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"Few events have stirred greater excitement throughout the organization," says Chairman Edward Telling, 64. Others might have added: "Or greater fear." Sears' previous two attempts to reshape its merchandising image ended in embarrassing failure. In the early 1970s, Sears decided to compete with the specialty stores then springing up around its suburban shopping malls. But a former Bloomingdale's fashion director who was hired to move the company into high-fashion merchandise succeeded only in turning off Sears' traditional value-oriented shopper. In the mid-'70s, Sears tried to go up against fast-growing discounters like K mart. When prices were slashed, customers came back but profits did not. Then the recession hit. By 1981, earnings at Sears stores had slid 45% from levels of only five years earlier.
Shortly after Telling took command in early 1978, a secret document known as the "Yellow Book" leaked out of Chicago headquarters. It laid out the company's woes in a disarmingly direct manner. "We are not a fashion store, we are not a store for the whimsical, nor the affluent," it declared. "Sears is a family store for middleclass, homeowning Americans." To refocus the company, Telling in 1980 promoted Edward Brennan, a third-generation company man, to head the merchandise group—to the astonishment of longtime employees; Brennan was only 46 at the time.
Brennan stationed market researchers outside Sears stores to poll customers about the company's strengths and weaknesses. Studies showed that Sears' emphasis on big-ticket items like appliances meant that customers went there to buy, not to browse. They were not purchasing high-profit impulse items like clothing. In addition, consumers went shopping at Sears less often because it was not considered fun.
Says Marketing Professor Louis Stern of Northwestern University: "Sears had nothing, just bland stores that were unappealing and not exciting.
They lost a whole younger generation of shoppers."
Nonetheless, Brennan uncovered 1 some Sears strengths. Since the chain's buyers specialize in single ., lines such as shirts or pajamas rather than whole departments, when Sears decided to change its merchandise mix its buyers knew the hot sellers and top values. Sears' geographical spread also allowed it to test different merchandise displays around the country. The experiments demonstrated that imaginative presentation can boost sales of even the most mundane items. A test store in Indianapolis that remodeled its displays, for example, sold 44% more small appliances and 45% more light bulbs.
Sears has been making more than cosmetic changes. It has also been revamping its operations. More inventory has been moved onto the floor to avoid time-wasting runs to the back room. Stockroom clerks who formerly stayed behind the scenes now put new goods on shelves in full view of customers. Shopping carts used to be anathema because they bore the aura of discount stores, but now they are being tested in some locations. Salespeople have been ordered to keep displays tidy and to fill in at cash registers to help cut average checkout time from three minutes to 90 seconds.