Amazon to offer Kenmore goods as Sears seeks lifeline
The struggling retailer partners with a Web rival in a bid for more customers online.
In the century before there was Amazon.com, it was Sears that was the everything store.
With its vast inventory of tools, toys and even firearms, it upended local retailers. With its catalog model and nationwide delivery system, it promised to bring anything anyone wanted to their doorstep.
But as a deal announced Thursday between Amazon and Sears illustrates, times have changed. In an attempt to win back the customers it has lost to online rivals, Sears will begin selling its Kenmore appliances on Amazon.com, including smart appliances that can be synced with Amazon’s voice assistant, Alexa. The partnership will begin in Los Angeles before expanding to other markets.
It’s a move that can be seen as both a step forward for the 124-year-old retailer and an acknowledgment of its current predicament. The company has closed more than 250 Sears and Kmart stores in the U.S. and conceded in March that there is “substantial doubt” it can stay alive after years of bleeding red ink.
On the one hand, the deal shows that Sears is attempting to reach a wider customer base — a premise that sent shares soaring more than 10.6% to $9.60 on Thursday.
“This is the first real bit of good news for the company in years,” said Craig Johnson, president at Customer
Growth Partners, a private equity investment and advisory firm with a focus on specialty retail.
On the other, it shows the ailing retail giant’s best chance at survival may be in partnering with one of its biggest rivals.
“I wouldn’t call this move by Sears a lifeline for the company necessarily,” said Sam Cinquegrani, chief executive and founder of ObjectWave Corp., a digital marketing technology and services company.
After five years of losses, Cinquegrani said Sears must do more to reinvent its business — “otherwise it will perish.”
“Sears pioneered the paper catalog — that was the first technology of the time that allowed people to order things from anywhere, and then they were one of the first to have an electronic catalog,” Cinquegrani said. “But it was thinking too narrowly, only selling its own products and Amazon passed them up.”
Sears Chairman and CEO Edward Lampert touted the agreement as a way to “significantly expand the distribution and availability of the Kenmore brand in the U.S.”
Kenmore is one of Sears’ most recognizable house brands. Earlier this year, Sears announced the $900million sale of its Craftsman brand to tool maker Stanley Black and Decker.
For Amazon, adding Kenmore products has the potential to help the Seattle company enter a market in which it hasn’t really dabbled: large appliances.
Major home appliances — think fridges, washing machines and dishwashers — is a rare sector that Amazon doesn’t dominate. But it’s a valuable one: In 2016, consumers spent $4 billion on major home appliances in online purchases, a 38% increase from 2015, according to data from NPD Group’s Checkout Tracking.
“For Amazon, this creates a clear point of competition with home improvement stores,” said Greg Portell, a lead partner in the consumer and retail practice of A.T. Kearney, a global strategy and management consulting firm. “It gets them into a space of service capability, showroom capability and they get a meaningful presence in a category that has been difficult for online retailers to get into.”
Unlike books and other household goods, delivering large appliances requires a bit more finesse — whether it’s fitting it on the truck or installing it in the kitchen. Amazon will rely on Sears’ and Kenmore’s existing delivery operation for whiteglove service, installation and extended product protection for its appliances.
Kenmore has been a Sears staple since 1927, when the brand name first appeared on a Sears wringer washing machine. Now it’s one of the best-known national brands, selling items as diverse as dutch ovens and smart air conditioners, said Kenmore President Tom Park.
Park said the idea behind the partnership is to boost online sales and potentially reach younger customers: “People will see the brand on Amazon and research it and go to a Sears store.”
Some experts question that logic, saying the partnership may lead to even less foot traffic in Sears stores. Why, after all, would someone check out a new Kenmore trash compactor in person when they can scope it out from their couch?
But Portell thinks the opposite may be true.
“The ‘showrooming’ effect could actually help Sears here,” Portell said.
With appliances, Sears’ bricks-and-mortar background may actually give it a leg up against e-commerce competitors. Sears shoppers can go to a store to see an appliance in person, regardless whether they prefer to buy online or in a store.
The partnership marks the latest deal struck by Amazon with a retailer once reluctant to offer its wares on the e-commerce hub. Nike Inc. announced last month it would for the first time sell some sportswear on Amazon.