Due to slow sales and less traffic at both Sears and Kmart, the two have decided to merge creating one entity named Sears Holdings. Kmart has agreed to buy Sears for $11 Billion. This puts Sears Holdings at the third largest retailer behind Wal-Mart and Home Depot. Although Wal-Mart is a direct competitor with Kmart, Sears Holdings goal is not to compete with Wal-Mart directly, but find areas that have been overlooked by other retailers, and take advantage of the expanded line of products the new company has to offer. Sears has had higher sales than Kmart, so hundreds of Kmart's will be transformed into Sears stores. As of now, most of Sears 870 stores are only found in malls.
The new strategy would be to open Sears stores in current Kmart locations, to offer consumers with a different variety of products than what's currently available from large retailers like Kmart and Wal-Mart. Sears is known for selling items such as their exclusive line of craftsman tools and Kenmore appliances. In the future these Sears exclusives will be found in Kmart stores, and Kmart exclusives such as Martha Stewarts line of housewares will be found in Sears. This merger will bring a wide array of products to a larger group of consumers.
Currently consumers looking to buy home appliances like stoves or refrigerators have to go to a mall with a Sears store or a specialty store like Best Buy or Circuit City. Not all consumers live near a mall, so buying from Sears may not be an option. Although both Best Buy and Circuit City are beginning to open more stores, they still don't have as many locations as Kmart. Changing some Kmart stores to Sears stores and bringing home appliances to Kmart, would offer customers shopping for those products with more locations to choose from. As a customer, this merger brings a wider array of products to more locations, making it easier to get everything you might need in one place. The merger of these two corporations would create more jobs.
Sears is looking to create more of a presence outside of shopping malls, creating more Sears locations in single store setups in a similar way to Kmart. Current CEO of Sears Alan J. Lacy, will become the Vice Chairman of the new company. His strategy of opening more Sears stores outside of the usual shopping mall would require many of the current Sears locations to be closed. In the long run jobs at new Sears locations would have to be filled, but the creation of those new jobs would have to be postponed until the new Sears stores are opened. In the meantime, the news of many Sears closings would put many workers out of a job.
Currently Kmart has been constantly losing to competitors such as Wal-Mart and Target. Target is seen as a higher class store compared to the other two, and Wal-Mart is seen as a good store with good prices. Kmart has had trouble finding it's own identity. They try to market themselves as being a better bargain than Wal-Mart, but the store is viewed as being "cheap" from the customer's point of view. Kmart tried to fix that, by bringing in the Martha Stewart line.
They marketed that as being higher class, because of the famous name associated with it. It seems like Kmart doesn't have it's own niche in the retail business, and they don't know how to market themselves correctly. Kmart needs to redefine their identity. If Sears Holdings markets themselves as a different kind of retailer, compared to Wal-Mart and Target, this merger could be profitable. Sears Holdings should let it be known that they offer a new and different service than what can be found normally.
The biggest advantage of this merger is the amount of stores that are currently open by both Sears and Kmart. Having a large number of stores currently operating will allow the new company to bring about the new changes quickly. One big hurdle Sears Holdings will have to clear is the current image that both Kmart and Sears have. Not many consumers look to Sears for apparel, and they " re known for selling appliances and tools. Kmart's image hasn't been the same since the early 90's. Once Wal-Mart and Target surpassed Kmart, their image has never been the same.
Now they " re seen as a lower class store compared to the two and it would take a long time before the stigma attached to the name can be fixed. I believe starting over with a new name would allow the slate to be clean and it would give Sears Holdings a fresh start in trying to find their place in the industry.