Sears pushes technology but fails at sales
Why is the historic retailer struggling to connect electronically with consumers?
If, as is often said, catalogs were the precursor to online selling, then Sears Holdings (SHLD), in the form of Sears, Roebuck and Co. set the standard in 1894 with the introduction of its “Book of Bargains.”
So why, with all this history behind it, is the company struggling to connect with customers in an increasingly online (electronic catalog) world? And more importantly, why is Sears unable to be profitable in any form? Wall Street, according to The Wall Street Journal, wants answers to these and other questions.
Sears CEO Edward Lampert has said he wants to attract "hyper-connected" shoppers with tablets and mobile phones. Lampert sees the need for bricks-and-mortar retailers like Sears to accommodate a seismic shift in consumer buying habits. And he is pushing the company to embrace technology in a big way.
Investors. simply put, want the company to make a profit. After reporting a $279 million quarterly loss May 23, Sears stock dropped 14%. Shares fell an additional 2.5% on Tuesday, closing at $48.98.
On a conference call with Lampert last week, Morningstar analyst Paul Swinand said "We're all interested and view the online and technology investments positively. I guess we're trying to bridge the gap of how we get to a profitable company from where we are today."
Lampert provided iPads to Sears store associates, and has ordered the development of online and mobile apps to improve communication with tech-savvy customers. One app even allows customers to text store employees with product questions, according to The Wall Street Journal report.
Other improvements include reducing delivery time for online shipments to an average of two days from the five days it took previously. In addition, like Amazon.com (AMZN), Sears now allows third party retailers to sell to Sears customers through its marketplace.
Finally, a loyalty program called 'Shop Your Way Rewards' lets Sears track customer buying habits, according to Lampert, to better target promotions in a way that could lead to higher margins.
Despite all these technology-oriented efforts, the Wall Street Journal reports that online sales, according to analysts, account for only about 2% of revenue. At that rate, e-commerce is years away from making a meaningful impact on Sears’ bottom line.
Meanwhile, the company has 2,000 physical stores -- and has not been keeping up with the competition when it comes to upgrading the bricks-and-mortar part of the business. Sears spent $378 million on capital expenditures last year. Kohl’s (KSS) spent $785 million, J.C. Penney (JCP) dished out $810 million and Macy’s (M) spent $942 million on store upgrades, according to regulatory filings.
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