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Sears Targeting Specialists With CE/Majap Store Plans

HOFFMAN ESTATES, Ill. — Sears has assigned a high priority to developing a national chain of freestanding electronics and/or appliances stores and is expected to turn its full attention to the project as the rollout of its Great Outdoors concept store gets under way this year.

News of the CE/majap format surfaced earlier this month at Sears’ annual meeting, when outgoing chairman/
CEO Arthur Martinez disclosed that the merchant is studying the possibility of adding the stand-alone units to its contingent of full-line, hardware and home-decorating stores.

The newest Sears specialty stores would range in size from 12,000 to 15,000 square feet and would ostensibly be aimed at top category killers Best Buy, Circuit City and Home Depot.

Martinez said the new electronics and appliance concept stores would increase Sears’ penetration in markets not currently served by its mall-based department stores or dealer-owned Craftsman stores, which are located largely in rural and suburban areas. “We have strong franchises in those businesses,” he said, “and we don’t want to be outlet-poor and distribution-poor.”

He added that the new units would not affect the way electronics and major appliance products are currently sold in existing Sears channels.

According to a Sears spokesman, the No. 1 majap retailer and No. 6 seller of CE products is “looking at and evaluating a number of concepts,” including both separate CE and appliance stores or a combined assortment. “It’s possible the recommendation will be to split those categories,” he said. “There are a lot of proposals on the table.”

The spokesman emphasized that the impetus behind the new format is market saturation. Indeed, despite its network of more than 850 full-line stores, those units are largely based in regional malls, creating “pockets where Sears has no presence,” he explained. “We don’t want people to overlook us because there’s no store nearby.”

Freestanding stores will also allow the retailer to offer a wider and deeper assortment of consumer electronics and major appliances than floor plans permit within its full-line stores.

The spokesman added that Sears will be ready to take on the electronics/
appliance project after getting two major construction initiatives under its belt. Its first priority is a systemwide retooling of its department stores that includes wider aisles, improved sight lines, new storefront facades, the introduction of shopping carts and a less cluttered appearance.

Next on the agenda is the aggressive rollout of The Great Indoors, a home-decorating and remodeling concept store that features more than 50,000 products, including A/V, major appliances and home furnishings. Goods are grouped into kitchen, bath, bedroom and living room departments and are merchandised in upward of 90 room vignettes.

Sears expects to have 17 superstores operating by year’s end, with a total of 150 locations in 40 markets near term.

According to observers, Sears’ interest in adding freestanding CE/majap stores to its brick & mortar mix is a clear reaction to market share challenges by The Home Depot, which is currently rolling out appliances to its 900-plus stores.

Sears is also feeling competitive pressure from Best Buy and Lowe’s, which continue to build new units at a dizzying pace, and from second-place majap and electronics chain Circuit City, which is also exploring new appliance-only and electronics-only formats.

“Home Depot, Lowe’s and some other people are stepping on Sears’ toes, and they need another way to get their product out there,” said Warren Chaiken, senior VP of Philadelphia-based Almo, which distributes white and brown goods to retailers, e-tailers and buying groups in 26 states. “Home Depot said it plans to be No. 1 in appliances, and Sears is just protecting its turf. Opening Craftsman-type stores will make them more accessible and will help them press their advantage in service.”

Chaiken added, “There are going to be some blood baths as a result of all this. It’s going to be interesting.”

Rebecca Yarchover, a senior research analyst with US Bancorp Piper Jaffray, said Sears is looking to capitalize on both its specialty store initiative and the growth of consumer electronics. “Sears had what they view as a successful run with its home stores,” said Yarchover, “and they’re looking for growth opportunities. Electronics is growing more rapidly than other product categories, and they want to capture it and be a player.”

She warned, however, that operating specialty stores “is a very competitive business, and one or two mistakes can put you out of business,” citing Best Buy’s early missteps. “There’s no room for mistakes. Best Buy almost went away. And I question Sears’ ability to take on another project based on the experience of two Great Indoors stores.”