Worried about home-improvement chains stealing its market share, Sears, Roebuck and Co. will expand its number of appliance and electronics outlet stores over the next 2 years by nearly 70 percent.
Calling it a quick and inexpensive way to plug holes in its lineup, the largely mall-based retailer plans to open as many as 17 outlet stores this year and an additional 13 in 2005 in strip centers across the country.
Hoffman Estates, IL, U.S.-based Sears, whose 870 traditional department stores are losing business to more conveniently located rivals, has 45 outlets selling overstocked, discontinued, and returned electronics, appliances, and home and garden products at discounts of up to 50 percent.
The addition of another 30 outlets comes as Sears faces greater pressure to open stores in a retail industry building few malls. While retailers Home Depot Inc. and Lowe's Cos. opened a total of 250 "big box" stores last year and are making appliances a staple, Sears opened about two dozen stores, and most were independently owned franchises in smaller markets.
The new stores will be called Sears Appliance Outlet. The existing stores, now called Sears Outlet, will be renamed. Sears has one outlet store in Maryland, U.S.
The outlet store expansion is Sears' latest effort to make its bread-and-butter products more accessible to shoppers.
In early 2004, to halt its market share decline, the company announced plans to add appliances by year's end to all 163 of its freestanding Sears Hardware stores. Last year, in its 870 mall stores, Sears started stocking more lower-priced white goods to court bargain hunters.
"We want to expand our position in the appliance value segment by positioning the outlet channel as a viable alternative to home centers," said Karen Peters, Sears' director of outlet stores.
Sears is the nation's biggest appliance seller, with 2003 sales up 3.7 percent. But sales gains at Lowe's and Home Depot reached double digits. Also, Sears, once a Top 10 player in the electronics industry, now ranks 11th, with 2003 sales slipping 8 percent, according to industry publication TWICE.
Through the new locations in strip centers, Sears hopes to stem the erosion.
Stores will be "about 25,000 to 35,000 square feet in strip-center type locations, and we typically sign a 5-year lease so it allows us to expand pretty quickly with a relatively low-cost format," Ms. Peters said.
Sears said its outlet stores appeal to rental property owners and cost-conscious, first-time homebuyers. "Our customers are willing to drive about 19 miles to get to us," Ms. Peters noted. Sears' outlet stores also sell goods on eBay.
One retail expert believes that the new stores could appeal to the classic outlet-mall shopper: an upper-middle-class consumer wanting premium brands at a bargain -- real or perceived.
Jim Robisch, senior partner for Indianapolis retail consultant Farnsworth Group, notes that he has seen appliance prices at Sears outlets that are higher than at a local Best Buy and only a shade below Sears' full-line stores. But "maybe malls are no longer attracting the market they want for their markdowns," he said.
"It might be an above-average value shopper that doesn't shop malls or doesn't shop Sears in malls, so by going to strip centers and putting out an outlet sign," Sears might succeed in luring new customers, he said. (The Chicago Tribune)
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