To shore up loyalty, Sears has the “Shop Your Way” membership program. It has also enhanced customer service by implementing a faster delivery service. Delivery is now within one to two days. That is what the Chairman feels is the answer -despite the fact that the company continues to lose sales momentum, customer loyalty, and customer awareness. The recent fourth quarter will report an estimated sales decrease of 7.5% which attests to the consumer’s shift away from this once powerhouse retailer. It also decries the loss of customer loyalty. Sears reputation was built on service, value and quality. In the past, Sears’ exclusive lines such as Die Hard batteries, Kenmore appliances and Craftsman tools were very special merchandise that consumers knew stood for quality. The luster is now gone, since Home Deport, Lowe’s and other chains offer the same quality goods in a more updated environment with knowledgeable staff.
I examine here the core problems of the retail industry that Sears is part of. Some of the department stores like Sears and especially Kmart are becoming irrelevant. Irrelevant because they carry merchandise that other stores carry at lower prices; irrelevant because the stores have not been kept up and are unattractive – some even dirty – irrelevant because customer service is lacking since many associates have lost pride in their job and are not serving customers with helpful information and smiles.
I believe that the lack of friendly service at Sears and Kmart contrast with many other department stores that have pumped up the attitudes of associates. In addition, customer reward programs abound. Bloomingdale’s Loyalist program, Nordstrom’s Fashion Awards program and Macy’s Rewards program are just some examples of how department stores are trying to keep their best customers coming back, either to stores or the Internet.
Customer traffic in malls has fallen off this year impacting most stores, but some are fighting back with new merchandising ideas. The department stores have an appeal to an older generation ranging from 40 years and older to 55 years and older. Rather than just aging with the customers, department stores are changing their look and making sure they have offerings that appeal to younger customers too. Nordstrom has added Top Shop products, a UK based branded retailer, in 41 stores and is trying some pop-up departments featuring unique specialty items and fashion. Macy’s has expanded their shoe departments and added an athletic shoe franchise with Finish Line as a partner. Other stores, like Bloomingdale’s are constantly changing their junior and contemporary floor offering the latest hot brands and trends.
Specialty stores in mall lack the momentum of the past because of lack of new fashion message (Lady Gaga does not wear much). Their youthful customer is more strapped, has less discretionary spending power, since electronic gear, school loans, and the occasional vacation have zapped their funds.
I believe that consolidation of department stores will continue in two ways. One will be the closing of unprofitable stores – we have seen all major department and chain stores like Macy’s, Kohl’s, J.C.Penney, Saks Fifth Avenue, Nordstrom and Walmart close units. The other way will be the absorption of stores by other retailers. Names like Jordan Marsh, Marshall Field’s Arnold Constable, and Montgomery Ward are gone. I believe there are some additional candidates for extinction around today, but perhaps not for long.
I do not believe it has to happen.
There are many ways that customer loyalty can be shored up and stores can survive. Here are some ideas:
1. Develop a strategy that includes satellite stores. These stores will allow for customer pick up and returns of merchandise purchased on the Internet. These more convenient stores should feature an edited assortment of merchandise. This omnichannel approach to business recognizes the need for order fulfillment and faster customer service.
2. Develop a prestige private label program that is featured in stores and on the Internet featuring exclusive higher quality merchandise.
3. Create special events that are not just price driven.
4. Use the loyalty card for special events.
5. Have fun days in stores. Here is an example that went over very well with customers: on opening night of the local opera company, Loeb Department Store (no relation) in Bern, Switzerland dresses associates in costumes. It creates a festive feeling, lifts morale, brings in traffic, and generates business for the local store.
6. Train associates to greet customers – if possible by name. In the United States it is becoming a standard practice to have a greeter at the door. This is well received by arriving customers. In Germany security officers do not greet new customers—which is an opportunity for change.
Too bad Sears Holding's management is not doing these things. This is still a very large company with 798 Sears stores and 1221 Kmart units. Sales are just under $40 Billion. However, its Chairman Ed Lampert does not get it. The clock is ticking. I see a future for the company that will be even more difficult.
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