement amongest their young consumer's. Unfournately , the line has been unsuccessful and this leads me to believe the companies' use of influencers was not the best.
2.
Describe the external and situational influences that steer shoppers like Ashley away from Sears.
In this case, the external influence that steered Ashley away from shopping at Sear's was the competition. While Ashley was going to meet her friends, she noticed the different outfits in American Eagle, Abercrombie & Fitch, and Buckle. Even though the case study did not mention how old Ashley was, personal experience made me come to the conclusion that stores such as American Eagle tailored to her needs and wants more than Sears did. From doing further research, American Eagle, Abercrombie & Fitch, and Buckle, have their target customers ages between 15 to 30 years. Ashley has a chance of being in this age range and that results in her going to stores that tailor to her needs. Since Sear's appeals to the general public, they might not do a good job at connecting with its youthful consumers. Therefore, this could result in kids such as Ashley deciding to take their business somewhere else. The situational influence was that while Ashley was in the store, she noticed a shirt but realized that she could get it at a better price somewhere else. This particular instance is turning Ashley away from the store because a shirt was priced way too high. Competitors could have better deals on shirts such as the one she saw.
3.
Compare and contrast the total value concept for Sears and for your favorite retailer.
The retailer that I choose to compare Sears with is American Eagle. Recently Aerie, which is a brand owned by American Eagle created an advertising campaign that is centered on the hashtag #AeireReal. This campaign is all about empowering women to love themselves regardless of their figures and differences. In this case, American Eagle is using the total value concept by getting women to buy their items through sharing the message that these customers do not have to change their looks to wear the merchandise. Even though this hashtag is focused on a specific part of the company, I would be more enticed to shop here due to the fact that they want all differences to be embraced. In contrast, Sear's practices the use of the total value concept in a different way. With a focus on the clothing that Sears has, it does provide customers with high quality brands such as Ralph Lauren. An additional point to add is that Ralph Lauren in Sears is sold at a decent price compared to what it would be in the actual Ralph Lauren store. Therefore, Sears is using the total value concept by providing customers with well-known brands at affordable prices. In other words, customers are getting valuable merchandise that they may not have been able to get if they did not go to Sears.
4.
What types of utilitarian and hedonic value does Sear presently provide to its customers?
The utilitarian value that Sears provide to its customer is that customer's can get basic necessities. Examples of these necessities are clothes, shoes, car tires and wheels, and different household appliances such as those for a kitchen. The hedonic value that Sears provides to its customers is that they can buy a variety of different activities that they might not necessarily need. Examples of these fun activities are a trampoline, board games, swing set, and video games.
5.
Can Sears be revived? If so what should their new value equation be? If not, explain.
With changes constantly being made in our culture, I believe that Sears has a chance of being revived. The companies new value equation should be centered on creating products that are unique and different compared to their competitor's. They can achieve this by understanding the trends in today's society and what their customers need and want. By doing this, Sears could create a product that creates profit for their company. In terms of the marketing portion of this value equation, Sear's could create a marketing strategy that is worth the price and creates a profit. With this in mind, Sears could look to incorporate well-known and current influencers in to their marketing strategy. Even though Sear's attempted to do this with the Kardashian's, there are a lot of people that do not like what they stand for. With this second try, Sear's should look to choose an influencer with a large enough fan base that will allow them to create a profit on their products. In summation, both of these values need to be incorporated together. Sears can create customer desired unique products that are endorsed by a well-liked influencer.
