When Sears announced that it was cutting prices across the board, the nation’s press hailed it as a revolution in retailing. Then the day came and the signs went up saying: “We have the brands you want at great low prices every single day!” and crowds of customers raced to Sears as to a one-day fire sale.
But what kind of a revolution is it when other retailers have had low prices every day for years, building empires by discounting national brands? And what are these low prices, and how long will they last? “I’d guess they’re lowering prices to try to save themselves,” says Los Angeles resident Dorothy Clark. “They’ve probably been at a competitive disadvantage: there’s Target, and Toys R Us, and even Saks always has a sale. The question is, are their prices now worth my going there? For a long time they weren’t.”
Actually, Sears’ very effort to change is news: At $30 billion in annual sales, the nation’s largest retailer still has girth, if not shine. And what it’s doing may ultimately be revolutionary--not because of Sears’ rather tardy insight that “everyday low prices” are less costly to a retailer than constant sales promotions, but because some of the other things Sears is doing in an effort to save itself may give the marketplace some new shine.
Sears has announced changes before, of course. For two decades the big chain has struggled to find its “franchise” in a new era of discounting, of clean, well-lit, socially acceptable K marts, Targets, Marshalls and Toys R Us, selling not junk but nationally advertised brands. Above Sears was a “glass ceiling” of upscale merchandising--department stores, with fashion goods and affluent shoppers. Below was discounting, which Sears couldn’t match, given the overhead of its big mall stores, service personnel, distribution centers, catalogue operations and expensive Chicago headquarters.
Lost Market Share
Over 10 years, Sears has tried some deeper discounting, some higher fashion (a Cheryl Tiegs sportswear line). It introduced a “store of the future,” with contemporary layout and graphics like other stores of the present. It clung to its traditions--private labels, exclusive models of national brands, promotional sales of the week.
And it kept losing its share of the retail market, which had “moved to another plateau,” says Walter Loeb, senior retail analyst at Morgan Stanley in New York. For Sears, he says, “this is a fight for survival.”
It’s not easy to test the validity of Sears’ revolution in pricing (even granting that low prices are revolutionary only to Sears). Comparison shopping its prices leads to several pitfalls. For one thing, at this point, Sears may have blacked out its old prices on some items but provided no new prices on the ticket.
For another, many of Sears’ goods may be comparable to goods elsewhere but impossible to compare. Some departments have only private labels: One cannot compare Sears-brand linen prices with another store’s Fieldcrest, Cannon, Wamsutta. Similarly, one can’t compare toaster oven prices when Sears stocks only Sears brand and everyone else carries Black & Decker.
More confusing, Sears has exclusive models of many nationally branded items, with unique model numbers and slightly different features. Sears’ Black & Decker Automatic Shut-Off Electronic Iron F440WHD is $44.74 (old price $59.99), but it’s found only at Sears. The closest comparison elsewhere is model F440WHS, priced between $40 and $50, and, says the manufacturer, slightly different. How does one compare Sears’ exclusive model 1570SR of Century’s Kanga-Rocka-Roo baby carrier at $27.46: Is its proper counterpart the widely available model with tray? With storage pouch? In fabric or vinyl?
When direct comparisons are possible, Sears wins some and loses some. A Fisher-Price nursery monitor is $42.96, compared to $44.84 at Toys R Us. An AT&T; Trimline 210 phone is $29.84, infinitesimally lower than the $29.90 at Adray’s, one of L.A.'s most competitive discounters, but a Black & Decker under-cabinet can opener is $13.94, compared to Adray’s $9.90. Braun’s Citromatic 2 juicer is $17.96 at Sears and $20 at the Broadway stores, but the Levi’s 501 Student Fit blue jean is $20.94 at Sears, compared to $19.95 plus 25% off at the Broadway. (More fascinating is the vision of Sears’ old prices: the Citromatic 2, for example, was $24.99--$5 more than at the Broadway.)
The validity of Sears’ revolution in retailing is another matter, so far widely misunderstood. Sears’ endorsement of the principle that everyday low prices are more cost-efficient than constant sales promotions is news, but not a revolution. A revolution would be the success of the overall program--both sales boosting and cost cutting--of which the new pricing is only a part.
Sears has already closed three of its 13 regional distribution centers and will have only six by mid-1990. Catalogue sales will become a separate organization; its unit inventory cut by up to 25%. Sears’ headquarters building in Chicago is for sale, and its merchandise group employees--already 400 fewer since last year--will be moved.
To build traffic, Sears is also introducing “power formats” (Loeb’s translation of “power” marketing: “If you walk into a store, you really feel like shopping there”) in the guise of “superstores within a store.” The first were “Brand Centrals"--collections of appliances and home electronics that have already been deemed a success. This week Sears introduced its first “Kids & More"--a children’s department featuring clothes, shoes, toys, furniture (both Sears labels and national brands such as Oshkosh, Levi, Bugle Boy, Hush Puppies, Reebok), even maternity clothes, a haircut salon and play areas.
Impossible to Evaluate
These “superstore” formats--applicable in the future to tires, paint and hardware, men’s or women’s apparel, says retail analyst John Landschulz at Cowen & Co. in Chicago--could eventually give Sears some escape from its expensive mall locations. If a region or neighborhood could use a “Kids & More” or a “Brand Central,” but not a full Sears, it could be introduced economically as an independent store on a street or mini-mall.
But those are future developments, revolutionary in concept but impossible to evaluate. The new pricing, selection of goods and presentation are open to review. So is Sears’ promise that salespeople who would otherwise be changing sale signs and re-marking goods will now be freed to provide more customer service.
Now that would be news, and downright revolutionary.