When Earl Jahnke, 78, needs replacement blades for his Sears Craftsman grass trimmer, he could drive to the Sears, Roebuck & Co. store at the Hawthorn shopping mall in Vernon Hills, Ill. Instead, the retired plant manager skips the 25-mile trip and the mall parking hassle and buys his blades at a local hardware store. A lost sale for Sears? Hardly. It owns the hardware store.
It's a major departure from Sears' decades-old strategy of locating cavernous general-merchandise stores in shopping malls. This year, Sears is opening a slew of freestanding stores on commercial strips and in small towns. Its thinking: The number of shoppers visiting malls has tailed off since 1990, as has mall construction. "If the company wants to grow, we have to look off the mall," says Marv Stern, president of Sears Home Group.
DRESSING ROOM. Sears has been playing with pieces of such a strategy since 1983, when it opened the first of its freestanding hardware stores. Now, though, the company says it is fully embracing the new direction. It won't discuss how much it will invest but says it expects to open 50 hardware, 30 furniture, and 80 rural "authorized dealer" stores by yearend. By 2000, it hopes to expand to 500 hardware stores, 250 furniture stores, and 800 dealer outlets.
Such plans are the doing of Arthur C. Martinez, Sears Merchandise Group chief executive. Since taking charge of the division in late 1991, Martinez has renovated hundreds of dated stores and upgraded apparel quality, lifting operating profits to $890 million last year from 1992's $2.9 billion loss. Now, Martinez, who will succeed Edward A. Brennan as company chairman in July, is looking to free up even more space for apparel while finding new avenues of growth.
To do that, the retailer has focused on three new stand-alone chains. One, called Sears Homelife, will sell all of Sears' furniture and mattresses by 1997. Sears also is developing the network of dealer stores featuring appliances, electronics, and home and garden gear to serve the rural areas it largely abandoned when it closed its catalog operation in 1992. And the hardware stores, mainly in urban areas, are aimed at expanding sales of such well-known Sears home-improvement brands as Craftsman tools and Weatherbeater paint.
More store concepts may be on the way. At a May 24 meeting with Wall Street analysts, Martinez said Sears might accelerate the expansion by acquiring a furniture chain--or an auto service chain to complement Sears' mall-based auto business. Analysts applauded the notion. "This [new strategy] has great potential to be a big winner for Sears," says retail consultant Alan Millstein. "Their brand equity is unequaled."
WRENCHES TO GO. Indeed, early results are encouraging. The rural dealer stores are producing average gross sales of over $1 million each in their first year, exceeding expectations. In hardware, Sears says it already has found a lucrative niche by focusing on do-it-yourself home remodelers who want to get in and out of the store quickly. In Columbus, Ohio, where it has opened 10 20,000-square-foot hardware stores in addition to its three full-line stores, Sears claims its home-improvement market share has doubled. All the hardware outlets it has opened in the city are profitable.
Still, the hardware business is hotly competitive, pitting aggressive neighborhood chains such as Tru-Value Hardware and Ace Hardware against the home-improvement behemoths, Home Depot Inc. and Builders Square Inc., which are expanding rapidly into new markets. Sears admits that its furniture stores, meanwhile, haven't been wildly successful: With consumers unwilling to spend consistently on big-ticket items, results of that chain have climbed and dropped with durable-goods cycles.
Which is to say, Sears isn't writing its big department stores off. The retailer says it remains committed to rejuvenating its 800 mall-based stores with better brand-name apparel, cosmetics, and jewelry. And when the spin-off of the Allstate Insurance Group unit is finalized in July, Sears again will be focused purely on retailing, a focus that may be the key part of Martinez' plan. He's proving that in retailing, strategy is more important than scale--and not every sale is made at the mall.
Off The Mall
HARDWARE This year, Sears will open 50 Sears Hardware stores stocking tools, hardware, and garden items. By 2000, it wants 500.
FURNITURE Sears furniture will be sold in Homelife stores. The chain plans to open 30 in 1995 and wants 250 stores by 2000.
SEARS DEALERS Since June, 1993, Sears has opened 301 independently owned rural stores. By 2000, it wants 800.