Sears: Bright Lights, Big Store

Sears finds a great new place to open up shop: The city

It's urban, it's trendy, it's...Sears? Not quite. But after decades of closing stores in cities and building them in the suburbs, Sears, Roebuck & Co. is changing course. In 1996, Sears opened three full-line stores in metro Los Angeles, one in Queens, N.Y., and another in downtown Oakland, Calif. This year, Sears is opening a Brooklyn store, bidding on a mid-Manhattan site, and may acquire real estate in Harlem. The company is also scouting locations in Chicago, Detroit, Philadelphia, San Francisco, and Washington, D.C.

With the exception of a few discounters such as Kmart Corp., which just opened stores in Manhattan, most retailers are sticking to suburban malls--for now. But if Sears is successful, expect rivals to follow the trail back to city centers, says Kurt Barnard, president of Barnard's Retail Marketing Report. "The times are ripe for it. [Urban] consumers are looking for beautiful merchandise and large assortments at a moderate price."

So far, Sears' bet on downtown stores seems to be paying off. Rents are higher than those on Sears' suburban stores, but the volumes are higher. The new stores average between $75 million and $100 million in annual sales, almost triple the chainwide average. "Our strong metropolitan stores have really performed, and that's not going unnoticed within our corporation," says Allan B. Stewart, Sears' president for retail stores.

CUSTOM BLENDS. The new stores are not clones of Sears' suburban outposts. Sears is customizing the merchandise mix for each urban store. In Long Beach, Calif., where there's a large Cambodian population, the racks have more petite sizes. And for areas where there's a large African-American population, Sears has special apparel lines including African Village and Mosaic, a house brand that features bold colors and a layered look. Says Melveline Green, a retired budget analyst who shops at Sears' new Oakland store: "They have everything you need. There was nothing here before."

Like other chains, Sears had been fleeing cities for more than a decade. During a 1993 restructuring, it shuttered stores in Dallas, New York City, Pittsburgh, St. Louis, and Washington, D.C. It had closed its flagship Chicago store in 1983.

But with mall construction slowing and a downturn in mall traffic, Sears made a decision to become more of a city retailer again. Urban stores--which are defined as those with densely populated, ethnically mixed customer bases--represented almost 20% of new stores in 1996, up from zero in 1994. "There's a match between [urban] market needs and what their stores offer," says Glenn A. Pitman, a professor of business at Pennsylvania State University.

The new Sears isn't for everyone: Saks Fifth Avenue doesn't need to worry. But J.C. Penney just might.

Before it's here, it's on the Bloomberg Terminal.