K-Mart and Sears: to hell in the same handbasket.

Great Debates
1

In case you hadn’t heard.

Note that K-Mart is the purchaser.:eek:

Theses:

  1. Both brands suck. K-Mart has been a joke since at least the 70s, and Sears is just pathetic, having flushed a good brand down the jakes and now this, being bought by yesterday’s embodiment of cheapness and lumpen proletariat culture.

  2. The fact that this merger will create the nation’s third largest retailer (after #1 WalMart and #2 Target) is technically true but functionally irrelevent.

  3. In retail, as opposed to the physical world, the heavier object really does fall faster.

But first…

Their paltry good points.
Sears has many excellent locations, assets that it has done its best to squander over the past 25 years. In theory a good retail operation could put these to use. The same can be said about K-Mart: it has locations that a decent bigbox retailer like Target could use effectively.

The Sears brand, I suppose has a certain cache with the over-50 set. Even to people my age (33), it conjures up warm memories of the 1977 Christmas catalog, whose toy section was just about the most thrilling thing in the world. But even by 1979 Toys R Us (now a struggling retailer in its own right) had blown Sears away in terms of selection and price. Sears would never seem cool again.

Sears also has a large credit card/finance operation.

And now…

Suckage
I am not old enough to remember the day when K-Mart served any serious purpose. Remember back in the 1970s that nauseating smell of carmel corn, circus peanuts, and cotton candy that hit you as soon as you entered, or before? That stink, to me will always be K-Mart, and K-Mart that stink.

In short, K-Mart has been a joke for at least the past 30 years. Their brand symbolizes nothing positive. They do nothing that WalMart and Target have not done better for a very long time. If ever there was a brand that deserved to die–decades ago–K-Mart is it. But K-Mart, having shagged its previous stockholders in an orifice not of their choice, is back–and with enough capital to buy a brand that actually would have had potential in the right hands.

Sears is a different story. Not only did Sears used to have a good toy selection, it used to be a store for serious carpenters and mechanics–back in the day when its Craftsman brand was well made. Sears also used to have one of the best appliance departments around. Oh wait, it used to have a decent clothing department, too. Come to think of it, Sears used to do everything pretty darn well and was part of nearly American citizen’s shopping life.

But since the late 1970s, Sears has been a living Harvard case study on how to blow, totally and irrevocably, every marketing advantage you posses. I’m too lazy to sleuth up the dates, but two failed, and widely publicized efforts, spring immediately to mind. The first is (late 80s or early 90s?) its “everyday low pricing” gimmick. People, understandably, went to Sears’ appliance department thinking that Sears would beat anyone’s price. Uh, no, we’re just, you know, not so pricey. That debacle generated approximately 1/10 the bad press of New Coke, which is still quite a lot.

The second was the egregious “softer side of Sears.” Actually, that might have been a mild success, a last jolt of speed from a once unbeatable jade. Not that it matters now.

In any case, Sears has been consumptive for the past 25 years or so. Unlike K-Mart, which has been a joke forever, Sears has been a cherished, loved brand that we’ve been forced to watch slowly wither. Sad.

**Irrelevence of new #3 status.
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This is a pretty simple point: the only thing that the K-Mart and Sears brands have in common is their heavy layers of tarnish. Neither brand was built to appeal to the same customers. Their locations are totally different, their lines of merchandise overlapping both too little and too much.

Talk of synergy in this instance will be BS and wishful thinking, unless a suicide pact can be thought of as synergistic.

It’s true that companies manage different businesses so as to cover an entire category completely: the Gap and Old Navy are the same company, each appealing to a slightly different segment. GM back in the day invented the idea of layerd brands, so that the driver of a Chevy one year would trade up to a Cadillac once he got flush. Anheiser-Bush makes Bush, Bud, and Michelob to cover the low, mid, and (pseudo) high end of the beer market. It’s a valid strategy–when the conditions are right.

But they are not right for K-Mart and Sears. If what they did were more similar it could work. One can imagine (hope?) that all WalMarts could suddenly become Targets without the retail concept changing much. On the other hand, if what they did were more different, one could apply 1960s style conglomerate thinking, in which excellent management (haw haw) can manage different businesses with the same deftness.

But K-Sears will truly be a Frankenstein’s monster with the part at odds with one another. For K-Mart is a valid retail concept (value bigbox) that has been managed with great ineptitude, whereas Sears’ model (traditional multi-department quasi-full-price department store) is simply obsolete (plus ineptly managed).

Target has nothing to fear from this unholy massing of failure. Because…

The more massive object falls faster.
Mergers are hell even on strong companies. They create office politics that make the 30 Years’ War seem like paddycake. And just from a logistical standpoint, they create a lot of drag as heads roll, accounting systems are merged, and the execs move into bigger offices. What this will mean for immuno-compromised K and S can’t be anything very good.

In order for me to make truly informed predictions, I would have to study both retailers’ locations, assets, finances, etc.–really get into it. You’d have to pay me to do it, and even then I wouldn’t want to. Because my intuition already tells me that this turd is heading straight for the bottom of the jakes.

Neither retailer will see meaningful improvements in sales. What the hell are they going to do, improve their ad campaigns? Although K-Mart has a valid retail concept, WalMart (cold and heartless but effective) and Target (kinder, gentler, but loses in the ruthlessness department) already have the two wickets covered. That pie is et. And as for Sears, what are you going to do–inject the mummy’s lips with collagen? It’s hopeless.

There is a chance, but it would require smart management, which the new “entity” doesn’t have. But I’m willing to do some free consulting here, just for the heck of it:

The K-Mart brand is dead; if it has any value, it’s negative. Trash it, forget it, cremate it. The Sears brand still has nostalgic value. The news stores will all be named “Sears.” Now what do you have? You have f*** all except one thing: your locations and your stupidly loyal customers. The question only question, the sole question of impotance, is what to put in those locations.

Best Buy does appliances better. J.C. Penny and a dozen other in the mall do clothing better. Macy’s and Ayres do housewares better. You, Sears, do nothing with excellence. That needs to change now, else ye die.

But I have concept for you. In this age of outsourcing, you’re going to go 100% American made. Yes, every item in the store. You’re going to scour this great land for the best of everything.

In your mall locations, you are going to sell the best mid-range American clothing and housewares you can find. You’re going to hire buyers who know their stuff, who can get creative, who can source for your various regions and for the chain as a whole. You’ll be different. You’ll sell real Navaho blankets (made in USA) and candles from South Caroline (made in USA).

Your current K-Mart locations will look just like a WalMart or a Target. But every damn item in them will be labeled “Made in USA.”

Sure, all of this will cost more than the cheap shyte from China. But you’ll be 10 steps ahead of the pack when the dollar crashes and you’ve got to source stuff from the US anyway. Going 100% American made, no exceptions, will generate a literal flood of good press. A torrent. Get your ark made. And it won’t just be press, it will be genuine good will from every US citizen. The time is right.

I genuinely think that the above concept could work. In any case, it will take something thus radical to save this newly built Fane of Failure. But this is the New Economy, and you know who’s out to help whom. Expect a new chapter 11 within 11 months of the merger’s finalization, and lots of happy golden parachutes floating off into the distance.

2

I’m still pretty happy with their hardware department. I’ve been satisfied with the Craftsman brand and on the rare occasions they’ve broken I’ve been able to replace them. It’s nice knowing that I’ll be able to replace those tools no matter where I am because there’s always a Sears nearby.
Marc

3

Two not so bright farmers are watching their hogs being loaded for market.

One says to the another, “The way I figure it, we’re losing $10 per head. I guess you know what that means.”

“Yep”, said the other, “We need a bigger truck”.

4

Not much I can add to Aeschines’s post except for the perspective from one of the over 50 generation. I haven’t shopped at Sears for 20 years yet I despise them to this day. They became such arrogant SOB’s before their fall.

Long, long after everyone was using Visa and MasterCard, Sears accepted only their in-house credit card. That would have been annoying enough, but they also would report you to credit agencies if you were a single day late in paying it. For years, everytime someone ran a credit check on me some old fogotten $10 purchase from Sears would pop up and I’d have to write a letter explaining something I had never noticed when it happened and had long since forgotten.

MGibson, which Craftsman tools do you buy? I know from personal experience that their power tools - which were once the standard by which other tools were measured - are absolute crap. Most woodworkers now refer to the Craftsman brand as Crapsman. Tiresome joke, but accurate. I suspect their hand tools like wrenches and hammers may be just fine, so that’s what you might be experienced with.

5

I work on small engines like lawnmowers, motorcycles, and boats. The tools I’ve bought in the past year have been pretty basic for the most part. Nut drivers, socket wrenches (and sockets), various wrenches, various screwdrivers, pliers, feeler gages, combination wrenches, various hammers, punches & chisels, compression gage, and some torque wrenches. With the exception of one split socket I haven’t had any difficulty.

The only Craftsman power tool I’ve bought was an angle grinder and I’ve been pretty happy with that. Sadly, it appears as though my relationship with Craftsman may be coming to an end. I shall soon be attending a diesel mechanic school and I don’t believe I’ll be able to walk into any old Sears and find the tools I need. I suspect I’ll be switching to Snap-On because they also have a life time warranty, they’ll have what I need, and they’ll deliver to my place of employment.

Just to keep this post slightly on topic, I have no shopped at a K-Mart in many years. Not counting going to one that was going out of business a few years back amid rumors of dirt cheap PS2 games. Other then tools I haven’t bought anything at Sears for many many years.

Marc

6

How do you think K-mart came up with 11 billion to buy Sears?

Selling off assets and inventories.

Look for more of the same.

No one can compete with WalMart and Target.

7

I tend to agree pretty much with what’s been posted so far, including the one good bright spot-- craftman hand tools.

I heard one business commentator saying something like: If you merge two crappy retailers who were ranked 4th and 5th, all you get is one crappy retalier ranked 3rd. Both stores seem hopelessly trapped in the 70s.

8

As soon as the merger was announced I said “One crappy company buys another crappy company to become the largest crappy company”.

On preview, I am not the commentator of whom John Mace speaks.

9

Anyone else reminded of the HP-Compaq deal? I was saying “Wow twice the suckage merged into one company” I had the same reaction when I heard about K-Mart-Sears.

I wonder what’s next? Burger King merging with McDonald’s?

10

Let’s faceit, Sears and K-Mart serve the very low end of the market, and that market is being eaten up by WALMART. It is going to be very difficult for the newly-merged company to compete with WALMART’s dictatorial buying power.
That said, I wish them well…but how do you compete with a company (Walmart) that pays rock-bottom wages, no benefits, and buys the cheapest crap they can get from China? I don’t think it can be done.

11

KMart increased in value from about 12 or 15 to 34 over the 80s. They were cheap when the nation needed cheap and then retail changed. WalMart started to eat KMart’s niche. At the same time that the rest of the industry was using new ways to track inventory and get the right stuff to the right place, KMart had major IT troubles. I have no idea about their HR practices but through the 90s their service in the various stores I visited was uniformly bad, much worse than other retail.

The biggest thing KMart did wrong was to abandon its brand without replacing it with something better. They got rid of the nice little cafeteria in the middle of the store and replaced it with a marketing deal with a cheap pizza company. Idiots. I loved to do a bit of shopping, then have some roast beef or pudding and then shop some more. They got rid of the blue light special. They seemed to get rid of all the reasons there used to be to hang out there are shop. I think if there had been a switch back to the old style branding in the middle of the notstalgia rush with improved inventory handling, they could have made a big comeback. They could have capitalized on the WalMart backlash. But no, everytime I went there the stores were less and less pleasant to be in. The new logo and style had nothing. Some of the Martha Stewart stuff was decent, a big improvement on the bizarre clothing choices previously available, but not worth going to the increasingly unpleasant establishments.

Sears got arrogant and forgot that people shopped there because they had good stuff at good prices. Their brands were usually reliable merchandise not the cheapest, but not a bad deal. Their kids clothes lasted forever. Adult clothes were not as stylish as JC Penneys but were better priced than them and lasted better than KMart stuff. I do wish that the oldstyle Sears catalog had moved to a web store with today’s shipping. I go to their store online and it is has been difficult to navigate, lacks selection, and often malfunctions.

I now do my shoping at target and IKEA.

12

But K-Mart has Icees… damn I love Icees…

But Icees are not enough to change a company that doesn’t respond to the economy.

13

What exactly is the debate? That both stores suck, or that the merger is stupid? The way the main stock holder is running things, it appears he plans on breaking up both companies and selling them for parts. Sears’ real estate holdings are worth more than, or close to as much, the company’s market capitalization. The have been holding onto stores that they bought decades ago, and many of those stores are in prime locations. Sears owns Lands End and OSH, both of which are profitable and reasonable companies in their own rights, and those will be spun off. Kmart has significant off-mall locations that can be either temporarily turned into Sears Latest Failure At Marketing stores, or sold outright.

The merger as it is seems for all the world to be an attempt to use over priced Kmart stock to purchase a company, use the buying power of those companies to negotiate slightly better deals with suppliers, and use the economies of scale created to slow the bleeding while breaking up the companies for parts and selling off all major assets. I seriously doubt there is a ten year plan for the companies, and suspect (although I will freely admit to being wrong) that they will both be gone within five years.

14

i fear for land’s end.

15

Although you may well be right about what management is going to do (and those ideas sound quite workable), the spin I’ve heard hasn’t been about raiding but about building the #3 retailer in the country, blah blah.

If it’s a raid, then merger good (most likely). If it’s a “let’s rebuild” deal, then merger bad.

I doubt that there will be much debate over whether both stores suck.

Sounds excellent. Put that capital to work (for all our talk about the US being “capitalist,” why does it take so long for these things to happen? Answer: We’re not truly capitalist; the economy is run mostly by and for the executive caste, i.e., a plutocracy.)

I mostly agree but think that someone might buy the brand shells and try to milk either for their nostalgia value. At a vastly reduced scale, of course.

16

An interesting and pertinent article:

http://prudentbear.com/midweekanalysis.asp

17

Remember, shop smart, shop S-Mart!

Sorry, that was the first thing that came to mind upon seeing the OP title.

18

K-Mart has had one and only one purpose to me in the past ten years.

When a really popular computer game or video game first hits the shelves, it’s very common that they sell out all over the place. So typically when I’m anticipating a game heavily I’ll make calls, first to EB Games, then Gamestop, Wal-Mart, Circuit City, eventually KMart gets called too because sometimes, due to KMart’s shittiness, they’ll still have the game because no on goes in there to buy anything.

Of course even this practice is dead to me now because I typically just reserve games whenever I can.

The only megaretailer that ever really gets my business is Wal-Mart, I’ve yet to find one that can compare. When the Target first came into town everyone was so excited, people saying “Target is great” but I was amazingly unimpressed.

I use the megaretailers for very specialized purposes. Basically for anything that is sold and the quality is either uniform or not that important. DVDs for example are going to be roughly the same quality everywhere, Wal-Mart tends to have a pretty large DVD selection and due to its good location versus the local video stores it usually gets my business first when I want to buy a DVD, they usually have it. Video games and computer games, I’ll go to Wal-Mart first because it seems when they have what I want it will often be for $5-$10 less than anywhere else but it isn’t uncommon they don’t have what I want, I have very specialized and niche tastes in computer games so I typically have to order them or go to EB Games. Then odds and ends like can openers, box fans, pens, pencils, notebook paper et cetera where you don’t have to buy from a nice store or really worry about it because they are things that are pretty much the same everywhere.

Clothing, home appliances, sporting goods, food et cetera no megaretailer could even hope to get my business.

Not even the pseudo “upper end”/middle class clothing stores get my business as I make a good amount of money and I’m not ashamed to dress myself well to reflect my financial resources, which means my average clothing piece is out of the price range of your typical Old Navy or Gap.

For home appliances when I buy one, I buy high quality and built to last, and often Wal-Mart and target don’t have the brands I am faithful to, sometimes they do and in those rare cases I’ll buy (from Wal-Mart because I don’t go into Target.) For food the meat and produce sections in Wal-Mart are unacceptable so my local grocer gets the business.

So the only areas that really matter to me are the cheaper electronic products where quality isn’t an issue (games, cds, blank cds, disks et cetera) and odds and ends. And in those two areas Wal-Mart has Target beat enormously so I see virtually no reason to ever go to Target and so I never do.

19

They should call the merged brand Kraphöuse.

20

I haven’t used them myself, but many ladies seem to think that the Sears Kenmore sewing machines are okay.

I have fond memories of the Sears down in Glendale, California, and the K-Mart in Sunland, California. The Sunland K-Mart has been sold to Home Depot, unfortunately. Bummer. :frowning:

But you know, just because I have fond memories of these stores, it doesn’t mean they’ve been all that great in the last few years.