From "territorial' to national, hardware core gets timely fix - Sears finest in hardware/diy - Company Profile

DSN Retailing Today, Sept 8, 2003 by Debbie Howell

Sears did something four years ago that easily could have been viewed as risky and stupid. It tinkered with a proven, solid business in its Craftsman tool line by expanding its assortment to include other name brands. The result? Rather than retail suicide, customers in fact responded enthusiastically to the new Tool Territory concept that positioned Sears as an even greater expert in the field.

That concept today, with its compelling visuals and fixtures, hands-on interaction for testing tools and occasional demonstrations, tins given Sears the competitive edge it needed to stay alive as Lowe's and The Home Depot began eating away at home improvement industry share from weaker players. And although Sears has abandoned or scaled back unprofitable home improvement categories, such as ceiling fans and residential lighting, strong loyalty to the 75-year-old Craftsman private label gives Sears at least one iron-clad advantage--one that it has promoted to combat the product breadth of big-box home centers and low-price positioning of discount retailers.

"We're still maintaining some very strong share numbers. It points to the power of the Craftsman brand," said George Kurkowski, storewide marketing planner for Sears' full-line stores.

Given the growth and the expanded assortments of home centers, Sears' ability to secure a 26% share in tool sales is impressive. By category, Sears boasts a 44% market share in mechanics tool sales, 31% in tool storage, 29% in benchtop tools and a 23% market share in portable electric tools.

Combined with other home improvement categories, including Sears' strong paint program, this revenue totals about $8 billion annually, or 3.9% share of the broader $204 billion market in home improvement products. That includes portions of revenue from Sears' 870 full-line stores, 20 The Great Indoors units and 250 Sears Hardware or Orchard Supply Hardware stores.

Though Kurkowski declined to comment on the sales performance of hardware categories, the broader hardlines segment that includes tools, appliances, automotive, lawn & garden, consumer electronics and fitness has performed better than softlines, though both had negative comp-store sales last year. In the latest quarter, Sears reported a low single-digit comp in home improvement, driven by solid performance in fitness and lawn & garden.

The idea behind Tool Territory, now in more than half of Sears' full-line stores, was to market Sears as "America's best tool store," a slogan now being used in direct-mailings to promote tool department sales.

"Everybody knew Sears had Craftsman. Part of the whole project was to raise awareness that we have other brands," explained Kurkowski.

Tool Territory added more than 75 tool brands, and this assortment has been rolled out chainwide. The physical fixturing and signage for the in-store department, however, is proceeding at a slower pace, added as stores are remodeled. The concept expanded the tool department size to 8,000 to 10,000 square feet, taking space from other hardlines categories that had been cut.

"As far as selection, it really makes a statement that this is a major big-league tool department and it happens to be in Sears," said Jim Robisch, a senior partner with The Farnsworth Group, a hardware industry consulting firm.

Workshop-style fixturing in silver, blue and yellow, along with extensive use of lighting show off tools in a way that gives them optimal attention and goes beyond the industrial-style, cramped displays of home centers.

"Because of the fixturing and lighting, it appears to be a more impressive presentation," said Kurkowski.

Beyond the look of the section, Kurkowski said innovation is an important factor in maintaining loyalty to Sears and the Craftsman tool brand. The retailer works closely with vendors to develop unique new tools, such as a Craftsman laser-track surveying tool that assists with hanging pictures.

Sears' tool department mainly attracts the moderate to serious do-it-yourselfer rather than pros. Gift-giving occasions such as Father's Day are a huge sales driver, said Kurkowski, with Sears becoming a significant tool destination.

Some of the positives from the Tool Territory experiment have been translated to the retailer's hardware stores, though the section is not called Tool Territory there. Kurkowski said the expanded tool assortment has been well-received by customers of Sears Hardware and Orchard Supply Hardware.

Meanwhile, these formats have evolved on their own, with the larger Orchard Supply stores gained through a 1996 acquisition used to improve the size, assortment and look of Sears Hardware. In 2000, the retailer began testing 55,000-square-foot hardware stores that were double the size of earlier units.

"The solid performance of our new large-format Sears Hardware stores proves that the unique product selection of an OSH store translates well to the Sears Hardware marketplace. Our stores provide product selection and depth combined with service, convenience and shopping experience attributes that differentiate us from the competition," Lyle Heidemann, evp and gm of hardlines for Sears, told DSN Retailing Today.