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Sears Canada Mines 60-Year-Old Database for Turnaround

Sears Chief Mines 60-Year-Old Data for Rebound
Sears Canada cut its loss by almost 50 percent in the third quarter to 22 cents a share from a year earlier. Photographer: Brent Lewin/Bloomberg

Sears Canada Inc. is betting on using its 60-year-old credit card database, the largest in the country, to create advertising for targeted customers and help return the retailer to profitability by 2014.

“We recognize it as a huge opportunity, it’s been under-leveraged,” Chief Executive Officer Calvin McDonald, 41, said in an interview at the company’s Toronto headquarters last week. “We’re on it.”

Sears Canada, which has reported 12 straight quarters of sales declines, delved into its database for the relaunch of its Jessica women’s brand in September, analyzing customers’ past purchases to determine who it should choose for exclusive discounts by direct mail and e-mail.

The company, which operates the biggest chain of department stores in Canada, is running pilot programs to see how else it can use the database of addresses, contact information and shopping history for 4.5 million credit card holders, McDonald said. The shopping history may be a competitive advantage over Minneapolis-based Target Corp., which plans to open 125 to 135 stores in Canada starting next year, and Bentonville, Arkansas-based Wal-Mart Stores Inc.

“The key leap here is the power to figure out what’s going to happen in the future, how long is it before someone is ready to purchase a new mattress?” David Smith, vice president of marketing at Revolution Analytics, a software company that makes analytical tools for statisticians, said by phone from Palo Alto, California.

Loyal Shoppers

Canadians are some of the most enthusiastic adopters of customer loyalty programs in the world, with 92 percent belonging to some type of program, according to a survey by Maritz LLC, a St. Louis-based sales and marketing services firm.

Sears Canada cut its loss by almost 50 percent in the third quarter to 22 cents a share from a year earlier. Revenue dropped 6.8 percent to C$1.04 billion as the retailer reduced promotional and clearance sales. Sears Canada fell 1.3 percent percent to C$10.90 at the close in Toronto today and has dropped 59 percent in the past five years, compared with a 20 percent decline in the Standard & Poor’s/TSX Consumer Discretionary Index.

Sears Canada was spun off from its U.S. parent, Sears Holdings Corp. in November. The U.S. company, controlled by hedge-fund manager Edward Lampert, distributed 44.5 percent of the outstanding stock to its shareholders, retaining a 51 percent interest. Lampert didn’t respond to a request for comment.

Data Analysis

U.S. retailers pioneered this kind of data analysis, gaining the ability to use a person’s address and purchase history to figure out everything from income to age and race, and plugging that information into algorithms that suggest products an individual is likely to buy, Smith said. Target is particularly adept at learning things about its customers, Smith said.

Target is still several months from opening stores in Canada and couldn’t comment on its use of targeted marketing or data mining in the country, Molly Snyder, a spokeswoman, said in an e-mail.

“It probably isn’t used as much in Canada as it is in the States, but Sears has got to have a tremendous database and I think if used prudently and aggressively it can work,” said John Williams, a senior partner at retail consultant J.C. Williams Group by phone from Toronto.

“We’re going to continue to take away marketing dollars from mass marketing and fund it into direct-to-consumer marketing,” McDonald said, declining to give an exact figure.

McDonald, who became CEO in June 2011, is in the first year of a three-year turnaround plan he says will make the company profitable by 2014.

Fewer Sales

He is looking to stage fewer, more effective sales as a way to protect margins and convince customers to consider Sears for a broader range of products, and is looking to personalized marketing to help him do this, he said.

“As Target comes in, there’s going to be more and more competition, and one way to drive competition is to lower prices, and by doing this kind of customized offering you may be able to mitigate that somewhat,” said Alex Arifuzzaman, a partner at Toronto-based retail consulting firm InterStratics Consultants Inc. by phone. “So margins are going to be the key things as competition heats up.”

McDonald is focusing resources on what he calls “hero shops,” where Sears already claims the first or second largest market share in Canada, like major appliances, mattresses, women’s dresses and mens formal wear.

Rural Stores

At the same time, Sears is dialing back or exiting under-performing categories, like electronics and toys. This Christmas, Sears will keep only the top 15 toys on store shelves, reserving the full compliment for their online store.

Data and analytics will help Sears further refine their product mix as they pare down and refocus the business, McDonald said.

Sears is taking a similar approach to their portfolio of 122 department stores across Canada, focusing on the rural and mid-market communities where there is less competition, and their product offering is more distinct.

“It’s how our business grew up, our business back in 1953 started in rural Canada,” McDonald said.

Sears has renovated stores in eight small towns and cities as it exited leases in Calgary, Ottawa and Vancouver which have since been picked up by Seattle-based Nordstrom Inc. as part of its Canadian debut in 2014. Sears is currently working on its strategy for urban markets, McDonald said.

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