Attention Shoppers: Kmart/Sears Experiencing Technical Difficulties
By George Anderson
Christine Augustine, an analyst with Bear Stearns, has some questions about whether the merger that brought Kmart and Sears together is going to work.
One of the biggest areas in need of improvement - the company's supply chain management - is also one of the least likely to be fixed because it would require a major financial investment in new information systems, believes Ms. Augustine.
According to a report in the Chicago Sun-Times, the analyst believes Kmart continues to suffer "chronic out-of-stock problems" because of its "unsophisticated replenishment system." Sears has also had problems with inventory management, which Ms. Augustine believes signals a need for better "merchandise-planning and allocation systems."
Failure to fix its technical problems means shoppers at the stores can expect continued out-of-stocks in Kmart and marked down merchandise at Sears, believes Ms. Augustine.
Moderator's Comment: Can Sears Holdings be competitive without fixing its supply chain issues? What does the company need to do correct the specific problems that continue to hurt Kmart (OOS) and Sears (planning and allocation)?
While not directly related in the Sun-Times article, shoppers can also expect to continue paying higher prices at Kmart and Sears because of the inefficient manner in which the retailers manage their supply chains.
According to Christine Augustine, "Kmart's prices can be 20 percent higher than those found at Wal-Mart or Target. A similar disadvantage is expected at Sears Essentials, Sears' new off-mall format that combines brands from Kmart and Sears."
Edward Lampert and company seem to be hoping that, by moving stores into more affluent areas, consumers a) won't mind spending 20 percent more for the same goods they can purchase elsewhere and b) will buy higher priced items such as car batteries and electronics to help offset the dollars lost by out-of-stocks, and markdowns in areas such as apparel, where too much merchandise has been brought in. - George Anderson - Moderator