SHLDQ - Sears Holdings Corp

[Luke 532]

 

In this sense, Amazon becomes a fulfillment commodity.  However, due to their scale they might be able to do it at the lowest cost and thus have a moat anyhow.

 

Unless SHLD offers cheaper leasing rates in exchange for exclusive rights to sell the brands' goods on ShopYourWay.  The brand would have to weigh the pros-cons of having cheaper rent (via SHLD) and one outlet (SYW) vs more expensive rent (via SHLD) and 2 outlets (Amazon, SYW).  SHLD gets a piece of the pie either way.

 

Depending on the $/sq ft SHLD is paying for space, they could offer ultra-cheap leasing terms to would-be brands.

[plato1976]

Sir, for appliances, SHLD is competing with home depot etc. , and the problem is not showroom etc.

It's about the price (shipping/installation included)

 

Can you see a future other than the one where the brands lease space in showrooms?

 

If/When things like 3d projection and imaging get better and cheaper I can see people not needing to visit a showroom because they can see a 3d hologram of themselves in clothing rather than having to try it on. I was thinking about this a few months ago when I heard about IndoChino ( http://www.forbes.com/sites/edzitron/2012/05/15/indochino/ ) a company that imports tailored suits from China. With the right technology your computer or mobile device could measure you for your suit and show you a 3d projection what it looks like on you all without leaving your home.

 

If this happens and when it happens is anyones guess. But yes I could see a future different than brands leasing spaces in showrooms or at least I think there are other options long term.

 

And you can probably have sex with women in virtual reality too.  So pick-up bars will go away.

 

Malls are a social experience that have no replacement.  Bored women like to shop.  Brands benefit from this behavior, but there needs to be a setup where the showrooms don't go bust (Amazon getting all the revenue).  The brands will get the sale -- if Amazon fulfills the sale, so what.

 

In this sense, Amazon becomes a fulfillment commodity.  However, due to their scale they might be able to do it at the lowest cost and thus have a moat anyhow.

 

People who are into fashion like to see and be seen.  It's part of the brick and mortar experience.  It is entertaining to have an ice cream in the mall and watch the fashion jeans walk by -- it just is.  People watching is what people do in malls.  And people like to dress up and be seen.

[compoundinglife]

This idea that brick and mortar malls will go away is complete BS -- or at least I am biased enough from love of the physical world.  Maybe I'm just to old to get it.

 

Everything will be available from Amazon only?  Where do you go to look at furniture, sit on it, feel the texture?  Where do you try on the Hugo Boss shirt to see if it fits your shoulders?  You can just buy everything from Amazon and if it doesn't fit then return it free of charge.  That would kill Amazon in shipping charges.  Currently Amazon sells you the Hugo Boss shirt that you tried on in Nordstrom and you know it already fits you.  That only works for Amazon so long as the mall retail stores survive in their present form.  They are starving their showrooms to death.

 

Amazon's model effectively depends to some degree on dying retail models to continue to struggle and not die.

 

Let's say every single retail store was gone.  You'd really be buying things sight-unseen from Amazon and not be returning a lot of the stuff?  I don't believe it -- I think return charges would come back to bite them.  There has to be showrooms.

 

On that note this is why I mentioned the commerce-hub connection earlier. Amazon offers the best prices by relentlessly focusing on efficiency and scale which is something that most brick and mortars (except maybe Costco and Walmart??) have struggled with because they have legacy operations that are harder to change vs building a hyper efficient operation from scratch (Amazon).

 

Take a company like commerce hub, a startup that is focused on supply chain and fulfilment efficiency from the get go but providing it as a service to existing retailers. If they can get the top 20 retailers on board for some % of sales then they could have considerably more purchasing power than Amazon and potentially enable more traditional retailers to compete with Amazon on price. At which point the pricing spread could go away. This is all just wild ass speculation on my part but I don't think its outside the realm of possibility. Add on to that your points about Amazon being dependent on brick & mortar to provide free showrooms for their products.

 

[wisdom]

Eric - my thoughts are in line with the way you see it.

 

In addition, you have the choice of selling/leasing RE that you don't need to generate additional revenue or to fund the start up.

 

They do not have to take down AMZN - they just need to be the top 5 and they will do very well.

 

He seems to be going with the franchise model for SAC and SHOS stores. This will make it further asset lite and allow their footprint to be increased without much more capital being required.

 

If successful you can roll this out globally. I believe in this situation the brands would become even more valuable - such as LE's brand recognition in say UK.

[ERICOPOLY]

Sir, for appliances, SHLD is competing with home depot etc. , and the problem is not showroom etc.

It's about the price (shipping/installation included)

 

Right, it's not Amazon that is beating Sears in the tools/appliances department.  It's Home Depot, etc...  They have showrooms too, and the staff is better at helping you with questions.  Plus, you point out that the price is better -- I'll take your word on that.

 

The showrooms line of thought I followed was to think about whether the square footage in the malls has any value in the future.  However on the other hand as someone pointed out SYW is not there yet and the cash bleed from the stores is getting severe.  It might be that SHLD is the pioneer -- you can always spot a pioneer because of the arrows in his back.

[LC]

This idea that brick and mortar malls will go away is complete BS -- or at least I am biased enough from love of the physical world.  Maybe I'm just to old to get it.

 

Everything will be available from Amazon only?  Where do you go to look at furniture, sit on it, feel the texture?  Where do you try on the Hugo Boss shirt to see if it fits your shoulders?  You can just buy everything from Amazon and if it doesn't fit then return it free of charge.  That would kill Amazon in shipping charges.  Currently Amazon sells you the Hugo Boss shirt that you tried on in Nordstrom and you know it already fits you.  That only works for Amazon so long as the mall retail stores survive in their present form.  They are starving their showrooms to death.

 

Amazon's model effectively depends to some degree on dying retail models to continue to struggle and not die.

 

Let's say every single retail store was gone.  You'd really be buying things sight-unseen from Amazon and not be returning a lot of the stuff?  I don't believe it -- I think return charges would come back to bite them.  There has to be showrooms.

 

Well, retailers are trying to change the problem of clothing. I can't find a link off the top of my head, but there are services here in NYC that will take a 3-D image of your body shape and have clothing fitted to you. So for a one time appointment you get fitted clothes at a reasonable price.

 

I agree though, the physical world of retail won't die. People like to go and shop. We've been doing it since the early days of civilization. What else, are we all just going to sit home all day? Work from home, shop from home, watch movies at home, watch sports at home, interact with your friends at home, etc. etc.? At some point, human nature wants to go out and be social. And no, by social I don't mean facebook and twitter! :D

[compoundinglife]

Can you see a future other than the one where the brands lease space in showrooms?

 

If/When things like 3d projection and imaging get better and cheaper I can see people not needing to visit a showroom because they can see a 3d hologram of themselves in clothing rather than having to try it on. I was thinking about this a few months ago when I heard about IndoChino ( http://www.forbes.com/sites/edzitron/2012/05/15/indochino/ ) a company that imports tailored suits from China. With the right technology your computer or mobile device could measure you for your suit and show you a 3d projection what it looks like on you all without leaving your home.

 

If this happens and when it happens is anyones guess. But yes I could see a future different than brands leasing spaces in showrooms or at least I think there are other options long term.

 

And you can probably have sex with women in virtual reality too.  So pick-up bars will go away.

 

Malls are a social experience that have no replacement.  Bored women like to shop.  Brands benefit from this behavior, but there needs to be a setup where the showrooms don't go bust (Amazon getting all the revenue).  The brands will get the sale -- if Amazon fulfills the sale, so what.

 

In this sense, Amazon becomes a fulfillment commodity.  However, due to their scale they might be able to do it at the lowest cost and thus have a moat anyhow.

 

People who are into fashion like to see and be seen.  It's part of the brick and mortar experience.  It is entertaining to have an ice cream in the mall and watch the fashion jeans walk by -- it just is.  People watching is what people do in malls.  And people like to dress up and be seen.

 

I don't disagree. The 3d projection idea was just me trying to provide ideas that could be alternatives to a showroom. I think the shopping experience as we know it we know it will always exist to some degree.  Human's are social creatures and while they may love the fact that amazon automatically delivers a case of toilet paper every month without any interaction they want to be able to do side by side touchy-feely comparisons of other items. 

 

I also don't see Amazon killing Ikea.

[plato1976]

will this turn out to be another bbry thread and FTP thread ?

 

Can you see a future other than the one where the brands lease space in showrooms?

 

If/When things like 3d projection and imaging get better and cheaper I can see people not needing to visit a showroom because they can see a 3d hologram of themselves in clothing rather than having to try it on. I was thinking about this a few months ago when I heard about IndoChino ( http://www.forbes.com/sites/edzitron/2012/05/15/indochino/ ) a company that imports tailored suits from China. With the right technology your computer or mobile device could measure you for your suit and show you a 3d projection what it looks like on you all without leaving your home.

 

If this happens and when it happens is anyones guess. But yes I could see a future different than brands leasing spaces in showrooms or at least I think there are other options long term.

 

And you can probably have sex with women in virtual reality too.  So pick-up bars will go away.

 

Malls are a social experience that have no replacement.  Bored women like to shop.  Brands benefit from this behavior, but there needs to be a setup where the showrooms don't go bust (Amazon getting all the revenue).  The brands will get the sale -- if Amazon fulfills the sale, so what.

 

In this sense, Amazon becomes a fulfillment commodity.  However, due to their scale they might be able to do it at the lowest cost and thus have a moat anyhow.

 

People who are into fashion like to see and be seen.  It's part of the brick and mortar experience.  It is entertaining to have an ice cream in the mall and watch the fashion jeans walk by -- it just is.  People watching is what people do in malls.  And people like to dress up and be seen.

 

I don't disagree. The 3d projection idea was just me trying to provide ideas that could be alternatives to a showroom. I think the shopping experience as we know it we know it will always exist to some degree.  Human's are social creatures and while they may love the fact that amazon automatically delivers a case of toilet paper every month without any interaction they want to be able to do side by side touchy-feely comparisons of other items. 

 

I also don't see Amazon killing Ikea.

[compoundinglife]

will this turn out to be another bbry thread and FTP thread ?

 

Trying to understand if retail RE will be of any value in the future is related to SHLD in my opinion.

 

[ERICOPOLY]

Home Depot has a lot more to offer than just the appliance sale.  They'll sell you the entire kitchen upgrade (cabinets, sinks, flooring, and all).  So Sears really has a long-term uphill battle there with appliance sales.  Makes sense to spin off Kenmore as the battle is lost.

 

[Spekulatius]

The huge decrease in EBITDA from the LE financials recently published is quite worrisome to me and I hope it's not a trend. But with the way everything else is going...

 

I think the fact that LE is generating about 1/2 the EBITDA that it did when it was acquired in the early 2000's and has gone fairly steadily downhill since 2008, even though the economy is recovery is a clear indication, that SHLD does not know how to run a retail operation.

 

LE for the most part (except ~15% of their revenue coming from an ill attempt to sell in Sears stores) is still mostly an online brand and fairly independent of Sears. That is why i think this spinoff has the most promise, more so than SHOS, which i think will be going under too, as Sears retail operation circle down the drain (due to impact in brand image, sourcing relationships and financial ties).

[ERICOPOLY]

This idea that brick and mortar malls will go away is complete BS -- or at least I am biased enough from love of the physical world.  Maybe I'm just to old to get it.

 

Everything will be available from Amazon only?  Where do you go to look at furniture, sit on it, feel the texture?  Where do you try on the Hugo Boss shirt to see if it fits your shoulders?  You can just buy everything from Amazon and if it doesn't fit then return it free of charge.  That would kill Amazon in shipping charges.  Currently Amazon sells you the Hugo Boss shirt that you tried on in Nordstrom and you know it already fits you.  That only works for Amazon so long as the mall retail stores survive in their present form.  They are starving their showrooms to death.

 

Amazon's model effectively depends to some degree on dying retail models to continue to struggle and not die.

 

Let's say every single retail store was gone.  You'd really be buying things sight-unseen from Amazon and not be returning a lot of the stuff?  I don't believe it -- I think return charges would come back to bite them.  There has to be showrooms.

 

On that note this is why I mentioned the commerce-hub connection earlier. Amazon offers the best prices by relentlessly focusing on efficiency and scale which is something that most brick and mortars (except maybe Costco and Walmart??) have struggled with because they have legacy operations that are harder to change vs building a hyper efficient operation from scratch (Amazon).

 

Take a company like commerce hub, a startup that is focused on supply chain and fulfilment efficiency from the get go but providing it as a service to existing retailers. If they can get the top 20 retailers on board for some % of sales then they could have considerably more purchasing power than Amazon and potentially enable more traditional retailers to compete with Amazon on price. At which point the pricing spread could go away. This is all just wild ass speculation on my part but I don't think its outside the realm of possibility. Add on to that your points about Amazon being dependent on brick & mortar to provide free showrooms for their products.

 

Thanks for mentioning commerce hub.

[ERICOPOLY]

This idea that brick and mortar malls will go away is complete BS -- or at least I am biased enough from love of the physical world.  Maybe I'm just to old to get it.

 

Everything will be available from Amazon only?  Where do you go to look at furniture, sit on it, feel the texture?  Where do you try on the Hugo Boss shirt to see if it fits your shoulders?  You can just buy everything from Amazon and if it doesn't fit then return it free of charge.  That would kill Amazon in shipping charges.  Currently Amazon sells you the Hugo Boss shirt that you tried on in Nordstrom and you know it already fits you.  That only works for Amazon so long as the mall retail stores survive in their present form.  They are starving their showrooms to death.

 

Amazon's model effectively depends to some degree on dying retail models to continue to struggle and not die.

 

Let's say every single retail store was gone.  You'd really be buying things sight-unseen from Amazon and not be returning a lot of the stuff?  I don't believe it -- I think return charges would come back to bite them.  There has to be showrooms.

 

Well, retailers are trying to change the problem of clothing. I can't find a link off the top of my head, but there are services here in NYC that will take a 3-D image of your body shape and have clothing fitted to you. So for a one time appointment you get fitted clothes at a reasonable price.

 

I agree though, the physical world of retail won't die. People like to go and shop. We've been doing it since the early days of civilization. What else, are we all just going to sit home all day? Work from home, shop from home, watch movies at home, watch sports at home, interact with your friends at home, etc. etc.? At some point, human nature wants to go out and be social. And no, by social I don't mean facebook and twitter! :D

 

That helps dramatically to quickly sort which brands/size will fit you -- less time in the dressing room.  However I still think you want to try them on to see how the fabric feels.  It is soft?  Scratchy?  Does it stretch?  I don't know, the tactile thing. 

 

Well anyhow, aside from the 3d modeling thing look at it like this... if I'm wrong then people don't currently go to the malls to demo products and then buy them online.  Online is here today, yet people still go to the "showroom" at the mall.  It is unproven that Amazon can survive without a showroom -- for some products at least.  Or perhaps it is unproven that some brands can maintain an edge without a showroom.

 

The showroom reduces the number of online orders that get returned.  That's one of it's advantages to today's Amazon model.  Costs aside, it's also a hassle for the customer to return things that don't fit or work as expected.  So some of the convenience of Amazon goes away if you can't try on or demo the product at a physical store before ordering it from Amazon.

[compoundinglife]

This idea that brick and mortar malls will go away is complete BS -- or at least I am biased enough from love of the physical world.  Maybe I'm just to old to get it.

 

Everything will be available from Amazon only?  Where do you go to look at furniture, sit on it, feel the texture?  Where do you try on the Hugo Boss shirt to see if it fits your shoulders?  You can just buy everything from Amazon and if it doesn't fit then return it free of charge.  That would kill Amazon in shipping charges.  Currently Amazon sells you the Hugo Boss shirt that you tried on in Nordstrom and you know it already fits you.  That only works for Amazon so long as the mall retail stores survive in their present form.  They are starving their showrooms to death.

 

Amazon's model effectively depends to some degree on dying retail models to continue to struggle and not die.

 

Let's say every single retail store was gone.  You'd really be buying things sight-unseen from Amazon and not be returning a lot of the stuff?  I don't believe it -- I think return charges would come back to bite them.  There has to be showrooms.

 

On that note this is why I mentioned the commerce-hub connection earlier. Amazon offers the best prices by relentlessly focusing on efficiency and scale which is something that most brick and mortars (except maybe Costco and Walmart??) have struggled with because they have legacy operations that are harder to change vs building a hyper efficient operation from scratch (Amazon).

 

Take a company like commerce hub, a startup that is focused on supply chain and fulfilment efficiency from the get go but providing it as a service to existing retailers. If they can get the top 20 retailers on board for some % of sales then they could have considerably more purchasing power than Amazon and potentially enable more traditional retailers to compete with Amazon on price. At which point the pricing spread could go away. This is all just wild ass speculation on my part but I don't think its outside the realm of possibility. Add on to that your points about Amazon being dependent on brick & mortar to provide free showrooms for their products.

 

Thanks for mentioning commerce hub.

 

Correction on my earlier post, Commerce hub is not a startup they were founded in 1997.

[BG2008]

wsj article about high rate of returns

 

http://online.wsj.com/news/articles/SB10001424052702304773104579270260683155216

[hyten1]

interesting thought some of you have on shld's future plan

 

- convert as many shld shopper to syw (at what point is enough, i thought they said 60 or 70% already are syw members, have we hit the inflection point, or are they waiting/wanting 75, 80 or 90%)

- close, re-purpose, give back, sell RE (cut cost, for showroom, as distribution center etc.)

- ultimately shld became the distribution/show rooming service for various retail brands (including its own craftsman, kenmore) - if you think about it that is what JCP tried to do, but obviously they failed (at least in the most recent attempt). shld is trying to reach this ultimate goal in a different way.

 

i guess the devil is in the details, its the implementation that matters.

 

the question is is this "startup" worth invest in at the current valuation.

 

my question is:

- will this integrated retail work? meaning this setup still benefits amazon,  people can still  try on things at these so call showroom and buy at amazon. unless shld can offer the same price as amazon as well as the showrooms? that doesn't seem possible with this setup (unless shld take a even smaller margin). Or maybe SHLD can charge for handling the returns for the brands and/or for amazon?

- Or maybe its the fact you can return at a physical store you are will to pay a little more (i don't think this works for most people)

 

hy

[Luke 532]

E-commerce strategy slide deck

http://www.slideshare.net/ishmelev/digital-franchise-sears-2014-jan

[ERICOPOLY]

my question is:

- will this integrated retail work? meaning this setup still benefits amazon,  people can still showroom/try on things at these so call showroom and buy at amazon.

 

hy

 

I think Lands' End is sort of like the example.  Post spinoff, they will rent space from SHLD.  So they are renting showroom space.  Therefore, it doesn't matter if people try things on and order online.  Sears just cares if the rent is paid.  The brand only cares that they sold a product under their label.

 

The success will happen if Lands' End isn't the only one doing that.  Will others come?

 

It might be the ultimate destiny, but we aren't there yet.  If brands can still find space on JC Penney stores today, then why rent showroom space from Sears?  I guess there is some sort of lag time before the freeloading brands are forced to either rent space in malls (from Sears perhaps) or cease to have any showrooms at all.

 

I think it is speculative.  I like Buffett's philosophy here on startups.  He has made plenty of money on just buying temporarily discounted businesses that don't need to solve any major transformative hurdles.

[ERICOPOLY]

E-commerce strategy slide deck

http://www.slideshare.net/ishmelev/digital-franchise-sears-2014-jan

 

So why is that posted on the internet for all to see if it is real?  Look at how the "confidentiality statement" at the bottom of the first slide reads.  Supposedly we are all "strictly prohibited" from even reading it.

[compoundinglife]

E-commerce strategy slide deck

http://www.slideshare.net/ishmelev/digital-franchise-sears-2014-jan

 

So why is that posted on the internet for all to see if it is real?  Look at how the "confidentiality statement" at the bottom of the first slide reads.  Supposedly we are all "strictly prohibited" from even reading it.

 

Looks like a pitch deck. He probably pitched the idea at some point and put it on his slideshare account as personal marketing.

[BTShine]

E-commerce strategy slide deck

http://www.slideshare.net/ishmelev/digital-franchise-sears-2014-jan

 

So why is that posted on the internet for all to see if it is real?  Look at how the "confidentiality statement" at the bottom of the first slide reads.  Supposedly we are all "strictly prohibited" from even reading it.

 

Looks real to me.  Not sure why someone would go through all that work to create a fake presentation...just so he can trick the CofBF SHLD message board? 

 

Seems like some decent ideas in there.

[ERICOPOLY]

E-commerce strategy slide deck

http://www.slideshare.net/ishmelev/digital-franchise-sears-2014-jan

 

So why is that posted on the internet for all to see if it is real?  Look at how the "confidentiality statement" at the bottom of the first slide reads.  Supposedly we are all "strictly prohibited" from even reading it.

 

Looks real to me.  Not sure why someone would go through all that work to create a fake presentation...just so he can trick the CofBF SHLD message board? 

 

Seems like some decent ideas in there.

 

Sure, but are they (the ideas in the slides) really the strategy adopted by Sears (in which case he is posting corporate strategy here, presumably illegally) or did it get rejected so that he is now free to post it?

 

What's it doing posted without a secure login if it's really the corporate strategy?

 

 

[ERICOPOLY]

E-commerce strategy slide deck

http://www.slideshare.net/ishmelev/digital-franchise-sears-2014-jan

 

So why is that posted on the internet for all to see if it is real?  Look at how the "confidentiality statement" at the bottom of the first slide reads.  Supposedly we are all "strictly prohibited" from even reading it.

 

Looks like a pitch deck. He probably pitched the idea at some point and put it on his slideshare account as personal marketing.

 

Sounds most likely.

[BTShine]

E-commerce strategy slide deck

http://www.slideshare.net/ishmelev/digital-franchise-sears-2014-jan

 

So why is that posted on the internet for all to see if it is real?  Look at how the "confidentiality statement" at the bottom of the first slide reads.  Supposedly we are all "strictly prohibited" from even reading it.

 

Looks real to me.  Not sure why someone would go through all that work to create a fake presentation...just so he can trick the CofBF SHLD message board? 

 

Seems like some decent ideas in there.

 

Sure, but are they really the strategy adopted by Sears (in which case he is posting corporate strategy here, presumably illegally) or did it get rejected so that he is now free to post it?

 

What's it doing posted without a secure login if it's really the corporate strategy?

 

Eric,

 

Fair points. 

 

I don't, and likely will not ever, know the answer to your questions. 

 

I don't think information in the slides is groundbreaking or drastically different from the direction Sears has stated it's going.  Much of the slide deck relates to 3rd party sellers and their use of Sears.com to host their product, etc.  It doesn't seem like highly sensitive information (even though the disclaimers would lead you to believe it is).

 

Again, these are just my thoughts and by no means does it mean I'm right. 

 

 

[LC]

I think Lands' End is sort of like the example.  Post spinoff, they will rent space from SHLD.  So they are renting showroom space.  Therefore, it doesn't matter if people try things on and order online.  Sears just cares if the rent is paid.  The brand only cares that they sold a product under their label.

 

The success will happen if Lands' End isn't the only one doing that.  Will others come?

 

It might be the ultimate destiny, but we aren't there yet.  If brands can still find space on JC Penney stores today, then why rent showroom space from Sears?  I guess there is some sort of lag time before the freeloading brands are forced to either rent space in malls (from Sears perhaps) or cease to have any showrooms at all.

 

Curious...what if Amazon does this. Just "rent" space on Amazon to vendors. Amazon is essentially real estate + fulfillment. Split the company into 2. Charge rent to stay on Amazon's website real estate, pay more "rent" + a fee to have your product stored in Amazon's warehouse & fulfilled by Amazon. No inventory problems on Amazon's side, as those product are still generating 'rent'.