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Telling's most distinctive innovation during his remodeling of Sears was to steer the company into the financial-services business. Within a single week in 1981, Sears moved to buy Dean Witter for $610 million and Coldwell Banker, a California real estate firm, for $202 million.
Sears was already in the money business through its credit operation and its Allstate Insurance division, which was founded in 1931, as well as a Sears Savings Bank in Glendale, Calif. But the new subsidiaries put Sears squarely into the mad swirl of financial services. Sears intends to compete not only with banks like Citicorp and Chase Manhattan but also with Merrill Lynch and American Express in offering services like lending and selling stock. Last year the Sears financial-services divisions earned $703 million.
The big Sears move into financial services concerns some people. Federal Reserve Chairman Paul Volcker has said bluntly, "We don't want Sears, Roebuck in the banking business." He believes that nonbanks like Sears would have an advantage over a federally controlled bank or savings and loan. Bankers are worried about the power of a rival that has won such deep consumer loyalty. Outgoing Citicorp Chairman Walter Wriston has long complained that while Sears is free to enter his business, Citicorp is restricted by a mass of state and federal regulations.
Wriston is right to worry. Telling says that a large number of Sears financial customers are "men and women who have been unwilling to venture into traditional securities brokerage and real estate offices, but who trust the integrity that Sears has established over time." About 60% of Dean Witter's new clients at the 234 Sears Financial Service centers are first-time brokerage accounts. Overall, these clients are younger, with slightly lower household income than Dean Witter's traditional customers. Says David Wells, 37, a Chicago engineer and experienced investor who has opened a brokerage account at a Sears store near his home in Roselle, Ill.: "I'm a big believer in Sears. In fact, half my house is made up of Sears products. So when I read that they were introducing financial services, I decided to go with Dean Witter because of their affiliation with Sears." His portfolio consists of stocks, bonds, tax-free municipals and stock options.
The Sears strategy for expansion into financial services is bold, and Sears is now aggressively going after this market. While it has let go a few analysts, Deari Witter nonetheless plans to add 1,200 account executives this year, at a time when other brokers are holding firm or cutting back. Merrill Lynch, for example, has laid off 1,000 people, and 1,500 more are scheduled to follow by year's end.
Meanwhile, an internal Sears committee is looking into all sorts of new financial ventures. One plan would turn the company's credit card into a debit card that would automatically deduct the price of purchases from a savings account. Speculates Stuart Greenbaum, a professor of finance at Northwestern: "The Sears credit