There’s a significant difference between “65% of our sales were driven by Shop Your Way members” and the closer-to-reality “65% of our sales came from customers that happen to be Shop Your Way members.” Incentive programs only help if they actually increase sales, and Q2′s top line of $8.87 billion made the 26th consecutive quarterly decline in sales. Lampert even recognized in his comments about the success of the program that it had proven costly.
But if he takes those costly discounts away, he might find that the only loyalty consumers have is to their own wallets.
#3: Multiple Factions + Limited Resources = Big Fat Mess
Many consumers who’ve shopped at Sears recently know why they don’t want to bother shopping their again — nearly every aspect of the experience is miserable. But there’s a bigger underlying reason the average consumer can’t see that’s ultimately destroying Sears Holdings.
It’s not one company, but rather, more than 30 separately run divisions that all have to go to Papa Lampert to ask for permission (and often money) before taking any initiative.
Though unusual, it could almost work were it not for the fact that Lampert still doesn’t really understand how department store retailing works. Ideas like loss-leaders don’t fly with him, and ideas like collaboration and cooperation don’t fly with the 30-plus division chiefs who are paid a bonus based only on the profitability of their particular division. Just for perspective on how dysfunctional this inter-company rivalry is, at one point, divisions were forced to bid against one another for spots in the company’s advertising circulars.
Although some of the infighting has been reined in, much of the mentality remains because most of that business structure remains.
It’s cliche, but true nonetheless — for a company, everything starts at the top. Eddie Lampert may well be a master of engineering deals, but he remains a fish out of water at the helm of a department store chain. Tablet-toting salespeople, unaligned divisions and profit-bleeding rewards programs just don’t get the job done when it comes to retail shoppers. It’s (still) all about the merchandise, the price, and the experience.
Until Lampert is willing to acknowledge that’s his weak spot, Sears’ struggle will continue.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.