Business model of Sears

Customer Segments

Sears Holdings operates a variety of retail outlets that directly serve the general consumer market. According to a recent survey, the typical customer of the Company’s chain of Kmart discount stores is a married woman over the age of 45, from a low-income household. The Company’s Kmart stores are located principally in urban or on the edge of urban locations, with a view to serving communities.

The Company’s Sears chain of department stores are typically frequented by older female consumers, generally 55 and over. It has recently had difficulty attracting and retaining younger customers, with customers aged 18-34 and 35-54 declining significantly. In addition to serving consumers directly, Sears also operates a commercial unit that sells merchandise in bulk to businesses.

Sears Holdings serves customers across the US, retaining a presence across all 50 states. International customers are also able to utilize the Company’s online Sears sales channel, which ships merchandise to 100 countries worldwide.

Value Propositions

Sears Holdings provides value to its customers in the following ways:

• Its low prices and discount deals, with the Company, particularly its Kmart chain, offering merchandise to customers at low prices, and providing regular discount deals and rewards schemes for further savings;
• Its expansive portfolio of products, with the Company’s Sears and Kmart chains stocking a broad range of products, spanning apparel, electronics, shoes, food and produce, toys, tools, home furnishings, and auto parts, among others;
• Its domestic reach, with the Company operating an extensive network of retail outlets across its Sears and Kmart chains, which have a presence across 50 and 49 US states respectively, serving local communities across the country; and
• Its digital retail channels, with the Company operating online retail channels through its Sears and Kmart websites, as well as providing mobile apps, which include options for home delivery and in-store pickups.

Channels

Sears Holdings operates a website at www.searsholdings.com, through which it provides information on its various services and locations. It also operates separate websites for its flagship Kmart and Sears-branded retail chains at www.kmart.com and www.sears.com respectively. These websites also serve as online retail channels, through which customers are able to browse products, make purchases and arrange deliveries. The Company’s online channels are supported by mobile apps that are available for iOS and Android devices.

The majority of Sears Holdings’s sales are made through its network of physical retail outlets. This includes Kmart’s 934 discount stores and seven super centres across 49 US States, Guam, Puerto Rico, and the US Virgin Islands, as well as its network of 705 Sears-branded stores across 50 US States, and Puerto Rico. The Company employs sales and service personnel across its stores that sell directly to customers.

Sears Holdings operates a separate division for its Sear commercial sales, operating a website at www.searscommercial.com. Commercial orders are placed primarily through the Company’s telephone sales staff.

Customer Relationships

The majority of Sears Holdings’s products are available to customers on a self-service basis through its various digital sales channels. These online and mobile channels allow customers to make purchases, schedule deliveries and pickups, and manage account details without interacting with members of the Company’s sales and service staff.

The Company’s retail chains also operate on a largely self-service basis, with customers able to browse and select items autonomously, with sales staff only necessary for completing transactions. Sears and Kmart staff, however, are available across the store networks to provide personal care to customers, providing advice on products and responding to questions.

Sears Holdings provides online support resources to its customers in the form of guides and FAQs relating to shipping, returns and order management through its Sears and Kmart websites. The Company also has dedicated customer support teams that can be contacted directly over the phone or via online chat services.

Additionally, both Kmart and Sears operate a number of social media accounts – including with Facebook, Twitter, Instagram, Google+, and Snapchat – through which they are able to interact with customers directly.

Key Activities

Sears Holdings operates as an integrated retailer.

Its activities are organized into two reportable operating segments: Kmart, through which it operates a network of Kmart-branded discount stores across the US, Guam, Puerto Rico, and the US Virgin Islands; and Sears Domestic, which operates a network of full-line stores and specialty stores across the US and Puerto Rico, and provides commercial sales and home service solutions.

Both the Company’s Kmart and Sears chain offer a broad range of merchandise spanning numerous product categories, including seasonal merchandise, toys, lawn and garden equipment, food and consumables, apparel, household appliances, consumer electronics, and tools.

Key Partners

Sears Holdings works in conjunction with a number of companies and organisations across its two operating segments. These partners include:

• Supplier Partners, comprising merchandise suppliers that provide products and services for resale across the Company’s Kmart and Sears outlets, as well as non-merchandise suppliers that provide goods and services for use within the Company’s stores;
• Marketing and Branding Partners, comprising various companies and businesses that collaborate with the Company in co-marketing projects or provide exclusive products lines to the Company’s retail outlets;
• Rewards Scheme Partners, comprising various consumer-focused companies that contribute products, deals, and offers as part of the Company’s Kmart and Sears rewards scheme programs; and
• Social and Community Partners, comprising various non-profits and charitable organisations, with which the Company collaborates on social and community projects.

Sears Holdings has recently launched a partnership with ride-sharing service Uber as part of its rewards scheme, which will see Sears customers receive loyalty points for every trip made via the platform. The Company also has a number of service partners in relation to its ecommerce activities, including ChannelSale and Ecomdash.

Key Resources

Sears Holdings’s key resources are its products and supply chain, its online retail platforms, its IT and communications infrastructure, its network of physical retail stores, its distribution and logistics infrastructure, its partnerships, and its personnel.

Sears Holdings owns and leases numerous properties across the US. This includes more than 1,600 retail outlets, the majority of which are leased, and 28 domestic supply chain distribution centres, of which nine are owned and 19 are leased. The Company also has 416 domestic store warehouses, customer call centres and service facilities, the majority of which are leased.

Searches of records published by the US Patent and Trademark Office identified numerous patent applications filed in the name of the Company’s subsidiary Sears Brands, including applications entitled ‘Merchandise reservation system, apparatus, and media’, ‘Display screen or portion thereof with an icon’ and ‘Checkout and/or ordering systems and methods’.

Cost Structure

Sears Holdings incurs costs in relation to the procurement of merchandise and management of its supply chain, the development of its online and mobile platforms, the maintenance of its IT and communications infrastructure, the implementation of marketing and advertising campaigns, the operation of its physical sales and distribution infrastructure, the management of its partnerships, and the retention of its personnel.

In 2015 Sears Holdings accrued cost of sales, buying, and occupancy – which includes costs associated with the acquisition of merchandise and supplies – in the amount of $19.34 billion. Its selling and administrative expenses – including the payment of salaries and benefits to the Company’s workforce of 178,000 employees, as well as advertising and marketing costs – totalled 6.86 billion.

Revenue Streams

Sears Holdings generates revenue primarily through the sale of merchandise through its Sears and Kmart-branded retail chains, both through physical and digital channels. The Company also derives a portion of its revenue through bulk commercial sales and certain home services, provided through its Sears Domestic segment.

In 2015 Sears Holdings generated an annual revenue of $25.15 billion, down on the $31.20 billion recorded by the Company in 2014. The Company attributed this decline in revenue largely to actions taken during 2014 to streamline its operations and increase its focus on members. The majority of the Company’s annual revenue was generated by its Sears Domestic segment, which accounted for $14.96 billion of the Company’s total revenue.