The first domino to fall?

Well, that didn’t take long. This morning the Sears Holdings conglomerate, which operates both Sears and KMart stores around the country, announced over 100 underperforming stores would be closing in the next few months. It’s too early to tell whether any of the stores on this part of Delmarva will be among the victims – there are KMart stores in both Salisbury and Rehoboth Beach, a full-service Sears at the Centre of Salisbury, a smaller Sears in Seaford, and Sears Hometown stores in Rehoboth Beach, Milford, Easton, and Onley.

The story cites one expert who claims Sears “offers a depressing shopping experience and uncompetitive prices.” To be honest, I work there more than I shop there and neither is done all that much. But I’m told their prices are fairly steep and most of the clientele I see when I am in there is older.

Yet the trouble also extends to KMart, as the combined concern reported same-store sales for those open a year or more were off 5.2% for the most recent quarter, which included the holiday season.

I don’t often delve into business stories like this, but if you read my Christmas message you’ll note that I pondered what the retail season may bring:

I suppose if I see a lot of “Going Out Of Business” signs in 2012 I’ll know there was a lot of coal left in retailer’s stockings.

Well, looks like Sears and KMart may have received a double dose of anthracite. It’ll be interesting to see how other retailers do once the holiday season numbers come in, and also whether any local Sears stores are on the chopping block.

One thought on “The first domino to fall?”

  1. As with General Motors, the seeds of Sears’ downfall were sown years ago, and at least from my viewpoint they are remarkably similar.

    In the late 90s until about 2001 I followed the auto industry closely, and by around 1998 it was obvious that GM was in trouble. There was even speculation about its bankruptcy then. The problem is fairly simple: the company was six competing brands of vehicles that were almost identical to each other except for their namplates. Chevrolet, Buick, Pontiac, Oldsmobile, Cadillac and GM used the same “platforms” for the various vehicles in their product lineup, but the brands competed against each other, requiring separate dealerships, advertising and to a large degree separate parts numbering and inventories. The single bright light in GM’s business picture was Saturn, a new and unique brand they had cranked up, and had the good fortune to be able to manufacture without the crippling legacy costs of the UAW contracts in place at the other brands. And when things really began to get tight, what was the first brand eliminated? Yup–Saturn.

    WIth Sears, the problem was that the company’s retail stores competed with its catalog sales. At one point, Sears had two entirely different product lines–one for retail and the other for catalog sales. The products were just different enough not to be interchangeable. In my opinion the company misread the problem, thinking that it was the catalog production costs that were killing profits. I think the separate-but-nearly identical product lines cost them far more in the way of consumer confidence than they have ever been willing to admit. And with the catalog system discontinued, Sears moved on to make a new mistake in its major appliance, power tool and automobile departments by offering national brands of goods that compete with the company’s own house brands.

    None of this is the entire problem, but it’s too big a piece of it to be ignored.

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