Sears Canada is poised to be an agent of chaos for the retail industry this holiday shopping season, as the the prospect of deep discounts looms large over competing big box stores. While the company’s planned liquidation is sure to reverberate through the industry heading into year’s end, a pair of retail experts say the only certainties it brings are instability and uncertainty.
Tony Chapman is firmly in the camp of those who believe the retailer’s liquidation will upend dynamics of the broader industry. In an interview on BNN, the founder of Tony Chapman Reactions predicted the sudden influx of discounted wares would create carnage across the holiday retail landscape.
“It’s going to be a disaster,” Chapman said. “You’re flooding a lot of stuff into the marketplace, and it’s going to create a lot of instability in the retail channels.”
While Chapman sees widespread doom and gloom emanating from the company’s looming demise, Retail Advisors Network co-founder Bruce Winder is taking a somewhat more sanguine stance, with an expectation the impact will be restricted to other players dealing in big ticket items like appliances and mattresses.
“It will put margin pressure on retailers that carry similar products, such as Sleep Country (ZZZ.TO), Leon's (LNF.TO), The Brick and Home Depot (HD.N),” he wrote in an email to BNN. “I think [those] retailers … will feel a small sales dent as a result of this.”
Further complicating the situation is Sears Canada’s yet unknown discounting strategy.
The company has duelling interests in clearing out inventory: garnering the largest possible return for creditors, while simultaneously conducting the sale in the shortest possible timeframe to reduce rent and salary costs.
Shoppers interviewed by BNN at the last round of liquidation sales uniformly complained Sears had taken a conservative stance on slashing prices. The company will commence full liquidation as early as Oct. 19.
Even if Sears aggressively slashes prices, Winder warned the mandate of competing retailers may prevent them from matching the company’s deep discounts, curtailing the possibility of price wars benefitting deal-hunting shoppers.
“It also creates odd dynamics as retailers don't match clearance pricing in their price match guarantees in major appliances and mattresses,” he wrote, adding warranty concerns will come into play. “Some customers won't buy from Sears even at a clearance price, as they are afraid of warranty not being honoured.”
While Winder and Chapman agree it will be a retail season to remember, Chapman said the best opportunity may be seized not by consumers, but by the smaller, more specialized retailers operating within Sears Canada’s physical orbit.
“If you’re smart though, and you happen to be located near a Sears store, focus on that right now because there will be a lot of people coming in,” Chapman told BNN. “Hopefully you can siphon off some of those consumers and bring them into your store.”
“Wake up right now to the opportunity. For the next 14 to 16 weeks, there’s going to be traffic that you haven’t seen in a long time.”