THE JOURNEY YO REMARKABLE RETAIL

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Sears Holdings to convert most stores to indoor waterparks

This blog was originally posed April 1, 2014.

After years of fighting declining sales and anemic profits, Sears Holdings (the parent company of Sears and Kmart) announced today that it would convert all of its more than 800 mall-based Sears department stores to indoor water parks. The new parks–reportedly to be called “Eddie World”–are scheduled to open in early 2015. Proceeds from the company’s spin-off of Lands’ End will be used to fund the renovations and re-branding.

In a press release, Sears Holdings Chairman & CEO Eddie Lampert said that the company worked with consultants Bain & Company for over a year to explore strategic options for its chronically under-performing stores. “Our initial review revealed that almost anything would be a better use of all that space than what we were currently doing, but I knew we had a fiduciary responsibility to get more specific,” said Lampert in the prepared statement.

According to people familiar with Sears’ deliberations, the company embarked on an extensive consumer research exercise which took longer to complete than expected as many respondents were surprised to learn that Sears was still in business. Ultimately more than a dozen different options–ranging from what one former Sears executive characterized as “bulldoze the suckers,” to repurposing the buildings as urban contemporary rental apartments (initially dubbed “The Loftier Side of Sears”)–were considered.

According to the press release the decision to convert the stores to indoor waterparks centered on America’s growing interest in family-based entertainment, the convenient locations of the existing units, the relative ease of turning escalators into water slides and what Lampert referred to in the press release as Sears’ “core capability in plummeting.”

Sources with knowledge of Sears’ analysis said that the company also considered, but rebuffed, offers from both Forever 21 and Apple to acquire the stores as part of their expansion strategies. Forever 21 is reportedly interested in piloting a new concept aimed at aging baby-boomers called Forever 39. The stores would feature wildly inappropriately, but more comfortably sized, apparel and accessories than the company’s flagship brand.

Apple, under new retail store chief Angela Ahrendts, is considering launching Apple Mega Stores, where the company’s 3 products would be displayed over and over on more than 200 displays, of varying sizes and configurations, across a wide expanse and on multiple levels. The much larger units would also dramatically expand the number of Apple Geniuses, though the company does not expect any improvement in average wait times or the ability to actually solve your problem.

In a phone call with analysts this morning, Lampert indicated that Sears Holdings is also considering shuttering its entire fleet of Kmart stores. The company recently conducted pilots in Charlotte and Phoenix where it simply didn’t open any of its more than 32 Kmart units in the market for more than a week. According to Lampert “we didn’t get a single call. Not one. No one seemed to notice at all. So we have to really take a hard look at that.”

In pre-market trading Sears shares were up over 11% on the news.

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"The Store Operations Council enjoyed every minute of Steve Dennis's presentation on retail's future. He always keeps it real and speaks the language of retail experts."

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"The Store Operations Council enjoyed every minute of Steve Dennis's presentation on retail's future. He always keeps it real and speaks the language of retail experts."

Cathy Hotka

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Cathy Hotka & Associates

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