Sears consultant report paints picture of dysfunction and disarray
A global retail consultant warned Sears Canada of the dire state of its business more than a year ago, urging the now-insolvent retailer to make drastic changes immediately lest it go under, according to documents obtained by BNN.
The documents, prepared for Sears Canada management in June 2016 by Netherlands-based Eysink Smeets Retail Business Consultants, paints a scene of a company in disarray, lacking in direction, leadership and employees willing to take responsibility a full year before entering creditor protection.
Eysink Smeets pulls no punches in the expletive-laced report, warning management that their biggest problem was the simple fact they ran a department store.
“Department stores are dead. All over the world,” the report read. “The department store thinking leads to lethal decisions that have nothing to do with the consumer. We need to forget the term altogether.”
The retail consultant highlighted Sears Canada’s problems extended far beyond the fact it exists in a troubled industry, telling management that the brand was “already dead” for a large part of the country.
“Ask anyone in downtown Toronto about Sears. Their response will be: ‘Sears? Are they still around?’” the report read.
“The reality is that Sears is no longer in the lives of the largest part of Canada. They might think it’s dead – or they might drive past us everyday. The reality is that for most people, Sears fulfills little function anymore.”
Sears closed its flagship location at the Eaton Centre in downtown Toronto in early 2014 as a part of a $400-million sale of five of its leases, which severely curtailed the company’s presence in the nation’s largest city. That location was somewhat unique in boosting the retailer’s profile, as customers entering the North end of the mall had to walk directly through the Sears location to access other stores due to its gargantuan, five-storey footprint.
While that enormous physical size boosted the location’s traffic, its enormity enabled -- and perhaps necessitated -- Sears Canada to carry a bloated inventory. Eysink Smeets took umbrage with the sheer number of product offerings, which it recommended paring due to the uneven sales generated by different product segments.
“The old department store thinking created a monster of an assortment,” the report read. “Way too many brands of which, indeed, the majority doesn’t sell. As a result we order very few pieces of each item … sell only a portion of it, and burn the rest in our outlets.”
A spokesperson for Sears Canada confirmed the report was one of several delivered to the embattled retailer.
“The Company found some of the observations and commentary to be useful, while other parts were less helpful,” Longview Communications Partner Joel Shaffer told BNN via email. “Portions of the feedback did help inform what became Sears Canada’s ongoing reinvention efforts.”
According to Eysink Smeets, the massive array of offerings further exacerbated Sears’ existing demographic issue, as the only customers with enough time to peruse through the store’s wares were those who had aged out of the workforce.
“Our customers are an average of 55 years old. Ten years ago? 45 years old. In other words, we don’t get new customers in, and our supporters age with us,” the report read. “Pensioners are the only ones with enough time to work their way through the mess of an assortment to find (maybe) what they are looking for.”
Industry veteran Carrie Kirkman was tasked with addressing that exact issue, announcing with much fanfare in late 2015 the retailer would be chasing “Amy” – women between the ages of 35 and 50, married with children, instead of only serving the customers she dubbed “Lindas,” older women whose children have already left home. Kirkman lasted less than a year at the company before departing last summer, her task seemingly unfinished.
There is some evidence Sears Canada had already recognized the issue, given its announcement in March that it was pursuing a leaner, cleaner “Sears 2.0” concept. The wide-ranging overhaul was meant to freshen the staid company’s look with a new logo and revised store floor plans, spearheaded by Chairman Brandon Stranzl and Kirkman.
While the reinvention proved to be too little, too late, Eysink Smeets said the retailer shouldn’t pursue flash and dash and instead focus on the retail fundamentals.
“We’re going to fix the f***ing basics first,” the report advised. “We are pissing away so much money with rotten parts of the retail machine, that we must fix the basics first.”
Kirkman’s departure certainly didn’t help the company get back to basics, and underscored a worrying trend for the retailer. Between 2011 and 2015, Sears burned through four chief executive officers. The role has remained unfilled since Ronald Boire left to run Barnes & Noble’s retail division in 2015. Eysink Smeets criticized the revolving door of executives, highlighting the lack of cohesion when a company lacks stability in the corner office.
“That does only bad things to an organization: the real talent leaves,” the report read. “All store employees fear for the existence of Sears, everyday. If you’re a fridge salesmen, customers ask you about 20 times a day how it works with [the] warrantee if Sears no longer exists. They’re tired and scared.”
That fear and exhaustion, according to the consultancy firm, fed into a lack of ownership of responsibility as employees redirected blame to other parties and lacked properly defined roles.
“They always have a selection of escapes at the ready. When we talked to persons who we thought were responsible for a certain part of the marketing, it would never take long before the discussion ran into a barrier,” the report read.
The consultancy said employees would either admit they did a part of the job, but not all of it, or claim they can only spend a fraction of their time on the file before deflecting blame elsewhere.
Taking a holistic view of the situation, Eysink Smeets was short and to the point, and extremely blunt.
“Sears is in deep shit. And you’re standing before a huge task.”