Another Reason to Avoid Sears Stock: Botched Layaways

Just when you think Sears Holdings Corp. (SHLD) can’t possibly botch anything else, the struggling retailer finds a way of surprising you.

sears stockSadly though, owners of Sears stock probably have grown immune to the growing list of failed initiatives, if the non-movement we’ve seen from SHLD in the wake of the news is any indication.

The latest: Earlier this week, Sears and Kmart stores collectively canceled a couple thousand online layaway orders, apparently putting the items back on shelves for others to buy. The goods were supposed to be shipped to customers’ homes, and in some cases had already been paid for.

Although the company is working to retrieve the released items and still get them to these layaway customers, in some cases that may not be possible. Some shoppers who had reserved items will now be forced to try and find them somewhere else, while waiting for a refund.

It’s an embarrassment that clearly does nothing to help prop up the price of Sears stock, but to make this sort of mistake at this time of year borders on disgraceful. Yes, accidents happen. Vendors fail to deliver. Computers crash. Delivery trucks break down. Items break in transit.

A random cancellation of a couple thousand online layaway orders, though … that’s just a failure of what was a poorly thought-out idea from Sears to begin with.

And yet, it’s nothing new for those who’ve been following the SHLD saga.

None of It Has Actually Helped Sears Stock

You can say this much for hedge fund manager, majority owner and Sears Holdings CEO Eddie Lampert — he’s willing to try most anything. The one place you simply don’t want to try “most anything,” however, is in the world of retailing. Ideas that look genius at first glance can end up being fruitless, if not disastrous, when paying customers actually get injected into the process.

And Sears Holdings has a long list of failed initiatives.

Remember the idea of putting iPads in sales associates’ hands to use as mobile cash registers? That idea was unveiled in the latter part of 2012, just in time to make that year’s holiday shopping season a smash hit. As it turns out, though, the iPad-based POS terminals can’t always connect to the checkout system, and they can actually slow the checkout process even when “working properly.”

In early 2013, Sears announced that Shop Your Way members would have access to an app allowing them to text-chat with specific workers at the Sears store of their choice. It’s creative and cutting edge, but oblivious to the fact that an associate who’s available for a chat also might have three customers to take care of in the store, leaving the digital customer on hold, and wondering why service is so poor.

Then there’s the curbside pickup initiative Sears announced in February of this year, guaranteeing that a customer could order an item online and within five minutes of arriving in the store parking lot would have it hand-delivered to the car by a store associate. Never even mind the potential theft risk associated with an employee walking in and out of a store on a regular basis. It’s an idea that errantly assumes an associate will even be available to do ferry duty within five minutes of a customer’s arrival.

And let’s not even talk about Mygofer, which was odd to start with when it debuted in 2009, and has since been deemed a bizarre letdown by everyone except Eddie Lampert.

In all fairness, not all of these gimmicks initiatives were launched in all stores, and some have been improved in the meantime. None of them, however, have actually helped improve sales or earnings despite being lauded at the time they were unveiled. Sales and earnings have continued to dwindle for the past couple of years.

Bottom Line for SHLD

Putting all these impotent initiatives together, it’s becoming clearer every day: Lampert’s apparent love for technology and gimmicks is an effort to cover up the fact that he knows very little about the art of selling goods to customers.

If a department store chain can “do” the technology perfectly, it might, might work. If your technology efforts fail (as it did with online layaway and the iPad POS idea couple of years ago) and that’s all you really have to offer consumers, though, it can actually make already-challenging matters worse.

It’s been said before, but it bears repeating now — Sears and Kmart doesn’t need gimmicks like online layaway to thrive. If Eddie Lampert really wanted to turn Kmart and Sears around and by extension start pushing Sears stock higher, the focus should turn back to putting the right merchandise in the right place at the right time, then telling consumers about it. That’s 80% of the retailing battle.

Incredibly, that’s the one thing that rewards-program-obsessed Lampert has yet to speak about (to any meaningful degree) since taking the helm at Sears a couple of years ago.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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