Sears, Roebuck & Co. is moribund. In the retail banner year of 1998, Sears grew only 0.1% to reach $41.3 billion in revenues. When Americans are buying more apparel than ever, Sears' men's apparel sales fell 4%, women's 1%, and children's 2%. The value of benchmarking its woes is too learn what not to do. Let's examine three of its failing organs -retail sales, direct marketing, and branding to see what their morbidity reveals about today's marketing world.

　　Sears could never figure out the difference between retail selling and mass distribution retailing. The retail store, traditionally, was the brand of trust. Customers depended on the store for their shopping needs. The salesperson used this dependence to steer the customer to higher margin items, convincing him that he was getting more for less, when he may have got less for more. This produced high margins and a profitable business enterprise. But this retail model is rapidly declining.　

　　For example, kitchen and bath dealers sell high-end bathroom equipment and renovations. Equipment manufacturers, like Kohler, are able to communicate their brands through display modules. But the dealers strip brand decals, in order to give salespeople the flexibility to switch customers to higher margin equipment, and also to prevent customers from identifying products and going to home centers to buy the same piece at a lower price. Home centers today control 70% of bathrooms renovations. The dealers want to brand their store, not the manufacturer of known equipment brands. Sears still adheres to this culture of retailing. The store always promotes its own image and its own brands, like Kenmore and Craftsman, while restricting displays of independent brands.　

　　Walmart challenged this model with mass retail distribution. It does not depend on pushing sales to high margin items, but on high sales volume of well known consumer brands, and on efficient logistics and inventory control.　

　　Walmart understands that today's shopper wants well known brands at the lowest possible price.　

　　Rather than fit the new mass retail distribution model and bring in top apparel brands, Sears retrenched with a 15% apparel price reduction. This leads to lower quality and an appeal to price shoppers, instead of brand shoppers. Sears has made a faint pledge to introduce in-store shops for Disney and Benetton, but is unlikely to go far enough to be a true mass retail distributor. Macy's, Bloomingdales, and Dayton Hudson bring big brands to the people. Martha Stewart has reinvigorated K-Mart. But Sears lags behind.　

　　Sears is expanding its appliance sector based on its store brands and superior service and financing. Whether Sears can grow this sector competing against the broad brand and model variety of Best Buy, Circuit City, and Home Expo remains a serious question.　

　　The next vital organ to inspect is direct marketing. Sears gave up its catalogue business in the same decade that America Online was coming alive. Today, cyber-shopping is all the rage, and Sears has no cyber-shopping web capability. All their site permits is product description, pricing, and a 1-800 number for ordering. It is planning to open a direct cyber-ordering web site this year, while Sho.com, and Value America already have an appliance ordering capacity. It took Sears too long to understand what Amazon was doing, and how the retail world was traveling to the web.　

　　The reason for this time warp lay primarily in a misunderstanding of marketing strategy. Sears did not believe that its blue-collar target customers would use the Internet for shopping. While this may be is true, it ignored the more compelling corollary. Those who would use the Internet for shopping, needed an online source to buy from. No one was in a better position than Sears to provide the first e-commerce supply of goods and furnishings to the first generation of Internet shoppers. They failed to see their unique supply opportunity, and let new entities like Sho.com and Value America take the lead. By the time Sears comes online, it will only cannibalize its store sales, without attracting a new segment of shoppers. This will make the carrying costs of its store facilities an even greater hardship.　

　　The third mistake was to misunderstand the emerging power of mass brands.　

　　Sears thought that its target segment of blue-collar customers would remain faithful to value shopping. They would continue to seek quality at the lowest price. In fact, the blue-collar shopper betrayed them, and switched to mass brands at a higher price. The celebrity brand became a thing of value in itself. Value lay in identity.　

　　Popular culture, rather than traditional values, influence the blue-collar segment. Movies, TV and music prevail over unions, ethnicity, and old shopping mores. The blue-collar segment has an appetite for branding. Witness the power of Michael Jordan, Tommy Hilfiger, Calvin Klein, and DKNY. The children of this segment will not be caught dead wearing an unbranded piece of apparel, from outerwear to underwear. Instead of quality and price, their formula is identity at any price. And you cannot get identity at Sears.　

　　This is why Sears' apparel sales are plummeting. The same trend will effect appliances, as well as the new Sears lines of dinnerware, gifts and garden supplies. Martha Stewart and other celebrities have spread their wings into these sectors of mass retailing. Where does this leave Sears, with its continuing devotion to its own store brands? Sears' new policy of price-cutting will narrow its blue-collar segment to immigrants who are too new to the country for identity. This segment is too small to keep 850 stores going. MK