This is a remarkable evolution of the retail shopping experience, and love it or hate it (most hate it), it's only going to get more profound.
Of course, one way to differentiate yourself is by creating an outstanding and unique in-store experience, but the long-game doesn't favor that strategy. Some believe that a complete overhaul of the retail business model is necessary, but JC Penney's attempt reinvent their business model lasted only one year before they pulled the plug on the CEO (for good reason).
As online retail becomes more prominent, another way traditional retailers might survive is to act more like ... wait for it ... Walmart. (*GASP!*). Indeed. Walmart sees the writing on the wall and is transitioning to a strategy that considers their 4500 locations first as distribution centers and second as retail stores.
Set forth with a strategy to have a strong online presence that is backed up by a retail operation. It's not that far fetched ... consider Amazon.
Robin Lewis at Forbes makes a compelling argument for why Amazon should consider acquiring Sears and K-Mart. Although the appeal of entering the brick-and-mortar fray sounds about as appealing as diving with dead fish, Walmart has a significant competitive advantage over Amazon with 4500 "distribution centers" across the US already. A strategic move like buying Sears/K-Mart not only makes sense for Amazon, it may be necessary for it's long term future.
Here are the take-aways from Mr. Lewis's article:
April 17, 2014
Why Amazon Should Acquire Sears
For Amazon
- Amazon would acquire roughly 2,400 U.S. stores (or “buildings”), overnight (1,300 Sears, 1,100 Kmart), providing convenience of proximity for pick up and returns and competing with Walmart’s 4,500 stores that double as distribution centers
- The real estate assets would be the primary reason for Amazon’s interest in acquiring Sears Holdings (SHLD +5.33%). However, there are several other valuable assets and operations, which Amazon could enhance and grow.
- Amazon might be able to cut an incredible deal, at least far less costly in time and capital, than building or leasing its own nationwide distribution centers/stores.
- Amazon could also acquire Kenmore appliances, Craftsman tools, and DieHard batteries, iconic brands that can be re-energized.
- Amazon has mastered “Big Data” (its database is estimated to be larger than that of the Pentagon) and has the ability to guide customized or “localized” assortments into each of the store locations based on local consumer preferences.
As Sears:
- A sale is a potentially profitable exit strategy. Eddie Lampert has been managing the business into liquidation, including methodically selling, leasing (partial or in total), and/or closing Sears and Kmart locations.
- Sears Holdings revenues of the combined businesses were around $50 billion with about 3500 stores in 2005. Revenues and profits have dropped steadily, to $36 billion in 2013, with a loss of about $1.4 billion last year. The stock price hit a high in 2007 at $192 per share; today, a share of Sears Holdings is hovering around $30. One analyst said if the stock drops to around $20 per share, Sears would be “one stop on the way to liquidation.”
- Right now, the “whole” of Sears/K-Mart is still more valuable than the sum of each of the last few remaining assets, and it is not going to get better.
You say, ‘How sad!’ But, get over it. If Sears and KMart aren’t discarded in this kind of a deal, at some point in the very near future, they will end up in the trash bin of history.
Amazon, a little-known brand just a decade ago, is becoming the new American icon. Maybe acquiring these two fading American icons is a more dignified way to put them to rest than the blunt harshness of liquidation.
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