Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
How Sears uses a boffo web site to drive customers into the stores.
Since the start of the online retailing revolution, Hoffman Estates, Ill.-based Sears Roebuck and Co. has had a web plan. But when the dot-com hysteria hit, some critics bashed Sears-and all large department stores-as lollygaggers because they were slow to put all their products online and back them with flashy marketing campaigns.
But today, Sears is just as glad it didn’t move so fast. And, in fact, its deliberate approach to the Internet has positioned it to take advantage of the new reality of retailing. Today, it’s the multi-channel retailers who are succeeding on the web. And none has a better story to tell than Sears.
“The big picture today is the in-store influence of web shopping,” says Dennis Honan, vice president and general manager of Sears Customer Direct, the division that oversees the web and the catalog operations. “Our web site influences more than $500 million in major appliance sales a year.” For a company that dominates in appliance sales, accounting for nearly 40% of appliance sales with its Kenmore brand, that’s nothing to sneeze at.
Sears says its online strategy is to give customers the opportunity to shop wherever they want. And the ultimate goal is for that convenience to increase all sales at the $40-billion-a year retailer.
The tight relationship between Sears stores and its web site is winning Sears accolades. “Sears has employed probably the best thought-out and most practical e-commerce strategy of any brick-and-mortar retailer,” says Neil Stern, a partner with Chicago-based retail consultants McMillan Doolittle. “The company was criticized for moving too slowly. But it built its web site department by department instead of trying to replicate its stores. They’ve been very intelligent about it and it’s showing up in traffic numbers.”
In fact, Reston, Va.-based comScore Networks Inc., reports that while BlueLight.com consistently leads the general merchandisers (BlueLight, Sears, Target and Wal-Mart) in web traffic, probably because BlueLight.com is the homepage for web users whose Internet access is through BlueLight, Sears was in second place four out of the first six months of this year (see chart p. 38). While its visits per visitor were in line with the other sites, its pages per visit led the others, with the exception of March, peaking in June at 14. Interestingly, even though Sears stresses that its web strategy is designed to bolster other shopping channels, its conversion rates took a significant jump in April, and it converted 2% of its visitors to buyers in April, May and June, higher than the others.
It was no easy matter for Sears to achieve the close working relationship between its web site and its stores. For one thing, Sears was never part of the separatist movement that believed retailers had to establish stand-alone web operations, preferably far away from home. Rather, Sears.com planned to leverage the assets of its department store parent all along.
Furthermore, while other stores experimented with which products they would sell online, Sears made the call more than three years ago to focus on selling its strongest brand items online-tools, toys and home goods. “Sears has always led with its strengths, areas like tools and appliances,” Stern says.
These two points alone make Sears.com stand out among its competitors because it had the early vision of what has since become the accepted wisdom among retailers who are online. In fact, just this summer Kmart Corp. brought BlueLight.com back home and Wal-Mart re-absorbed Walmart.com. Furthermore, most early-to-market online stores have retooled their sites to sell items that consumers will buy online, instead of trying to sell everything in the store. Kmart and Wal-Mart, for instance, stopped selling apparel online earlier this year.
Beyond the corporate organization, there were technical challenges, such as integrating store operations with online operations, so that customers as well as Sears personnel could know in real time the inventory in stores, and linking Sears’ legacy computer system into web systems. Sears also had to deal with marketing issues to make sure customers understood they could buy in any venue. And on top of everything, Sears had to determine what levels of customer service it would allow on the web, resolving such issues as whether customers could arrange service calls via web and whether web customers could pick up at the store and return to the store.
Joe Charno, vice president of online management and marketing, sums up Sears’ approach to the web in three words: “Research, compare and shop,” he says. As long as Sears provides a means to do all these things, the company feels it’s on the right track.
To make those three goals work, Sears is keeping its online sales efforts targeted on the niches in which it excels. And those typically are the home categories for which it is so well known in the broader retail world: such major consumer investments as Kenmore appliances, replacement windows, lawnmowers, kids furniture and other home-improvement products and services. And Honan says Sears is taking online many of the same niches that it has developed offline: kids furniture within the furniture category, for instance.
Sears now features on its home page such items as televisions, digital cameras, school uniforms and lawn tractors. And it features prominently a store locator and an 800-number for placing orders.
Being able to provide all three channels to consumers seamlessly required implementing a near real-time inventory system that communicates data about web-available merchandise from the point-of-sale terminal to Sears’ central processor. “The issue we had was that we didn’t always know which stores had items in stock,” Honan says. “So our first thing was to build a real-time inventory system, which we implemented earlier this year.” Real-time inventory not only allows online customers to find items; it also helps sales associates find out-of-stock items at other Sears stores so they can save a sale if a customer cannot find what she is looking for.