Sears Launches Points for Progress, Will It Matter?
Sears Holdings has suffered a 5.02% revenue decline over the past year. The company is taking many approaches to turn itself around. This is commendable. The problem is that they don't seem to be highly effective approaches.
Sears recently announced its Points for Progress program on its FitStudio.com website. While FitStudio is a free online fit community, anyone who joins automatically becomes a Shop Your Way member.
Shop Your Way is the is Sears' best potential to grow its top line. The idea is for this loyalty program to attract more customers, and for existing customers to shop more at Sears thanks to savings on future purchases.
We'll take a look at FitStudio and the Points for Progress initiative to see if they have the potential to lead to increased Shop Your Way members, improved brand exposure, and ultimately, top-line growth.
FitStudio fit for profitable growth?
FitStudio's is a novel concept. This is how it works. You go to the website, register, get active by exercising and/or using social media sites such as Facebook and Twitter, and earn points that can be used for future purchases at Sears, Kmart, or Lands' End. As part of the #Fitin14 challenge, if you walk or run 14 miles, then you will earn 5,000 points, or $5 in points. But that's not all the website offers.
If you visit FitStudio, then you will also find articles on various topics, including diet and nutrition, exercises, workouts, and motivation. You can also find a trainer in your local area. I explored this feature to determine its quality. It was impressive. You type in your city and state and a list of trainers will appear. You will see how far away that trainer is located, what they specialize in, their credentials, and what previous clients have said about their experiences with that trainer.
Another aspect of FitStudio is that you can buy fitness gear. That's a nice feature, and Sears will likely generate some sales. However, this isn't going to make much of an impact on Sears' top line. FitStudio is more about increasing Sears' exposure to consumers through new means.
If you're into fitness, then FitStudio might be a success for you, helping you reach your fitness goals. With Points for Progress, you can earn Shop Your Way points by tracking your fitness progress through FitBit, MyFitnessPal, MapMyRun, and Netpulse-enabled fitness equipment at more than 500 gyms across the U.S. and Canada. But if you're an investor, what does it mean? Since this initiative is all about increasing exposure, let's take a look at the site's exposure.
According to Alexa.com (global leader in website analytics), FitStudio.com has a global traffic ranking of 244,001 and a domestic traffic ranking of 44,678. Not impressive, but direction is more important.
Over the past three months, the site's bounce rate has dropped 23% to 43.80%. The direction is a positive considering the bounce rate determines how many visitors view one page and leave. On the other hand, 43.80% is still too high for a bounce rate. This means that not enough new visitors aren't sold by the home page. Also over the past three months, pageviews-per-user has slipped 2.40% to 4.10, yet time-on-site has jumped 98% to 6:55. The latter is very impressive. It seems as though those who are interested remain interested.
Overall, FitStudio seems as though it has potential to be a success, but on what scale?
More impactful innovations
Macy's , a department store capable of stealing market share from Sears, has become the omnichannel leader for all retailers. Macy's has managed to successfully merge in-store, online, and mobile channels, making for more seamless shopping experiences for its customers.
Macy's has been investing heavily in technology as of late, and it has paid off in a big way. While Sears has suffered a revenue decline over the past year, Macy's has grown its top line 1.42% over the same time frame. This might not sound substantial, and it's not, but given the current consumer environment and the weakness in department stores overall, it's impressive. Also keep in mind that any Sears or J.C. Penney failures are likely to lead to market-share gains for Macy's.
The main problem for Sears is that it sells a broad range of products, but it doesn't sell a broad range of high-demand brands, and many of its other product categories can be found at a discount retailer like Wal-Mart .
If Sears has to compete with the likes of Wal-Mart, then it's fighting a steep uphill battle. Wal-Mart's $23 billion in annual operating cash flow allows it to reinvest in its business, including eight technology labs over the past three years. Therefore, Wal-Mart has much more potential for impactful technological advancements than Sears going forward. Sears generated operating cash flow of negative $694 million over the past 12 months.
The bottom line
It's good to see Sears continuously innovating to increase its brand exposure and attract more customers. However, while FitStudio, and its Points for Progress initiative, offers some upside potential, it isn't likely to be a big catalyst for increased Shop Your Way members, and ultimately, the top line. Keep in mind that joining FitStudio is free.
Sears is facing competition from all angles, its brand is dealing with negative sentiment, and its inability to generate positive cash flow will limit its upside potential. If you're looking to invest in a retailer with strong potential in technological innovation, which then has the potential to increase sales, then you might want to consider Macy's or Wal-Mart. Please conduct your own research prior to investing.
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The article Sears Launches Points for Progress, Will It Matter? originally appeared on Fool.com.
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