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An announcement took America’s retail trade by surprise on 17 November, when the Kmart discount chain and Sears, once the biggest retail company in the US, made public their merger.
The link-up was engineered by Edward Lampert, a financier with large blocks of shares in both companies, and Sears CEO Alan Lacy. With sales of US $ 55 bn, the resulting company will be number three behind Wal-Mart (US $ 265 bn) and Home Depot (US $ 65 bn).
Both partners to the deal are recording declining sales and both operate stores at poor locations: Sears is represented by over 870 small stores in shopping malls, which are falling out of favour with customers, and part of the ageing Kmart stores should really be revamped.
After initial speculation, both are going to go for cross-selling their brands in order to stimulate sales artificially in both chains. But will this concept work? Will consumers buy products in Kmart shops, where little assistance is available for purchasing electrical appliances or motorised tools, which were previously only to be had at Sears? Or will Sears customers be attracted by Kmart brands like Joe Boxer and Route 66?
Certain brands will probably find a ready market in both retail channels. These include Kmart’s Martha Stewart Living Products at Sears and Diehard car batteries at Kmart. However, this appears rather doubtful in other cases: for instance, the Craftsman tool brand offers high quality in the upper price range, but will these products sell to price-conscious Kmart customers? And something that has hardly been mentioned so far is the fact that neither of the chains can come up with a strategy to enable them to match their main competitors. These are Wal-Mart and Target in the hypermarket segment and Home Depot and Lowe’s in the male-dominated DIY retail segment, where the Sears Craftsman brands for tools and garden products have lost ground, as have Weatherbeater paint and Kenmore domestic appliances as well.
It is to be expected that Sears will transform some Kmart outlets into the new Sears Grand format, which is relatively untested still, since there are only five such stores so far.
Industry observers maintain that Sears reacts very slowly and bureaucratically to challenges that come up in the field of sales and marketing. The question is whether this “culture” can be altered quickly enough to bring both companies up to scratch again.
It will become clear next year whether this is in fact a successful retail strategy or no more than a camouflaged property deal.
The link-up was engineered by Edward Lampert, a financier with large blocks of shares in both companies, and Sears CEO Alan Lacy. With sales of US $ 55 bn, the resulting company will be number three behind Wal-Mart (US $ 265 bn) and Home Depot (US $ 65 bn).
Both partners to the deal are recording declining sales and both operate stores at poor locations: Sears is represented by over 870 small stores in shopping malls, which are falling out of favour with customers, and part of the ageing Kmart stores should really be revamped.
After initial speculation, both are going to go for cross-selling their brands in order to stimulate sales artificially in both chains. But will this concept work? Will consumers buy products in Kmart shops, where little assistance is available for purchasing electrical appliances or motorised tools, which were previously only to be had at Sears? Or will Sears customers be attracted by Kmart brands like Joe Boxer and Route 66?
Certain brands will probably find a ready market in both retail channels. These include Kmart’s Martha Stewart Living Products at Sears and Diehard car batteries at Kmart. However, this appears rather doubtful in other cases: for instance, the Craftsman tool brand offers high quality in the upper price range, but will these products sell to price-conscious Kmart customers? And something that has hardly been mentioned so far is the fact that neither of the chains can come up with a strategy to enable them to match their main competitors. These are Wal-Mart and Target in the hypermarket segment and Home Depot and Lowe’s in the male-dominated DIY retail segment, where the Sears Craftsman brands for tools and garden products have lost ground, as have Weatherbeater paint and Kenmore domestic appliances as well.
It is to be expected that Sears will transform some Kmart outlets into the new Sears Grand format, which is relatively untested still, since there are only five such stores so far.
Industry observers maintain that Sears reacts very slowly and bureaucratically to challenges that come up in the field of sales and marketing. The question is whether this “culture” can be altered quickly enough to bring both companies up to scratch again.
It will become clear next year whether this is in fact a successful retail strategy or no more than a camouflaged property deal.
