Why Sears Should Just Call It Quits

Former Sears exec calls for retailer to liquidate
Scott Olson/Getty ImagesCustomers leave Sears' flagship store in downtown Chicago in January. The store closed last month.
By Krysta Gustafson | @KrystinaGustafs

Former Sears executive Steven Dennis says now is the time for the struggling retailer to liquidate.

In a commentary on his blog last week, Dennis, a former vice president at Sears who exited the company in 2003 after about a decade, listed five reasons why the company should "stop the charade and embrace the inevitable." His points were:
  • It doesn't offer a value proposition.
  • It's lost its relevance in nearly every major category, while its competitors have gained ground.
  • After years of underinvesting in its stores, it has a lot of catching up to do, and it now would be unable to fund the necessary upgrades.
  • CEO Eddie Lampert "doesn't know what he is doing," and is investing in the wrong areas, such as the Shop Your Way loyalty program.
  • Its valuable assets, including proprietary brands Kenmore and Craftsman and its real estate portfolio, are becoming "less valuable every day."
Sears (SHLD) has closed hundreds of stores in the past decade, leaving more than 2,000 stores in its footprint, when accounting for both Sears and Kmart. More closings are expected.

Lampert, who owns about a 50 percent stake in the company, emphasized on his blog following last week's shareholder meeting that turnarounds are different than transformations, and the company is taking measures to improve its profitability.

He wrote: "Turnarounds happen when a company succeeds again at doing what it had once done successfully before. Transformations are almost entirely different -- they occur when companies adapt their business model to fundamental shifts in technology, competitive landscapes, government policies and regulations, or macro trends to serve their customers [or, in our case, members] in new ways.

%VIRTUAL-article-sponsoredlinks%"Over the last decade, incidentally, Sears and Kmart have faced all of the challenges I just listed." Lampert continued, "Turnarounds are challenging, but transformations are even harder because not everyone sees the direction you're heading in or your destination. After spending our annual meeting with shareholders, associates, and other partners, however, I am hopeful that looking carefully at other companies' transformations sheds more light on the actions we are taking and why."

He also asked people to remember the transformations that took place at Apple (AAPL), General Dynamics (GD) and Eastman Kodak (KODK).

"I want to be clear that I am in no way saying that Sears Holdings is just like any of these companies, but there are lessons to be learned from them," he said.

Last month, retail expert Robin Lewis, author of online newsletter The Robin Report, made the argument that Amazon.com (AMZN) should acquire Sears. He called the idea "win-win" for both companies, as an acquisition would supply the online giant with thousands of distribution centers, while it would give Lampert a "profitable exit strategy."

Sears posted a loss of $930 million for the year ended Feb. 1. It is scheduled to announce first-quarter earnings on May 22.

Sears' shares are slightly higher since Tuesday, the day of the company's annual meeting, after falling 4.9 percent that day.

17 Tricks Stores Use to Make You Spend More Money
See Gallery
Why Sears Should Just Call It Quits
In supermarkets, high margin departments like floral and fresh baked goods are placed near the front door, so you encounter them when your cart is empty and your spirits are high.    
Flowers and baked goods also sit near the front of stores because their appealing smell activates your salivary glands, making you more likely to purchase on impulse.

Supermarkets like to hide dairy products and other essentials on the back wall, forcing you to go through the whole store to reach them.



Once customers start walking through a store's maze of aisles, they are conditioned to walk up and down each one without deviating.

Most stores move customers from right to left. This, combined with the fact that America drives on the right, makes people more likely to purchase items on the right-hand side of the aisle.

Anything a store really wants customers to buy is placed at eye level. Particularly favored items are highlighted at the ends of aisles.

There's also kid eye level. This is where stores place toys, games, sugary cereal, candy, and other items a kid will see and beg his parents to buy.
Sample stations and other displays slow you down while exposing you to new products.
Stores also want items to be in easy reach. Research shows that touching items increases the chance of a purchase.

Color affects shoppers, too. People are drawn into stores by warm hues like reds, oranges, and yellows, but once inside cool colors like blues and greens encourage them to spend more.

Hear that music? Studies show that slow music makes people shop leisurely and spend more. Loud music hurries them through the store and doesn't affect sales. Classical music encourages more expensive purchases.
Store size matters, too. In crowded places, people spend less time shopping, make fewer purchases (planned and impulsive), and feel less comfortable
Stores not only entice you with sales, they also use limited-time offers to increase your sense of urgency in making a purchase.
The most profitable area of the store is the checkout line. Stores bank on customers succumbing to the candy and magazine racks while they wait.
Finally, there is the ubiquitous "valued shopper" card. This card gives you an occasional deal in exchange for your customer loyalty and valuable personal data.
Read Full Story