Why Home Furnishings Can Save Sears & Kmart… And Why It Will Never Happen

The Robin Report - KmartDisclaimer: This is not another opinion piece trashing Fast Eddie – aka Eddie Money, Edward Moneyhands, Edward S. Lampert. Unlike a whole lot of other people, I get what he’s doing at Sears Holdings, which is making a lot of money for Fast Eddie – aka Eddie Money, Edward Moneyhands… well, you get the idea.

The plan is not to run a great retail institution, it’s to make a great deal of money. And by that measure, they are perhaps the most successful company in American business today. If someone were able to analyze all of the SEC filings, reports and data coming out of ESL Holdings in Greenwich, Connecticut, it would no doubt show Fast Eddie has done quite well… for Fast Eddie.

No, we’ve come not to trash Fast Eddie, but to present a tale of what-if… what if Sears Holding really wanted to be in the retail business and operate not just one, but two strong, competitive and profitable stores?

Not only is that eminently doable, it’s quite frankly not all that hard and wouldn’t take a whole lot of capital investment. Even more amazing, what it would take are some of the very things Fast Eddie has tried, particularly in the earlier days of his ownership – back when it seemed there might have been even a glimmer of a plan to create successful retailers.

And the secret to the whole plan? It’s home furnishings. How about that? A little context would be helpful at this juncture, by way of saying the predicament these stores find themselves in today is not just the fault of Fast Eddie. You can trace Kmart’s slow but steady march to retail doom back to the 1980s and 1990s when, as a corporation, it took its eye off its core business and began diversifying into other retail channels: books, home improvement, whatever. At the time, Kmart was the unquestioned fashion leader of the mass merchant channel and had well established itself as the place for stylish home and apparel at a price … way before Target or H&M or IKEA, or any of the other cheap chic stores discovered the formula.

Kmart’s fashion leadership, particularly in home, reached its zenith with the original Martha Stewart program of the 1990s. Kmart was a pioneer in what remains today the largest private label program in the history of home furnishings that did more to raise the taste level of Middle America than perhaps any other single cultural phenomenon, short of the Internet. With corporate going off into assorted – and sorted – myriad directions, Kmart stopped investing in its physical plant and merchandising, and the death spiral was well on its way.

The Robin Report - SearsYou have to go back even further to the 1950s and 1960s to see the root of Sears’ problems, back when the great retail exodus to the suburbs began. Sears made the fatal flaw of deciding it was a department store, not a mass merchant, and set out on a strategy that sited its stores in shopping malls rather than in strip centers or freestanding locations. As the malls gradually became the province of teenage girls and shoe stores, the Sears merchandise mix – heavy on refrigerators, power tools, lawn mowers and utilitarian clothing – very quickly became largely irrelevant to shoppers frequenting regional malls. If you wanted those kinds of products, you went to strip centers and freestanding locations – exactly where Sears wasn’t.

By the time Fast Eddie came along to take over these two operations in the early 2000s, Kmart was a second-rate, tired-looking, also-ran – and Sears was the wrong store in the wrong location. But, here’s the most fascinating part of this entire equation: put the two together and you might just come up with two viable retail operations simply by rearranging the existing pieces … and buying some new light bulbs and some paint to fix up the stores.

Ladies and Gentlemen, I present to you the all-new Sears and Kmart coming to a shopping location near you. You’ll find thousands of Sears stores in strip centers and freestanding locations all across the country. You might remember these stores were once Kmarts.

No more. They now have a big red Sears’ logo over the front door and when you walk in, you are immediately presented with two options: to your left, occupying two-thirds of the store, is Sears Hard. It features the number-one brand in major appliances, Kenmore, which is now also the umbrella brand for small appliances, personal care products, home storage and a huge line of consumables like laundry detergent, paper goods, diapers and cleaning products. Immediately adjacent is the Craftsman-branded area, featuring power tools, hardware and a cherry-picked home improvement products area to scare the cash flow out of Home Depot and Lowe’s. And just beyond that, with its own entrance on the side of the store, is the Diehard automotive department with service bays, auto repair aisles and a Sirius XM area where you can get just about any tech gadget for your vehicle. Back at the main entrance and to your right is Sears Soft, a well-edited fashion and home goods department that features tons of apparel basics like underwear, footwear, khakis, knit tops and outerwear. Lands’ End is the dominant brand, taking up more than half the space in the department. The other portion of Sears Soft is home textiles. The Lands’ End sub-brand, Coming Home, is the star here where you’ll find some of the best values in the market on basic solid color sheets and towels. There’s a food court towards the back of the store with a Dunkin’ Donuts, a Pizza Hut and a Pollo Loco fast food chicken outlet, perfectly mated to the demographics of the store.

Because of the utilitarian nature of most of the merchandise, the raw look of the store – bare concrete floors, exposed ceilings, funky fixturing – is a positive rather than a negative for the average shopper. Taken together, these new Sears take the number-one choices for appliances and auto repairs and combine them with the best of the big home improvement chains and Kohl’s and Uniqlo. And they do it with minimal capital investment, downside risk in fashion markdowns, or store expansion programs.

But wait, there’s more. Drive down the highway a few miles to the mall and that big box at the end of the center now seems to have a giant red K adorning it. Inside, all of the last vestiges of the lawn mowers, screwdrivers and dishwashers are long gone. Instead, the main floor has a giant cosmetics, fashion accessories, and candy and snacks area, as if one took a Sephora and mashed it up with Hard Candy makeup, Dylan’s Candy Bar and Urban Outfitters – but cut the prices by a third. Fast-moving fashion fills out the rest of the main floor with enough tops, bottoms and in-between to embarrass a Zara’s. Upstairs and downstairs? They are gone, leased out to learning centers, dental hygienists and Storage Centers of America.

That giant red K – gee, we seem to have lost the word Mart somewhere during the move – is all private label all the time. And while the markdowns are going to be tough to handle, there are no royalties to pay, and the rent from the other floors is going to help the bottom line, big-time. And suddenly all of those teenage girls are going to stop making a U-turn when they get to the end of the mall and venture into a place they wouldn’t have stepped foot into not all that long ago.

Frankly, the Kmart strategy is going to be a tricky proposition. A whole lot of smart retailers have fallen flat on their faces trying to make it in the fast fashion game.

But the Sears end of the equation is a no-brainer. Great brand names – including Sears itself – convenient locations situated near where their core customers live, and a low-risk merchandising mix are a powerful combination. The new Sears would more than pay for whatever ultimately ends up happening at Kmart.

Remember way back when to the era when Sears advertised itself as “Where America Shops”? That doesn’t have to be just retailing history. The saddest part of all is that it most probably will.

Warren Shoulberg is editorial director of several Sandow Media home furnishings business publications and is sitting by his phone waiting for Fast Eddie’s call.

Warren Shoulberg About Warren Shoulberg

Warren Shoulberg is editorial director of several home furnishings magazines and has been reporting on the home business for a long time. He is currently working on his next book, Stupid Business.