KMart Buys Sears...or How The Might Have Fallen
Wow. Where to begin on this one.
KMart has $11 billion dollars? Seriously? Seriously? I thought they had gone out of business. And I don't mean that in a "haha, they are so pathetic I'm going to harass them and say they are out of business"; I mean, I really thought they went under. I know they filed for Chapter 11 3 or 4 years ago. I thought they closed up almost all their stores? Wow...they have $11 billion dollars? Seriously?
Sears...what in the Hell happened to you? Do you realize you just got bought by KMart? KMart? I think Wal Mart and Target keep them around just so they have a third person to beat on when they are sick of going toe to toe against each other. I didn't realize that Sears had fallen this far. I thought that they had done a good job of promoting the rest of their product lines (the rest being anything that doesn't say Craftsman on it)--Come See the Softer Side of Sears supposedly went over really well with women--but to be purchased by KMart is a huge blow.
This is a great deal for KMart. It will give them some legitimacy, and--quite frankly--I think their brand name is so poor right now, they might as well just drop it completely and go with Sears. They're taking on a lot of big names, however. Basically it is now KMart/Sears v. Lowes, Home Depot, Wal Mart, and Target. Those are some pretty big names. If they can attract a substantial minority from each of those retailers, this will be a huge success for them. However, if they find that people want to buy their specialty tools at Sears in the mall, and the rest of their home improvement items at HD or Lowes, and that the average retail shopper (Target/Wal Mart) isn't impressed with the Sears/Craftsman name and continues to not be impressed with KMart, then both companies are royally screwed.
In the end, I think the Craftsman name is strong enough to bring in a significant amount of the Home Improvement business, and with this, people will begin doing some more of their retail shopping at the new stores. It will take some time, but it will work. KMart/Sears just needs to make sure they don't favor one product line over the other...they need to have clean stores, good selection, and good prices in both areas, not one or the other. The main thing to remember is this will not happen quickly; it will take some time for people to get used to doing their Wal Mart/Target type shopping at Sears. Go with the Target model KMart; you want to be the Higher Quality mass retailer--this will work since Craftsman has such a high quality reputation already. Don't be the cheapest and messiest low cost leader like Wal Mart or, well, KMart. You tried that, and it didn't work. Try something new.
KMart has $11 billion dollars? Seriously? Seriously? I thought they had gone out of business. And I don't mean that in a "haha, they are so pathetic I'm going to harass them and say they are out of business"; I mean, I really thought they went under. I know they filed for Chapter 11 3 or 4 years ago. I thought they closed up almost all their stores? Wow...they have $11 billion dollars? Seriously?
Sears...what in the Hell happened to you? Do you realize you just got bought by KMart? KMart? I think Wal Mart and Target keep them around just so they have a third person to beat on when they are sick of going toe to toe against each other. I didn't realize that Sears had fallen this far. I thought that they had done a good job of promoting the rest of their product lines (the rest being anything that doesn't say Craftsman on it)--Come See the Softer Side of Sears supposedly went over really well with women--but to be purchased by KMart is a huge blow.
This is a great deal for KMart. It will give them some legitimacy, and--quite frankly--I think their brand name is so poor right now, they might as well just drop it completely and go with Sears. They're taking on a lot of big names, however. Basically it is now KMart/Sears v. Lowes, Home Depot, Wal Mart, and Target. Those are some pretty big names. If they can attract a substantial minority from each of those retailers, this will be a huge success for them. However, if they find that people want to buy their specialty tools at Sears in the mall, and the rest of their home improvement items at HD or Lowes, and that the average retail shopper (Target/Wal Mart) isn't impressed with the Sears/Craftsman name and continues to not be impressed with KMart, then both companies are royally screwed.
In the end, I think the Craftsman name is strong enough to bring in a significant amount of the Home Improvement business, and with this, people will begin doing some more of their retail shopping at the new stores. It will take some time, but it will work. KMart/Sears just needs to make sure they don't favor one product line over the other...they need to have clean stores, good selection, and good prices in both areas, not one or the other. The main thing to remember is this will not happen quickly; it will take some time for people to get used to doing their Wal Mart/Target type shopping at Sears. Go with the Target model KMart; you want to be the Higher Quality mass retailer--this will work since Craftsman has such a high quality reputation already. Don't be the cheapest and messiest low cost leader like Wal Mart or, well, KMart. You tried that, and it didn't work. Try something new.
posted by Michael Pondrom at 5:45 PM
1 Comments:
When I first heard about this it was passing through some financial channel. They said both KMart and Sears stocks were UP relatively large percentages on the news.
One of the following two scenarios happened:
A group of cocaine-addicted schucks on the Sears side woke up hungover one morning and said to themselves, "Lets let the people that run KMart run our business too."
Or
Everyone on the Sears side knows something apocalyptic about their company and want to get out in time to use their stock options. They don't give a F who's holding the bomb when it explodes as long as it's not them.
In either case, how the crap did their stocks go up?!
Granted I don't have an Ivy League MBA, but I just don't see KMart or Sears as an attractive business model.
KMart might as well just pack up and go home, there's no coming back from the dead here. Walmart and Target have established their niches as the lower-income and middle-income superstores. There is a seriously high barrier to entry because of the cost of these stores plus you have barriers of routine/loyalty and operating cost. There's simply no way KMart can compete with Walmart's cost structure.
Mike, you're right.. their best shot is to mimic Target in some fashion. I still just don't know how successful they can be. Target is establishing themselves at a pace that feels similar to when Walmart superstores starting springing up (if not faster).
KMart would need a twist... if it were me (time to play Apprentice), I'd focus on building something the size of a Walmart and packing it with other established chains: Blockbuster, Radio Shack, one or two upscale fast food places like Chipotle or Baja Fresh, Autozone, Starbucks, maybe a Payless. You could drop in a Sears-backed small and large appliance store, a linen store, and a clothes store, and somewhere in all of this is groceries or whatever.
Basically, instead of trying to do everything yourself, leverage established brands and bring them together in an mall-esque environment. You sacrifice huge revenues, but you also limit huge costs, all the while building something that can not only stay competitive with Walmart and Target but something that has potential to bring more customer value in the long-run.
Also, I couldn't agree more that they need to drop the KMart name, it's a f'n embarrassing name. If there is a slim chance they can rebound, they've got to re-brand, no question.
-Nick
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