February 1, 2005, 12:00 AM

Playing to Strengths

(Page 2 of 3)

"They`re bullish on in-store pick-up and it`s a good play for them. It makes sense for some of the larger items," says Geoff Wissman, analyst and vice president at consultants Retail Forward Inc., Columbus, Ohio. "Sears and Best Buy were the first to get into that. They`ve been innovative in the online arena."

Another linchpin of Sears` multi-channel strategy is providing extensive online content, particularly on its hard-lines goods, that allows consumers to thoroughly research specs and features on refrigerators, washing machines and other big-ticket purchases before buying in a store, though they can also, of course, buy the items online. Beyond the potential for capturing the sale online, the idea is that the shopper who`s invested time in researching online at Sears.com, and who finds the information she wants, will be more likely to close the deal at Sears versus another merchant.

Depth of content

Sears was among the first to capitalize on the use of the web as a consumer research tool, and it counts on that dynamic to boost category sales. Sears has estimated that about 20% of appliance sales in its stores are influenced by online research and that in some other product categories, that percentage is as high as 15%.

Freedman believes the depth of content on big-ticket items such as appliances available online also lets the web play another key role: that of reaching out to new customers who don`t ordinarily shop Sears. A customer who might not walk into a Sears store who finds herself suddenly in need of a new dishwasher might decide to spend time on Sears.com and its wealth of product information--after all, it doesn`t require anything more of the customer than a few online clicks. That sets up the greater possibility of a follow-up store visit or online buy than if the shopper bypassed Sears completely. "Part of the web`s function is to bring in a customer through the online channel who might not otherwise shop there. I think they are achieving that," she says.

Sears beefed up consumers` ability to research online with a major overhaul of its web search function, part of a site redesign within the past 18 months. From the appliance category landing page, for example, customers can sort their options according to general appliance type--laundry care or dishwashers, for example; by specifics under appliance--wall ovens versus freestanding ranges versus cook tops under "cooking;" by brand, and by price. Easy-to-find links to other information that can affect the purchasing decision, such as on parts or product repair, are visible on the appliance category landing page.

Having Sears.com available in stores is another thread in the fabric that weaves Sears` multi-channel strategy together. In store departments such as consumer electronics, both customers and employees can get product information from the site.

Testing

Yet another way Sears uses the web to bolster its multi-channel approach is by testing whether new products justify store space by first seeing how they perform online. Its web channel served not only to test the popularity of new items and categories, but also to extend inventory beyond what`s placed in its stores. Though Sears` primarily mall-based stores are large, averaging about 90,000 square feet of selling floor, space is nevertheless at a premium given the breadth of the merchandise offering. "The stores don`t have the space to accommodate all the products we can offer online," Bass points out. "If we were to offer them in-store, it would mean shoe-horning them in."

That means Sears must make sure that what`s on the floor counts, and the web is a quick way to make that determination. IPods, for example, have done well on Sears.com and are now being considered for space in the store, Bass says. It works the other way, too. After experimenting with store-based sales, Sears determined that the best sales channel for computers, DVDs and sporting goods was online and pulled them out of its stores.

With sales historically driven by hard goods, Sears has worked hard of late to try to rev up its soft goods side. That effort was a major factor in the launch of its apparel brand, Covington, and its acquisition of direct apparel merchant Lands` End in 2002. There`s no denying that Lands` End`s web and catalog sales have contributed big to sales at Sears. Of the direct-to-customer segment`s 2003 revenues of approximately $1.8 billion, a segment that includes Lands` End as well as direct marketing of goods and services through specialty catalogs and other direct channels, Lands` End contributed about $1.6 billion. Yet a number of analysts say that putting a selection of Lands` End apparel in Sears stores has been less successful than Sears initially hoped in one of its objectives: that of getting customers who might shop Sears only for hard goods--or not at all--into Sears stores to buy other stuff.

"People who come into the store to shop for apparel typically aren`t going to cross the store to shop for tools or appliances and vice versa," Wissman says. "There is a difference in those customers from the perspective of income, gender, and numerous other factors you can point to."

But if shoppers won`t cross the store to check out what`s on the other side, they may be more willing to do that online. In a bid to increase interest in its soft line offering, Sears.com this fall launched apparel, including the virtual model technology pioneered by Lands` End. It also used the same technology to build a virtual decorator feature, which debuted at the same time, that lets shoppers visualize items such as furniture and bedding in a room setting online. While the virtual model proved popular at LandsEnd.com, Bass says it`s too early to assess utilization of the new features on Sears.com

Enabling technology

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