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Five days ago, officials at Sears Holdings announced plans to enhance liquidity and accelerate a return to profitability amid ongoing fiscal challenges (its third-quarter sales of $3.7 billion were far less than the $5 billion for the same period the previous year). All along its recent path of sinking sales, Sears officials have pointed to their successful Shop Your Way loyalty program as one of the keys to restore brand loyalty.
Sears officials outlined incremental actions to further streamline its operations and drive profitability, including cost reductions of $200 million on an annualized basis in 2018 unrelated to store closures.
Edward S. Lampert, Chairman and Chief Executive Officer of Sears Holdings, talked about progress in the Jan. 10 release.
“We made significant progress in 2017 through our efforts to reset our cost base and enhance our liquidity, as well as our recently announced agreement with the PBGC to pre-fund our contributions to our pension plan for the next two years,” Lampert said in the release. “The initiatives we have announced today build on those achievements and make clear our determination to remain a viable competitor in the challenging retail environment. The financial transactions we are pursuing and incremental cost actions are designed to accelerate our return to profitability and enable Sears Holdings to increase our investment in the most promising opportunities in our enterprise, including our Shop Your Way network and our Sears Home Services business. Our leadership team is more aligned and committed to the transformation of Sears Holdings than ever before. With the support of our associates, we hope to work constructively with our investors, vendors and other constituents to facilitate the actions we are announcing today.”
What’s more, according to the release, Sears will continue to strategically evaluate the productivity of its Kmart and Sears stores as the company transforms its business model so that its physical store footprint and its digital capabilities match the needs and preferences of its members.
Ten months ago, Lampert wrote a letter to shareholders, espousing the merits of the Shop Your Way loyalty program.
“Sears Holdings is built on a strong foundation that will continue to provide us competitive advantages, as we drive our strategic transformation to become a more innovative and agile retailer,” the letter says. “We have very valuable brands among our assets, including some of the most iconic American brands. We have a large store footprint, dedicated associates, and tens of millions of Shop Your Way members actively shopping with us. We saw the disruption of retail coming more than a decade ago and built a differentiated online shopping and membership platform (Shop Your Way) to ensure our participation in the next wave of retail. All of these assets, whether inherited, acquired or built, are our core strengths. They’re what makes us a competitive retailer today and will continue to do so.”
But, can Shop Your Way light the way for Sears in its bid to recapture its lost retail glory?
Donald Fairbanks, Senior Director of Strategic Services, HelloWorld, shared his thoughts on the issue with Loyalty360.
“The biggest point that jumps out as you read through this press release is that the brand’s Shop Your Way loyalty platform is a critical piece of Sears’ (re)growth strategy,” Fairbanks explained. “The financial transactions we are pursuing and incremental cost actions are designed to accelerate our return to profitability and enable Sears Holdings to increase our investment in the most promising opportunities in our enterprise, including our Shop Your Way network and our Sears Home Services business. This makes perfect sense in light of their focus on profitability, liquidity, and flexibility. Loyalty platforms, such as Shop Your Way, afford brands an efficient yet scalable model for delivering bottom line growth while building long-term equity in the form of consumer relationships.”
In Sears’ case, Fairbanks noted, declining sales have forced the scaling back of its brick-and-mortar footprint, impacting consumers’ direct interaction with products, services, and staff, “and the requisite affinity those experiences engender, while creating the impression of a company on the brink of collapse. Left unchecked, these issues can lead to shoppers migrating to other trustworthy brands or convenient retailers.”
Shop Your Way is a solid counter measure to this trend, Fairbanks added.
“Executed correctly, it gives Sears an incremental value proposition, a constant stream of data-informed insights, and better communication receptivity,” he said. “All of these can be leveraged to prove the brand’s commitment to individual consumers and re-establish the trust necessary to motivate them to continue to support the brand with their wallets or words.”
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