SHLDQ - Sears Holdings Corp

[merkhet]

I think that's a part of it, but I'm trying to figure out if there's more than that.

[Luke 532]

I think that's a part of it, but I'm trying to figure out if there's more than that.

 

This is kind of weird but also kind of cool and could be part of it...

At 6:30 in the video (Chu, SHLD guy): “if you have items, merchandises ready to pick up, you’re running our apps in the background, driving around going to stores, we actually send you a notification when you’re actually near a store, asking you if you want that item delivered to your car.”

 

It would need to be the smaller/medium sized items, but this could be pretty cool during the busy holiday season.  I'm a few blocks away eating dinner with my wife and kids, SHLD send a text that they can bring me items X, Y, and Z, and I meet them at my car between dinner and dessert.

 

Or I'm at my kid's baseball game just sitting in the bleachers, get a message if I'd like for them to bring me the new toolset I had on my "wish list" and that they can get it to me in 30 minutes.  I buy it, they bring it to me, and it's like I've gone shopping without ever having to go into the store nor wait for a day or two delivery.

[constructive]

I think the issue is that our mental models of what a retailer should provide are somewhat ossified by history and prior experience.  It's not altogether clear to me how retailers should best serve customers in the age of Amazon.

 

OK, it's not altogether clear how they should serve customers, but it's pretty clear how they shouldn't serve customers. Sears / KMart current retail operations are worst in class.

[adesigar]

I think that's a part of it, but I'm trying to figure out if there's more than that.

 

This is kind of weird but also kind of cool and could be part of it...

At 6:30 in the video (Chu, SHLD guy): “if you have items, merchandises ready to pick up, you’re running our apps in the background, driving around going to stores, we actually send you a notification when you’re actually near a store, asking you if you want that item delivered to your car.”

 

It would need to be the smaller/medium sized items, but this could be pretty cool during the busy holiday season.  I'm a few blocks away eating dinner with my wife and kids, SHLD send a text that they can bring me items X, Y, and Z, and I meet them at my car between dinner and dessert.

 

Or I'm at my kid's baseball game just sitting in the bleachers, get a message if I'd like for them to bring me the new toolset I had on my "wish list" and that they can get it to me in 30 minutes.  I buy it, they bring it to me, and it's like I've gone shopping without ever having to go into the store nor wait for a day or two delivery.

 

I think you misunderstood it. All it will do is. You buy it and when you go to pick it up based on GPs they know you are near and they bring it out to your car instead of you going inside the store to pick it up. That's all.

[merkhet]

I think the issue is that our mental models of what a retailer should provide are somewhat ossified by history and prior experience.  It's not altogether clear to me how retailers should best serve customers in the age of Amazon.

 

OK, it's not altogether clear how they should serve customers, but it's pretty clear how they shouldn't serve customers. Sears / KMart current retail operations are worst in class.

 

And yet it somehow is working for the people that provide Sears with $30B+ in sales.  So what is Sears doing for them that keeps them there?  Are they merely the masochists?

[Luke 532]

I think that's a part of it, but I'm trying to figure out if there's more than that.

 

This is kind of weird but also kind of cool and could be part of it...

At 6:30 in the video (Chu, SHLD guy): “if you have items, merchandises ready to pick up, you’re running our apps in the background, driving around going to stores, we actually send you a notification when you’re actually near a store, asking you if you want that item delivered to your car.”

 

It would need to be the smaller/medium sized items, but this could be pretty cool during the busy holiday season.  I'm a few blocks away eating dinner with my wife and kids, SHLD send a text that they can bring me items X, Y, and Z, and I meet them at my car between dinner and dessert.

 

Or I'm at my kid's baseball game just sitting in the bleachers, get a message if I'd like for them to bring me the new toolset I had on my "wish list" and that they can get it to me in 30 minutes.  I buy it, they bring it to me, and it's like I've gone shopping without ever having to go into the store nor wait for a day or two delivery.

 

I think you misunderstood it. All it will do is. You buy it and when you go to pick it up based on GPs they know you are near and they bring it out to your car instead of you going inside the store to pick it up. That's all.

 

If that were the case, why would you need an app for that?  It seems to me the quote was saying that they can come to where you are, not vice versa.  I might be mistaken but I doubt he would mention that customers need an app for curbside service... wouldn't make much sense to me.

 

If I'm interpreting the quote correctly it would be like a pizza delivery service except it's everything else instead of pizza, and it doesn't have to be delivered to your house but anywhere you might be (as long as within X miles of a SHLD distribution center). 

 

All the better if you live near a SHLD distribution center (and they have the item in stock) as a same-day delivery type of thing.  Heck, this would be wonderful for small businesses, or forgetful husbands on your anniversary or wife's birthday (although I don't recommend a toolset for your bride) :)

[Luke 532]

I think the issue is that our mental models of what a retailer should provide are somewhat ossified by history and prior experience.  It's not altogether clear to me how retailers should best serve customers in the age of Amazon.

 

OK, it's not altogether clear how they should serve customers, but it's pretty clear how they shouldn't serve customers. Sears / KMart current retail operations are worst in class.

 

And yet it somehow is working for the people that provide Sears with $30B+ in sales.  So what is Sears doing for them that keeps them there?  Are they merely the masochists?

 

Because half of them don't care what the stores look like.

17:40 (Chu): “Over 40%, 50% of our sales buy online and pick up in the store.”

[constructive]

Because half of them don't care what the stores look like.

17:40 (Chu): “Over 40%, 50% of our sales buy online and pick up in the store.”

 

So ~98% of sales are physical, ~1% are online, and ~1% are hybrid. Correct?

[adesigar]

If that were the case, why would you need an app for that?  It seems to me the quote was saying that they can come to where you are, not vice versa.  I might be mistaken but I doubt he would mention that customers need an app for curbside service... wouldn't make much sense to me.

 

If I'm interpreting the quote correctly it would be like a pizza delivery service except it's everything else instead of pizza, and it doesn't have to be delivered to your house but anywhere you might be (as long as within X miles of a SHLD distribution center). 

 

All the better if you live near a SHLD distribution center (and they have the item in stock) as a same-day delivery type of thing.  Heck, this would be wonderful for small businesses, or forgetful husbands on your anniversary or wife's birthday (although I don't recommend a toolset for your bride) :)

 

 

“if you have items, merchandises ready to pick up, you’re running our apps in the background, driving around going to stores, we actually send you a notification when you’re actually near a store, asking you if you want that item delivered to your car.”

 

He says the following.

1. you have items, merchandises ready to pick up. - You bought the items already

2. you’re running our apps in the background - this is for the GPS info

3. driving around going to stores, we actually send you a notification when you’re actually near a store, - driving by a SHLD/Kmart Location

4. asking you if you want that item delivered to your car. - Curbside pickup.

 

Nothing about coming to your baseball games and dinners. :)

[merkhet]

I agree that it's just drive up and get it delivered in the parking lot -- I've actually seen the button in the SYW app while I've been at the stores.

[Luke 532]

I agree that it's just drive up and get it delivered in the parking lot -- I've actually seen the button in the SYW app while I've been at the stores.

 

Alright, my mistake.  But it would be cool if they would deliver it to me while I was out and about... doesn't seem like it would be that difficult.

 

 

[peridotcapital]

40-50% of Sears revenue is buy online/pickup in store? That seems like an amazingly high number to me. Wow. That could help tremendously in reducing the average store size, but it also complicates things as you try and keep inventory levels high enough. And you aren't saving as much floor space since you need to store the merchandise somewhere (even if it is condensed in the back room and not spread out on the sales floor). This all begs the question as to what is driving the comp sales declines we are seeing. Is it split fairly evenly among online sales pickups and in-store purchases, or is the online side holding up well at the same time mall traffic is declining. Essentially, are they gaining/losing share of the online sales, mall sales, or both. Of course, Eddie would never breakdown the comps like other stores do (avg ticket vs # transactions vs channel, etc). Here's to hoping the 10-K has some goodies in it this year...

[heth247]

And yet it somehow is working for the people that provide Sears with $30B+ in sales.  So what is Sears doing for them that keeps them there?  Are they merely the masochists?

 

That's a big mystery. Every time I read an article online and the thousands comments followed, it is always like "Sears sucks, nobody goes to Sears".

 

However, even we net out the sales of

 

-1.5b LEND's END

-2.2b Craftsman

-4.0b Kenmore

-0.3b Diehard

-2.0b Auto centers

-3.0b Home services

= 13b

 

We still end up with 35-13=22b sales for the rest. So who are those shoppers supporting all these revenue?

 

[constructive]

40-50% of Sears revenue is buy online/pickup in store?

 

No. 40-50% of Sears online revenue is pickup in store. Sears online is ~3% of sales.

[peridotcapital]

40-50% of Sears revenue is buy online/pickup in store?

 

No. 40-50% of Sears online revenue is pickup in store. Sears online is ~3% of sales.

 

OK, that makes more sense.

[20ppy]

I agree that it's just drive up and get it delivered in the parking lot -- I've actually seen the button in the SYW app while I've been at the stores.

 

Alright, my mistake.  But it would be cool if they would deliver it to me while I was out and about... doesn't seem like it would be that difficult.

 

Well, the point of the painstaking transformation of retail is that it embraces the future: what's stopping Sears from doing just that?

[krazeenyc]

40-50% of Sears revenue is buy online/pickup in store?

 

No. 40-50% of Sears online revenue is pickup in store. Sears online is ~3% of sales.

 

Source please. My research (backed up by actual sources) says these numbers are complete fiction.

[wisdom]

sears.com should have sales just under $5 Billion this year. Total sales are expected to be $35B.

 

5/35 = 14% of sales.

 

SHLD is one of the top 5 online stores in the US. Where did you get the 3% of sales from.

[adesigar]

I agree that it's just drive up and get it delivered in the parking lot -- I've actually seen the button in the SYW app while I've been at the stores.

 

Alright, my mistake.  But it would be cool if they would deliver it to me while I was out and about... doesn't seem like it would be that difficult.

 

Well, the point of the painstaking transformation of retail is that it embraces the future: what's stopping Sears from doing just that?

 

Transformation of retail and embracing the future is one thing. Problem with most ideas is the need to think beyond the initial idea.

 

1. Is delivering small item to random locations around the city feasible?

2. Am I going to use most items I buy from Sears/Kmart at dinner, baseball game, grocery shopping, bank, Gym? If not then why have the hassle of waiting for it and carrying it when I can get it delivered home?

3. What is an acceptable time for a customer to receive these items in? 15 mins? 30 mins? 1 hr?

4. How big will a delivery window be since the delivery window can be off by 15-30 minutes because of traffic etc. Will customers wait?

5. What happens if the customer leaves before the item is delivered to that location? Will customer be responsible for delivery charges?

6. What is needed to have a fleet of vans running around delivering packages. Is that a retail business or would that turn SHLD into UPS?

7. Will it be faster to go to a store and buy it than wait for it to be delivered?

8. Will customers trying to save on state taxes by buying on Amazon be will to pay a hefty markup for the delivery charges?

 

That's just off the top of my head in a couple of minutes.

 

 

 

[constructive]

40-50% of Sears revenue is buy online/pickup in store?

 

No. 40-50% of Sears online revenue is pickup in store. Sears online is ~3% of sales.

 

Source please. My research (backed up by actual sources) says these numbers are complete fiction.

 

Here are a couple from 2013.

 

http://online.wsj.com/news/articles/SB10001424127887324125504578511673030644496

 

The problem for Sears is that analysts estimate online sales only account for about 2% of Sears's overall revenue, or about $800 million.

 

http://www.chicagobusiness.com/article/20130109/BLOGS10/130109802/sears-is-now-lamperts-company-to-kill

 

Analysts estimate Sears' online sales at less than 3 percent of its roughly $40 billion in annual revenue.

 

I'd be interested to see a source for 14%.

[constructive]

If those numbers aren't correct, maybe SHLD should break out their online numbers. And correct the Wall Street Journal.

[Luke 532]

 

I'd be interested to see a source for 14%.

 

Me too.

 

Here's one that claims $3B in online sales...

http://www.oldwestim.com/files/media/Download%20this%20site/Commentaries%20and%20Investor%20Letters%202013.02.04.pdf

OLD WEST INVESTMENT LETTERS (see June 8th, 2011)… pages 18-20 (of 41)

 

"What most people don’t know is that Sears has a $3 billion dollar online business that grew 20% last year (to add context, Wal-Mart has $4B in US online sales)..."

 

[20ppy]

I agree that it's just drive up and get it delivered in the parking lot -- I've actually seen the button in the SYW app while I've been at the stores.

 

Alright, my mistake.  But it would be cool if they would deliver it to me while I was out and about... doesn't seem like it would be that difficult.

 

Well, the point of the painstaking transformation of retail is that it embraces the future: what's stopping Sears from doing just that?

 

Transformation of retail and embracing the future is one thing. Problem with most ideas is the need to think beyond the initial idea.

 

1. Is delivering small item to random locations around the city feasible?

2. Am I going to use most items I buy from Sears/Kmart at dinner, baseball game, grocery shopping, bank, Gym? If not then why have the hassle of waiting for it and carrying it when I can get it delivered home?

3. What is an acceptable time for a customer to receive these items in? 15 mins? 30 mins? 1 hr?

4. How big will a delivery window be since the delivery window can be off by 15-30 minutes because of traffic etc. Will customers wait?

5. What happens if the customer leaves before the item is delivered to that location? Will customer be responsible for delivery charges?

6. What is needed to have a fleet of vans running around delivering packages. Is that a retail business or would that turn SHLD into UPS?

7. Will it be faster to go to a store and buy it than wait for it to be delivered?

8. Will customers trying to save on state taxes by buying on Amazon be will to pay a hefty markup for the delivery charges?

 

That's just off the top of my head in a couple of minutes.

At the start of a new era, things do appear lousy, there are more questions than answers, which is true to almost all the new things: the microprocessors, the internet, Amazon, cellphones, etc. over time though, new paradigm burns into our lives naturally. I am not saying Eddie is doing anything nearly as big and I don't think Eddie created anything new, but the fact that he is getting ready for the future and what it might bring, makes SHLD long term more secure.  If Eddie can make the transformation happen, no matter how lousy as it may appear today, CF positive at the same time with whatever means necessary, then, he was not bragging in his blog.

 

[krazeenyc]

40-50% of Sears revenue is buy online/pickup in store?

 

No. 40-50% of Sears online revenue is pickup in store. Sears online is ~3% of sales.

 

Source please. My research (backed up by actual sources) says these numbers are complete fiction.

 

Here are a couple from 2013.

 

http://online.wsj.com/news/articles/SB10001424127887324125504578511673030644496

 

The problem for Sears is that analysts estimate online sales only account for about 2% of Sears's overall revenue, or about $800 million.

 

http://www.chicagobusiness.com/article/20130109/BLOGS10/130109802/sears-is-now-lamperts-company-to-kill

 

Analysts estimate Sears' online sales at less than 3 percent of its roughly $40 billion in annual revenue.

 

I'd be interested to see a source for 14%.

Both articles did say according to analyst estimates (how many cover sears? how many are not gary balter lol ). I digress..

First off, we know that just Lands End had over $1 billion in direct sales (presumably a lot more internet than catalogue at this point). (I ignore lands end AND Sears Canada for obvious reasons).

 

From the Analyst call we know Sears online sales are much greater than kmart. 

 

Ok now to the numbers. (Some of it the original data ripped from Baker Street).

 

http://www.internetretailer.com/2013/05/24/big-and-getting-bigger  -- Here they say $4.2 billion but over $1-1.3 billion is from Lands End. (Not sure how much of Lands End direct business is catalog). 

 

So Sears/Kmart is $2.9 - 3.2B roughly in 2012 -- as a percentage of SHLD revenue (ex-Land's End -- it's being spun off and Sears Canada not part of transformation and only 50% owned anyways) - it's about 8.6% of Sears and Kmart Sales.

 

As far as in 2013 -- overall sales through Q3 are down 7.3% appx. 

We also know (ex-sears canada and lands end online sales were up 20%, 20% and 10% in Q1, Q2, Q3) (From Q3 Shld presentation) .  So if we estimate that overall online sales are up appx 15% while overall sales are down 7.37% -- we get that online sales are appx 10.7% of the whole pie now.

 

Couple more tidbits -

 

In Sears' job posts they state they are the 3rd largest online retailer in the country.

Sears additionally claims their online appliance business alone in 2012 was $500 million + and growing share

ALso their online marketplace is appx 20% of their total online sales. 

 

FOOTNOTE: If you remove the $1.23B in "revenues" that they got from passing appliances on to SHOS, the online portion of their business is even a larger percentage of their domestic business.

[spin]

It's Web-to-Home that's ~2-3% Sales.  Web-to-in-store/lot pickup and other delivery styles will make it a much higher %.

 

"Comparable store sales included sales from sears.com and kmart.com that were shipped directly to customers (i.e. - web to home) of approximately $836 million, $770 million and $665 million in 2012, 2011 and 2010, respectively. "

 

web-to-home, i.e what is traditionally understood as e-commence (a al Amazon) is tiny.

 

Spin