New ceo outlines Lacy side of Sears - Alan Lacy

DSN Retailing Today, Nov 20, 2000 by Peter J. Gallanis

HOFFMAN ESTATES, ILL. -- While the country woke Nov. 8 to news of a presidential election deadlock, another president--Sears' new leader Alan Lacy--was addressing the analyst community and laying out strategic plans on how he plans to grow the retailer as it enters the new millennium.

Among the leading growth areas that Lacy identifed were:

* The company's overall retail business;

* The Great Indoors (TGI);

* Sears.com;

* Marketing initiatives;

* Credit operations.

Lacy called the retail business the company's "most important area." With merchandise sales of $29 billion annually, he said the company is judged by how well the retail operation is performing. He also described the retail business as an area that could use improvement, but was quick to point out the success of its appliance business. He was especially bullish on the prospects of growing the appliance business now that Circuit City's share of the market is up for grabs.

On the soft lines side of the business, a long-time thorn in the side of Sears executives, Lacy conceded the business had not met expectations, but reminded analysts that between 1992 and 1999 there has been a steady and healthy 7% growth rate in soft line sales. Among the soft lines challenges the retailer faces, Lacy identified a lack of differentiation compared to the competition and a poor value perception of pricing and assortment.

To boost sales in soft lines, Lacy said the company is trying to improve on the quality of the merchandise and support the growth of its private-label brands. In recent years, private-label brands, such as Kmart's Route 66 and MSE, have done well. Over the long term, Sears would like to boost the recognition of its children's TKS Basics, Crossroads and Canyon River in-house labels, and replicate the success it has had in hard lines with such venerable names as Kenmore, Die Hard and Craftsman.

Of its peripheral retail formats, The Great Indoors has shown the potential to become a major contributor to revenues, and Lacy predicted store revenues could be as much as $50 million annually.

The advantage of TGI is there is very little, if any, cannibalization because the target demographic is wealthier than the typical Sears customer. Lacy said the company will open at least 10 TGI stores in 2001, and the current business plan calls for a total of 150 stores in five years. There are currently three TGI units in operation: Denver, Scottsdale and Dallas.

Sears.com is also a favorite of Lacy, who says that the company would continue to build on its existing infrastructure. Launched a little over a year ago, Lacy said sales have hit $500 million annually and represent 10% of full-line sales.

One of the most significant elements of the site are the appliance pages, which consumers use to research home appliances before visiting the store, exactly where Lacy wants the customer to be, and, with printouts in hand, make the final purchase. Of expanded service available, the company recently offered on-line real-time scheduling for home service repairs, online credit applications and electronic bill presentation. "We now have three ways to sell: on line, in store and by the phone," Lacy said.

There will also be a shift in the company's marketing strategy as Sears will move away from its traditional promotional marketing and focus on relationship marketing. "We need to be more brand focused," Lacy said. "We have been very reliant on pre-print [marketing], but that's declining in readership and doesn't create the opportunity to get new customers."

Sears will also leverage its strength in its credit operation to create more value with its existing consumer base. With the launch of the new Sears Gold Master Card this previous summer, Sears hope to gain new customers as well. While Lacy said they have no intention on giving up on the Sears card, he see the new Master Card as a way of better addressing consumer segments. The initial launch of the card has generated 7 million transactions, $1 billion in balances and is still growing.

Next up for the Sears card will be to gain additional members and make an aggressive move to sign up new Master Card (that may be used at TGI) users and perform pre-approved mailings.

Looking to the future, Lacy said he wants the company to continue to be a unique, multifaceted franchise, become more customer-centric and to focus on what really matters. "We're going to do fewer things better," Lacy said.