How Sears could affect holiday sales
Shoppers may see big discounts if retailer exits.
Just a few months after Toys R Us shut its doors, another iconic retailer may be absent from the retail landscape this holiday season as Sears reportedly hovers on the brink of bankruptcy.
If the 125-year-old company files for court protection, it could aim to restructure as opposed to closing up shop. But if it did decide to wind down operations, going-out-of-business sales could mean deep discounts for shoppers ticking off their holiday lists.
And the dwindling relevance that helped put Sears and its sister retailer Kmart in such dire straits to begin with may also mean that, if both disappear, many shoppers will hardly notice.
“While any store closure is bad news for Sears customers, given the unpopularity of the retailer and the ubiquitous nature of what it sells, customers will be able to easily find alternative places to shop,” says Neil Saunders, managing director of retail consultancy Global Data. “While people will regret the failure of a once iconic brand, I don’t suppose many people will mourn the loss of Sears in its present form.”
Sears Holdings, the parent company of Sears and Kmart, has been struggling to survive, hobbled by the rise of Amazon and more traditional rivals who’ve wooed away customers with similar merchandise offered for a lower price or with a better shopping experience. But time may have finally run out as the company confronts a $134 million debt payment due Monday and stalled efforts to restructure its debts and sell off more assets. The company is potentially preparing to file for bankruptcy protection as soon as this week, according to the Wall Street Journal and CNBC.
If Sears goes the way of Toys R US, which hoped to restructure after filing for bankruptcy protection but ultimately wound up liquidating, there could be a ripple effect among retailers that leads to good deals for gift buyers.
“If the company decided to shut stores and liquidate stock, it could force some other retailers to similarly discount product,” Saunders says.
Even if Sears decided to stay in business, it might momentarily get more attention from shoppers who assume that its urgent need to reorganize would force it to offer better bargains. Though, initially, they might be wrong.
“The reality is that for the first two to three weeks, the deals aren’t all that great,” says Paula Rosenblum, managing partner at RSR Research. “A savvy shopper can figure that out quickly, but the allure of the liquidation is hard to avoid. In that scenario, shoppers will flock to the Sears stores and take their chances, and other retailers will suffer.”
Yet shoppers may shy away from buying more expensive items, such as electronics or garden equipment, from a retailer that may not be around to replace them. “No one wants to buy durable goods from a company they don’t think is durable,” she says.
And the increased competition Sears has faced in categories it once dominated may diminish the impact a Sears bankruptcy could have on pricing by the rest of the industry.
“When you look at Sears ... what category will they dramatically take the prices down in?” says Greg Portell, lead partner for strategy and management consulting firm A.T. Kearney, noting that its rivals range from Home Depot to Kohl’s. “We have to infer the impact of bankruptcy would be scattered.”
If Sears ultimately doesn’t survive, its rivals stand to benefit in the long run from having one less rival to compete with.