Marketing Rule #1- Listen and Listen Well »
Friday
May012015

“Marketing Will Not Help Sears,” – Not Retailing is changing, Sears is not.

 

Sears (and K-Mart) has been on the down-and-out list for decades. Over twenty five years ago, I assisted an outside team to help them fix their merchandising and inventory systems issue. Even then, with their fancy new “electronic” cash registers, they had mediocre buyers, poor inventory control and difficult problems with computing power.  If that was not enough, they had lost their direction; soft goods were in trouble and big box stores were just starting to invade their market.

“No level of marketing effort ... can reverse the damage Sears has incurred.”

AdAge, the official publication of the American Advertising Federation, released a column recently stating that all was lost, marketing would not help! "No level of marketing effort with regard to quality or quantity can reverse the damage that Sears has incurred…Without appropriate leadership, product assortments, pricing and acceptable levels of productivity, a sinking ship like this will just continue to flounder. There is no viable strategy in place that customers find attractive or compelling, "says Columbia University’s Mark Cohen and former CEO for Sears Canada. See goo.gl/MgosFW to read the complete article.

I take umbrage with this exact statement, but allow that he was misquoted by AdAge. After all, his quote says “marketing” and the title says “advertising”.  Advertising people always think they know all about marketing, but this is rare. But this important comment speaks volumes about Sears and many other changing retail fortunes. Let’s look at it from a couple perspectives.

What Mr. Cohen would like to happen is in fact marketing strategy.

 

First, Mr. Cohen is generally correct about Sears’ direction. I have followed them for decades and, as I mentioned earlier, I was on an outside team in the 1980s that worked with them to “fix” their inventory planning process. We ended up with a very large software and consulting sale, but they failed to execute, despite their impressive new electronic cash registers. The truth was that they were so big that even a Cray super computer could not drive the software with the detail necessary to manage inventory. Much has changed during these intervening years!

But the issue is, as Mr. Cohen insinuates, much deeper. Sears was cut off at the legs in the 1970s by big box discount stores. They never focused on their market, and just like little piranhas, much smaller retailers did a better job specializing in one part or another of Sears’ business.

How did things get so bad? Sure they lost touch, hired non-retail executives, and fell in love with the financing side of the business. However, other influences were also underfoot.

New, changing concepts were proving the wheel of retailing once again. Some retailers are always trying to compete on price. They try to construct a value perception based on similar quality, lower service and lower price. This has played itself out for over a hundred years in the U.S. The general store was an attempt to increase variety and volume, compared with a specialty store, which had the effect of creating convenience and spreading costs across all fixed costs.

The department store did the same; some were high-end stores, others were more price-competitive.  J. C. Penny was successful at this.  J. C. Penny first found unserved small communities in the Wyoming and Colorado mountains. (He failed in the meat business in Longmont, Colorado first, but learned the retail business from working at The Golden Rule - a store that is remembered today mostly because of the Callahan House in the same town.)  Even into the 1950s a J.C. Penny clerk could not get a new pencil until it was used all the way to the eraser! Customers appreciated the thrifty nature of the store and it helped create the image of value.

 Sears, Roebuck and Co. was successful by providing a wide range of products from their catalog. They provided wider choice than the department store could, at competitive prices, and by the 1920s shipped anywhere on a train. The company was the first to have huge success by shipping to the customer and as it became tremendously popular, especially in farm country.

Sears, Penny’s, Woolworth’s and large local stores like May Company and Marshall Field’s dominated the retail landscape throughout the country. Then Gibson’s and K-Mart opened the first ‘big box” stores in the suburbs with stark furnishings, huge inventories and lots of parking. People would drive to get the broad selection and lower prices. Sears and Penny’s had been supplanted by the wheel of retailing.

Over the years as each grew, they added services and nicer displays, they moved into a slightly different market and they left the flanks open (the flanks being the Spartan, low cost niche). K-Mart exploded, and Wal-Mart fit into the geographic cracks left by K-Mart and a few others.  Later, specialty big box retailers like Home Depot, Costco, Office Depot and Best Buy cut into the hard goods side of the business. Penny’s tried to re-position as a middle market fashion retailer, and Sears relied on its hard goods and automotive business.

What I have described is all part of a continuing retail cycle that is influenced by technology and transportation. The never ending creep of adding costly services to low-cost concepts opens up new markets. One would think that this hundred-year story ends with stable winners (Walmart and Costco, for instance). But technology and transportation is driving a new entrant into the wheel of retailing.

Amazon, of course, is the darling today. While many other players exist, Amazon represents the trend, cutting delivery time and increasing selection over other retailers. Other retailers are not excluded from participating in this trend, but Sears was never excluded from technology, either.

This issue that I think Mark Cohen was referring to was that Sears never adopted a coherent strategy that developed “price, quality, product assortments” in a way that could compete with its new competitors. Of course, this is marketing. It was a marketing positioning and marketing emplacement strategy that was lacking. As I have said, I think Mr. Cohen would agree, and that the exact statement by AdAge was perhaps not what he said or meant. But it does provide excellent fodder for a more serious discussion about positioning and emplacement.

For Sears marketing positioning, as defined by Jack Trout, means that the company would carefully determine how to create its image in the minds of its target customers. This is not a straight forward process. It requires the following:

  • ·         A very detailed understanding of the Sears customer
  • ·         A deep understanding of the competitors that share the Sears customer
  • ·         The finesse in a marketing (and buying) message that communicates superior value and a mental image to the customer.

Fashioning this level of branding requires strong leadership and careful strategy. It would likely mean cutting entire business categories, new vendors and name brands. This is a difficult issue. Penny’s gave it “the old college try” several years ago when it re-focused its market, but the company is still a long way from success. Rebuilding image, especially from a “value” oriented brand, is much tougher than “coming down” from a luxury brand.

So Sears does have a difficult problem that may never be solved, even with the best leadership. Cohen is right in saying that advertising will not solve the Sears problem because it is a structural marketing issue. One that involves perceived value, changing customer habits, a moving competitive environment and intense online pressures.

The truth is that all of these pressures are coming so fast that a large part of all retail is in the cross-hairs of what is called Channel Disruption. Even retailers that are in good shape will have to adapt to the Internet and fast delivery- both of which are driven by technology.

While Sears failed at merchandising inventory control, Wal-Mart was building a reputation for savvy inventory management.

While Sears failed at merchandising inventory control, Wal-Mart was building a reputation for savvy inventory management. Wal-Mart was fortunate that the company could grow into the technological advances, while Sears was already huge. Today, Amazon is the retail technology leader, commanding huge assets in the form of server farms, software systems and warehouse automation that they rent out to retailers that can’t build their own. Of course, Sears might have been able to compete, but their merchandising team was already mediocre twenty years ago.

Today, mass merchants are making tough decisions about how to size retail locations, maintain inventory turnover without affecting selection, and maintain staffing levels when online stores need no sales people. As I stated above, this trend is not new; it’s been going on since the general store was supplanted by the first department store and the shoe factory put the boot maker out of business.

One thing is sure to me about staying current:  focusing on customer buying habits points the way to solving a marketing issue, if there ever was one. But, while Sears has been the same since they were in the 1960s when they ruled retailing, customers today are little like they were back then.

Read more:

IT ALL STARTS WITH THE EYE-Aristotle  http://www.burgessmanagement.com/burgess-management-articles/it-all-starts-with-the-eye-aristotle.html

The New Online Paradigm: Channel Disruption The changing ecosystem of distribution channels. http://marketing.redfusionmedia.com/channel-disruption 

Marketing Emplacement http://marketingemplacement.com/

Marketing Strategy http://marketingemplacement.com/category/strategy/

Marketing Positioning defined by Jack Trout  http://www.burgessmanagement.com/burgess-management-articles/market-emplacement-and-search.html