Shopyourway

The member-loyalty program integrates at-home, in-store, and online shopping, but it's likely being wasted on the ailing retailer. Image: Sears Holdings.

Sears Holdings (NASDAQ:SHLD) loyalty member program Shop Your Way is an innovative way to integrate its physical retail assets with an omnichannel sales approach. By allowing customers to shop when they want, where they want, and how they want, it brings together the best Sears has to offer.

The biggest problem with the Shop Your Way program is that it is operated by Sears. The retailer is slowly withering away under the not-so-benign neglect of CEO Eddie Lampert.

If Wal-Mart (NYSE:WMT) were to adopt the loyalty program, it just might reinvigorate its sales. Because while Lampert has let investment in his stores lag, he's been pouring millions of dollars into technology to bulk up the system, and Wal-Mart, already an undercover tech giant disguised as a retailer, could put such new ideas to better use.

Shop Your Way is much like many other member loyalty programs: the more members spend, the more they save via points that can be used at Sears, Kmart, and Land's End (NASDAQ:LE) stores. However, the program is also a social media network in which you can communicate with other members, find or serve as a personal shopper, and connect with employees.

While many retailers have followed Wal-Mart's lead in developing site-to-store free shipping policies, Sears has gone one step further by allowing SYW members to never have to leave their car when making a pickup. After ordering a product and having it shipped to the store, the customer parks in a designated spot and notifies the store via the program's mobile phone that he or she has arrived; within five minutes (guaranteed!), an employee brings out the purchase and loads it in the buyer's car.

Sears reports the member loyalty program has grown in popularity, and that about three-quarters of its sales come through Shop Your Way.

Unfortunately, the pool of customers shopping at Sears or Kmart these days is rapidly shrinking. Comparable-store sales were slightly negative once again in the third quarter, though Kmart actually posted positive comps of 0.5%, the first time in years they weren't worse than the year-ago figure. And the company is still recording plenty of red ink, expecting adjusted EBITDA losses for the third quarter between $275 million and $325 million and a net loss of $630 million.

Shld

Customers have fled the old-line retailer for rivals that have invested in their stores, and merchandise, not just the technology to drive them. Data: Sears Holdings quarterly SEC filings.

How much better would it be if Wal-Mart, which also has been struggling to attract customers, could meld the innovative aspects of Shop Your Way with its own technologically advanced programs?

The big-box king has long been on the leading edge of innovation in the retail industry. It was an early adopter of RFID tag technology; popularized the concept of vendor-managed inventory; advocated the use of universal bar codes as a labeling system; used GPS to forecast supplier demands through real-time sales data at the cash register; began using smart tags to keep shelves stocked; and most recently brought on its board of directors Instagram wunderkind Kevin Systrom to help it better engage customers across social media.

Seamlessly integrating retail across divisions would be a much easier proposition at Wal-Mart, which has vast experience in using technology, than trying to shoehorn it in at Sears.

Screen Shot

Connecting customers to its different businesses and to other Shop Your Way members is an innovative opportunity for loyalty programs. Image: Sears Holdings.

Lampert maintains he's trying to connect home, auto, and fitness at Sears (and not just slowly dismantle two retailing icons), but it's not just a matter of making it easier to shop at a retailer, it's also a matter of whether customers want to shop at the retailer in question. Because Lampert has eschewed investing in his stores even as he pours $100 million annually into the technology behind them, he has created a vast wasteland of physical assets that customers choose to visit less.

While the integrated, omnichannel concept minimizes the need for brick-and-mortar locations, it doesn't eliminate it completely. Even e-commerce giant Amazon.com (NASDAQ:AMZN) is beginning to experiment with actual stores.

Sears Holdings has found a rather unique way to bolster retail operations in its Shop Your Way program. It's just too bad that Sears and Kmart are implementing this innovative strategy, and not Wal-Mart.

Follow Rich Duprey's coverage of all the retailing industry's most important news and developments. He has no position in any stocks mentioned. 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.