So, Sears Lives for Now. But is That What’s Best for the Retailer?
There’s a ton to unpack with the various announcements to come out of Sears Holdings this week. On Thursday, the parent company of Sears and Kmart, officially announced that ESL Investments was the winning bidder in the bankruptcy court-supervised auction. Of course, ESL is the investment firm headed by Eddie Lampert, the chairman of Sears Holdings and former CEO of the retail brand. In line with the winning $5.2 billion, eleventh-hour bid for the company, ESL will essentially acquire all of Sears Holdings assets, including any remaining stores and the DieHard and Kenmore brands, among other parts of the company.
Perhaps most importantly from the human-interest side of things, the bid preserves some 45,000 retail jobs—for the time being.
Though the bid has been accepted, the sides still need to go through an approval hearing, which is currently scheduled for February 1. There, it’s expected that the remaining creditors who are tied up in this mess—and who would’ve preferred to go the route of liquidation—will mount some sort of legal challenge to block the sale. In their opinion, as detailed in court documents filed in objection to the sale, the company’s downfall was “precipitated by years of misconduct by Lampert, ESL, and others against Sears and its creditors.”
So, all of the legalese and document filing aside, is the bid by Lampert to save Sears really a great idea?
Well, from the employee perspective, it’s a nice story to tell that the former CEO is stepping in with his own money to help keep the company’s doors open, basically saving their jobs. Told that way, it makes Lampert sound like a savior. But this is a story that we’ve seen over and over and over again.
And the crazy thing is, it didn’t have to be this way for the retailer. If you want an example of how an age-old brand can remain relevant and actually thrive in the current retail market, you need only to look just over our southern border and find Sears Mexico. Once part of the U.S. company, Sears Holdings opened stores in Mexico as far back as 1955 through the early 1990s. However, in 1997, the company formed a strategic alliance with Mexican businessman Grupo Carso, selling him an 85 percent share in the company. By the mid-2000s, Carso took full control of Sears Mexico and has been operating fully independent of the U.S. brand.
The women’s juniors’ department of a Sears in Mexico City. | Credit: Bloomberg by Alejandro Cegarra
In a profile published this week on Bloomberg, Sears Mexico is described as a thriving retail chain that continues to open stores and (crucially) attract new customers. Stores there have a completely different look and feel from their American counterparts with layouts that lean towards the luxury side of the scale. Aisles are spacious and open, displays are marked with colorful LED lighting, and the overall vibe is described as hip and current. The contrast is downright shocking compared to U.S. stores that appear to be crumbling from the inside and are plastered with “store closing” signs hanging from the ceilings.
To me, the difference starts at the top. Carso took over the Mexican business not long before Lampert himself became involved on the U.S. side. Since then, the two versions of Sears have taken off in very different directions. It’s an almost perfect case study in the path to remaining relevant in retail today. Sure, ecommerce is offering a major challenge to the traditional brick and mortar model. And even though there are differences in culture and community that need to be accounted for between the two operations, at the end of the day it’s all about selling an experience to the customer that entices them to come out to your store and walk your aisles. Sears Mexico has remodeled itself—literally—in a way that’s helped them grow and thrive. Sears Holdings in the U.S.? Not so much.