Sears Holdings (NASDAQOTH:SHLDQ) has been struggling to survive. With 23 quarters of negative earnings Sears has had to sell valuable assets such as Sears Hometown and Outlet Stores, hold a partial spin-off of Sears Canada, and now Lands' End is scheduled to be spun off. Even more shocking is that Sears is losing ground in its hardline business, which includes Craftsman, Kenmore, and Sears Auto, with approximately $2.4 billion less in sales in the first 3 quarters than during the comparable period in 2012. CEO Eddie Lampert is running out of cards, but I think there is one card that just might bring Sears back to life despite intensifying competition from Amazon.com (NASDAQ:AMZN) and Wal-Mart Stores (NYSE:WMT).
A consumer revolution
A revolution occurred throughout the United States right before the turn of the 20th century that changed American consumerism forever, that revolution was the mail-order catalog. Imagine living in a small town in the Midwest where the only store that sold goods was the general store, where prices generally were high and the selection was low.
One day, a catalog arrived that offered almost every good imaginable, truly a 'Book of Wonders', and that book was the Sears catalog. From this catalog you could select any item you wanted, send for it, pay with credit, and the product would arrive in about six weeks with 'Satisfaction Guaranteed'. Amazing, right? Well, compared to today's standards maybe not so much, but back then, Sears opened up the door to mass consumerism.
No. 3 in online retail?
Online retail companies like Amazon(NASDAQ:AMZN) are not so different from the Sears Mail Order Catalog; they are truly the modern-day equivalent. A successful online retail company needs superior logistics, warehouse infrastructure across the country, and a means to effectively distribute products to the people.
The two largest online retailers are Amazon and Wal-Mart(NYSE:WMT) and both have renowned distribution systems; so does number three, Sears. Yes, I know Sears is not who you were expecting to be the third-largest online retailer in the United States, but the company has claimed this spot and it is fighting to not only stay alive, but undergo a complete revitalization.
Sears: Back to the roots
CEO Eddie Lampert has made a conscious decision to not focus on reinvesting in Sears Department stores like J.C. Penney has done. Instead, he has changed Sears' focus to online retail with the member-centric Shop Your Way program. It is paying off, as 70% of all Sears' sales used Shop Your Way so far this year.
Sears actually has approximately 100 million products available online at a number of websites under the Sears and Kmart banners. In addition, the company offers multiple transaction choices such as same-day shipping or pick up from one of the nearest Sears stores. That's what I call instant gratification. You won't be picking any items up from an Amazon Store anytime soon!
The Shop Your Way initiative has continued to gain traction as members are able to earn points, receive additional benefits, and buy key proprietary brands such as Kenmore, Craftsman, and DieHard. I believe Sears is going to continue to sell assets such as valuable mall-anchor stores and under-performing lines, all while using these sales to continue to grow online and become a marketplace to rival Amazon.
The Will of Fire
Richard Sears left the firm when his board decided to focus on department stores instead of the mail-order catalog. Now, ninety years later Sears is shifting away from department stores and toward the Sears Online Market Place. This firm, who fueled the American consumer revolution, is not ready to simply keel over and die; it is adapting, evolving, and fighting for its rich heritage to survive another generation.
Sears has a lot of work to do, this is undeniable; competition is fierce across the board and it is no longer the ultimate one-stop shop. In spite of this, the company is making smart decisions by spinning off Lands' End and potentially Sears Auto. Praise the company for making the difficult-but-smart choice; invest in Sears' revival, and you may be rewarded.
Rob Byrnes has positions in Amazon.com. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.