Sears Canada announced this week that it would permanently cut the prices on 5,000 items by up to 30%.
Recently installed Sears Canada CEO, Calvin McDonald was quoted in the Globe & Mail as saying “Our customers are demanding great value every day of the week, Sears has a history of being known for great value across the store every day.”
Cutting prices may provide a short-term bump but we don’t think this is a wise spend of cash as Sears Canada’s revenues and profits continue to slide.
Here’s where Sears should be investing its margin during the turnaround:
Train Sears Staff – Sears store staff need to be more knowledgeable than its competitors’ staff. People are happy to pay more to get good service. This is why Safeway holds its market share in Western Canada in the face of RCSS and Walmart Supercentres. McDonald should take a page from Starbucks and close its stores for one evening and start with basic training for all staff and kick-start a service turnaround.
Be In-Stock – Sears is reminiscent of Canadian Tire in the 1990s and is continuously out-of-stock on key items, frustrating shoppers and resulting in under-performing sales both in-store and through its catalog / on-line operation. Refine the assortment and make a commitment to 100% in-stock on the same 5,000 items which were reduced in price this week.
Join The 21st Century – Sears heritage in catalog sales is one of its best assets that continues to go untapped. With a network of over 1800 catalog locations in every little town across Canada, Sears has a huge advantage over prominent in-line retailers such as Indigo and Amazon. We think that e-commerce could become the biggest and most profitable part of Sears Canada. Investing in a great website, mobile apps and free shipping to catalog locations could boost sales and bring in a new generation of shoppers that currently see Sears as their grandmother’s store.
These three initiatives would add more “value” to the Sears brand than a broad range of price cuts could ever achieve.
Price is not the only lever Canadian retailers can pull to compete with Target. They have to be excellent retailers and ensure the fundamentals of their value proposition are delivered to their shoppers each and every day. Sears (and many other Canadian retailers) have a lot of work left to do in the next 12 months.