Sears Tries Grocery Delivery, Because Anything Goes as Eddie Lampert Flails About
In the never-say-die world of Sears Holdings (SHLD), the latest brainstorm involves... home delivery of groceries. However dicey that may sound, failure will only drive the company to try something -- anything! -- else as long as it can be done on the cheap.
Sears is testing home grocery delivery in Manhattan and the Hamptons, and will soon extend it to Chicago and other points west. The trial effort is an extension of an initiative launched last year, known as MyGofer, which allows consumers to purchase a variety of general merchandise and food products on the Internet, then pick them up at Kmart stores -- at least for the most part. As with auto center franchising and private label licensing, MyGofer represents another attempt by Sears chairman Eddie Lampert to squeeze more blood from a stone revenues from the company's existing operations.
Sears launched a single dedicated MyGofer outlet as a pick up point and showcase in Joliet, Ill., one that bears some similarities to the catalog showrooms the retailer closed a few years earlier. That debut was neither a misguided effort to revive past glories nor an impetuous launch of a new retail chain, even if some observers saw it that way at the time.
When MyGofer launched, no one yet knew that Sears' new strategy was to pursue growth on the cheap. The MyGofer showroom is less a prototype and more a laboratory to determine how best to connect consumers to a new, primarily online business. Sears can adapt Internet-based MyGofer operations in numerous ways at minimal cost, and Lampert clearly sees online as an opportunity to increase revenues as he pays down debt. A stronger balance sheet and low-cost growth prospects should boost Sears share price and the value of his hedge fund's investment in Sears Holdings.
In his last chairman's letter, published in February, Lampert wrote of Amazon and eBay admiringly, emphasizing their ability to take business away from traditional retailers without building actual stores. Looking forward, Lampert suggested that Sears might integrate existing stores and distribution facilities with a growing Internet capacity to provide more points of interaction with consumers online.
The company's MySears and MyKmart social networks encourage interaction even when consumers aren't actually shopping and, when they do, its ShopYourWay loyalty card program, with one percent cash back and other rewards, provides its own incentive to visit stores and websites. Sears also is keeping in touch with consumers through emerging digital channels with a MyGofer mobile initiative.
The expansion of MyGofer operations into home delivery is another way Sears is executing on Lampert's agenda. With online ordering and Kmart stores as fulfillment centers, the retailer only has to employ enough workers to get the merchandise arriving out to the customers who ordered it. New stores require not only buildings but a full staff to support them, all in the hope shoppers show up and spend enough to make the operation pay.
Expanding MyGofer operations through a food initiative isn't surprising. Kmart has experience as the first of the three national discount chains to operate supercenters. Lampert has tried food in Sears' Grand stores, and even if that didn't pan out, he clearly remains interested in a chance to sell something folks can't live without.
Home grocery delivery may never get past the test phase. Even if it does, it may not expand much beyond the special case environments where people don't have the time, the inclination or, in the Manhattan case, the car to go shopping. Yet the MyGofer concept is a nice, inexpensive vehicle that the company can keep retooling as it seeks to develop its own Amazon- or eBay-type success.
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