In its second-largest acquisition, Amazon buys the company for $970 million.
Sears buys Lands’ End, and while analysts applaud the move as improving Sears product mix, they question Sears’ decision to merge the dot-com operations.
Most retail analysts applauded Sears Roebuck and Co.’s announced $1.9 billion acquisition of Lands’ End Inc. in May as a good deal for both sides. Lands’ End gets Sears’ store distribution, while Sears gets a top brand to augment its own weaker apparel offering and a lure to bring new customers into its 870 stores. The companies did a fair amount of back-slapping on their own, too, pointing out opportunities in the complementary fit between Lands’ End upscale, well-educated shopper and Sears’ similar hardlines customer.
But while Sears and Lands’ End may each view the other’s customer base as a natural extension of its own, their web strategies are two different animals. In SEC filings, Lands’ End has said that while operating as a wholly owned subsidiary of Sears, it expects to manage both its own web and catalog operations as well as Sears’. While giving a thumbs up to the combination as a whole, that’s one aspect that some analysts are questioning.
“Rolling Sears.com into a new direct-to-consumer group separate from Sears stores is a mistake,” says Ken Cassar, analyst with Jupiter Media Metrix. “Sears.com is more important as an extension of Sears’ stores than are the direct-to-consumer sales it generates. If Sears .com is pulled too far away from the stores, the synergies between the channels may be missed.”
Specifically, Lands’ End’s web site racks up big bucks online by focusing on direct sales, while Sears’ biggest success online has been in making its web site an effective tool for researching big-ticket items that customers then purchase in-store. Those are two different goals, analysts point out.
“I worry that Sears.com may not be used as effectively to drive sales in the store,” says Cassar. “Go to Sears.com today, and the most prominent real estate is dedicated to large appliances. People are less willing to buy appliances online but very willing, even likely, to research appliances online before buying in the store. If Sears.com gets geared toward maximizing online sales, they are going to demote placement of those appliance promotions so they can promote the products people are more likely to buy online.”
Retail Forward vice president Lois Huff points out that for many retailers who’d separated online operations from their stores, the move was “a resounding failure.” Most, such as Nordstrom Inc.’s and Kmart Corp.’s BlueLight.com, have rolled web operations back into store operations. “The point is to make Sears a stronger cross-channel player, so taking Sears.com out of the store realm doesn’t make intuitive sense,” she adds.
Although they talk of growth opportunities in cross marketing, Lands’ End and Sears have yet to say how a combined web strategy might look, or how it would be executed. That will become visible in months ahead. But first, shoppers must validate the basic premise of the merger when Lands’ End merchandise gets to Sears stores this fall. That will take only the answer to two simple questions: Will a shopper who’s in Sears to pick up a hammer buy a Lands’ End polo shirt—and will the shopper who walks into Sears in search of a Lands’ End polo shirt walk out with a hammer?