Crazy Eddie and Sears’ Hail Mary Pass

I know that when I am faced with an urgent and dire situation requiring expert assistance I take a really long time to find that person and then retain someone with little relevant experience.

Wait, that seems crazy to you? Welcome to the world of Sears Holdings and its Chairman Eddie Lampert.

Yesterday Sears concluded its 3 year (?!?!) CEO search with the announcement that it had hired Lou D’Ambrosio, the former CEO of Avaya and long-time IBM executive.

Now I’m willing to believe that Mr. D’Ambrosio is a super smart guy with fantastic leadership skills. He may well get up early and stay up late. Heck, he’s probably even a great father and is relentlessly kind to animals. And the fact that he has battled and overcome a significant medical problem in recent years is admirable. I wish him the best on all fronts. But first, a little context.

I was head of corporate strategy at Sears–an oxymoronic title if there ever were one–when I left in 2003. At that time, despite massive efforts to turn things around, we were only slowly turning the ship. The appliance business, which contributed nearly half the company’s profits, was starting to lose share to Home Depot, Lowe’s, Best Buy and regional competitors like HH Gregg. The home improvement business (and the powerful Craftsman brand) had been declining for years and our efforts to open up new points of distribution (Sears Grand and free-standing hardware stores) weren’t going to happen fast enough to offset the competition’s advantages in assortment, convenience and price. The apparel business, which had been broken for years, was making incremental improvements through brand rationalization, quality improvements and the introduction of Lands’ End, yet remained massively disadvantaged relative to an expanding Kohl’s and a resurgent JC Penney, just to cite a few key competitors.

In 2005 Eddie Lampert combined Sears and K-mart, apparently on the theory that marrying up two wounded retailers would end up creating a winning couple (insert your own joke here about your first marriage). Since then, this powerful duo has had sales declines in every reporting period. The stock is lower, and in the just reported quarter, when most retailers are showing solid year over year performance, Sears Holdings once again announced declining operating performance.

While, admirably, Sears has made substantial, and sometimes innovative, investments in digital assets and multi-channel integration, one cannot escape from a few simple facts:

  1. They have not come up with a compelling value proposition that fights and wins in the mall
  2. They do not distribute their core proprietary brands (Kenmore and Craftsman) in the places where most customers want to buy them, namely at Home Depot, Lowe’s and/or Best Buy
  3. Without a decent softlines business, the long-term economics of operating a mall-based department store do not work
  4. The investment in digital is necessary, but not sufficient. Sears is in the business of selling stuff, overwhelmingly through physical locations, and that is not changing anytime soon. Lampert’s justification for these investments by making analogies to Blockbuster and Borders is somewhere between silly and frightening–at least until someone figures out how to digitally deliver a refrigerator, radial saw or sweater.

There is no question that Sears needs bold and innovative thinking–though frankly I’m skeptical that anyone can save Sears at this point. But to bring in someone who is going to have a substantial learning curve on the basics of retailing on the notion (hope?) that their technology background will be the thing that makes the difference seems downright crazy.

Or desperate.

Or both.

I hope I’m wrong.

 

6 thoughts on “Crazy Eddie and Sears’ Hail Mary Pass

  1. Steve,
    Why go here?

    Who says this fellow can’t make a difference?
    Plenty of well intended retailers and a bushel basket full of highly esteemed marketing consultants have tended to Sears, without any sustained success.

    Why not one more?

    Why throw a stone?

    peace
    BK

  2. Steve,

    Very well written and thoroughly reasoned review. The CEO search itself exemplifies the problems of Sears. Three years to find and execute a decision of CEO is entirely too long. It shows how they are not nimble and therefore unable to take advantage of market trends and changes. By the time they are reacting to consumer demand, the opportunity has been lost and they are stuck in a perpetual state of playing catch up.

    I too hope that this iconic American company can become a viable player again, but this latest decision does not bode well for them.

    JK

    • JK,

      Don’t assume that it took 3 years to find a CEO…..they found preferred candidates pretty much out of the gates of the dismissal of earlier leaders like Aylwyn Lewis etc. But they couldn’t convince any of the industry leaders to jump ship and come aboard…. Word was on the street pretty quickly about Lambert’s micro-management style and his somewhat eccentric vision of the future of Sears….and those two elements scared off any real retail gurus from joining the company and helping to turn the ship forward…..

      This announcement just cements the view that Lambert doesn’t see a future in bricks and mortar retailing or merchandising, he sees it as a world of online transaction brokering, bring buyers and sellers together, take a piece of the action and if it’s convenient, maybe sell a widget or two….

      …TK

  3. “…They have not come up with a compelling value proposition that fights and wins in the mall,” says S. Dennis.

    Agreed. They also need to understand that the economic downturn may have attracted a new group of customers to their stores, such as fashion-conscious Gen-Y.

    I am actually pretty excited to see that they introduced a number of U.K. fashion brands such as French Connection UK and NEXT.

    They badly need a new value proposition though, and ideally a new website. Their current version is dreadful to look at.

  4. Steve,

    The death spiral of Sears began in earnest in the summer of 2000. Alan Lacy did not have a clue as to how to position or manage the business. His crowning achievement after train wrecking Sears’ credit business, buying Lands End without any idea what to do with it, and then spending $600 million on 51 K-Marts in pursuit of a non event strategy called Sears Grand, was to give the company away to Eddie Lampert.

    Lampert’s doing a brilliant job of stripping the asset. No one with a scintilla of sense thinks this guy has any intention or ability to effectively manage this company. Having been run into the ground it’s now being slowly buried.

  5. Pingback: My top 10 blog posts of 2011 « Steven P. Dennis' Blog

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