Sears SWOT Analysis- All About Sears

Sears SWOT Analysis

Sears Holding Corporation (formerly known as Sears) is a company that is a part of the retail sector and has been for the past 125 years. In 2005, Sears and Kmart merged to become the Sears Holding Corporation 2005, thus acquiring all of Kmart’s stores. As of April 2019, the company owned 425 stores in the USA and employed over 45000 people. The company is headquartered in Hoffman Estates, which is in Illinois, United States. The company’s vision is enshrined in the like “to improve the lives of our customers by providing quality services, products, and solutions that earn their trust and build lifetime relationships”. Here, let’s discuss Sears SWOT Analysis.

A SWOT analysis of Sears Holdings Corporation shall analyze the strengths, the weaknesses, the opportunities, and the threats that the corporation may face. The purpose of a SWOT analysis would be to conduct a situational analysis of the company which is quite helpful for the managers as well as the people intending to invest in the company. In the following article, a detailed SWOT analysis shall be provided, both in a tabular form for quick access and in a detailed manner.

The internal factors that shall be analyzed will be Sears Corporation’s strengths and weaknesses. The external factors that shall be analyzed will be Sears Corporation’s opportunities and threats.

Brief SWOT Analysis (Tabular)

StrengthsWeaknesses
Exhibits a heavy retail presence for being a recognized brand interact with their customers through various channels of communication and has a good distribution networks streamlined their sales to a specific market rather than being a jack of all trades huge variety of products that are up for saleMade a strategic merger with Kmart to increase its competitiveness in the market The financials of the company are highly volatile leading to unnecessary and excessive cost-cutting market in which the corporation functions is quite saturated retailing model is not up to date due to the delayed adoption of e-commerce investment into the rebuilding of the company was not prioritized at the time of crisis
OpportunitiesThreats
There is great scope for the change in strategy to nurture growth by adopting e-commerce expand customer base by entering markets other than the highly competitive US markets target audience must shift from the older generations to the younger ones bringing back the focus on appliances to boost salesThe pandemic poses to be one of the greatest threats to the marketThe intensely competitive market of the United States of America the costs of production are on the rise Susceptibility to counterfeiting of the electronics and the apparel sold operations in multiple countries expose the company to currency fluctuations

Detailed SWOT Analysis

Strengths

Despite all the financial issues that Sears has been through, they still are one of the leading companies in the retail industry. The strengths that Sears Corporation has assisted them in protecting their existing market share as well as in the penetration of new markets. The strengths of the corporation are:

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  • Brand Recognition- the brand identity that Sears has is quite strong and it has come from its significant market presence since the end of the 19th century. The brand recognition has resulted in Sears being a household name and a go-to shop to get affordable deals on reputed brands. 
  • Superior Quality- although the products on sale lack luster and creativity, the products are of superior quality and have a durable nature. The long-lasting feature of the products is one of the main attractions to their consumers. The quality of the products is what retains its customer base despite the numerous shortcomings. 
  • Focus on Niching- management at Sears has recognized what they are primarily good at selling and have niched that out. They realized that their expertise lies in appliances and other such consumer products. By giving this additional focus to their niche, they have expanded their sales and have reduced wastage and losses. They have proven to be more successful than other companies which attempt to be a jack of all trades. 
  • Variety of Products- despite niching their sales, they still sell a variety of products such as washers, dryers, refrigerators, shoes, sporting goods, cookers, apparel and so much more. Any consumer product that a customer may require, a Sears store will have and that large variety is all under a single roof. 
  • Strategic Mergers and Acquisitions- Sears and Kmart were both fading giants in the highly competitive retail industry. By effecting the merger, Sears Holding Corporation as a whole became a strong competitor in the market. The number of locations that they were functioning in consequently increased substantially because of the merger and reached around 3500 stores. Apart from the merger with Kmart, Sears also integrated several companies related to technology to streamline their operations to ultimately construct a trustworthy supply chain.
  • Strong Distribution Network- Sears Corporation’s efficient distribution network facilitates the timely delivery of products to the customers who ordered them, without any damages caused by transportation. Through the company Innovel Solutions (a transportation and warehousing firm), Sears was able to utilize automation technologies which in turn ensured logistical sophistication to ensure. 
  • Customer Satisfaction- Since the company has a dedicated consumer base, one of their priorities is customer satisfaction, which they ardently provide. This plays a huge role in restoring brand identity which in turn attracts future customers. 
  • Exceptional Performance in New Markets- Sears Holdings has an exceptional track record of permeating new markets and making them successful and profitable for themselves. This has resulted in new revenue streams. 

Weaknesses

Despite a large number of strengths, there are a handful of weaknesses that Sears Holding must rectify. A person can identify the competitive advantage Sears has by acknowledging and rectifying the following weaknesses:

  • Excessive and Unnecessary Cost Cutting- “one must spend to earn” is a common phrase from an entrepreneurial perspective. However, this has been consistently ignored by Sears. Excessive cost-cutting has been done by the company to the extent of the earnings decreasing. This presumably safe path has resulted in Sears spending a mere 91 cents per square foot on upgrades in 2017. On the other hand, Best Buy, which is a prominent competitor in the market spent $15.36 per square foot for upgrading. 
  • Market Saturation- even though there are some pros to the lack of diversification of the products being sold, this has resulted in market saturation. There is little or even nothing that is left to update with regards to the products being sold, which puts Sears at a reasonable disadvantage.
  • E-Commerce Adoption- although at-home shopping was more or less invented by Sears (which it dominated for a few decades of the 20thh century), it did not take the opportunity of becoming a giant in e-commerce platforms, unlike Amazon. Its delayed entry into the world of online sales proved to be detrimental to the market share it possessed in the past. Some of the blame can directly be attributed to the CEO of Sears Eddie Lampert who unwisely adopted ineffective techniques solely due to his expertise in the field of hedge funds. He began to run the retail giant similar to a hedge fund which probably marks the beginning of the downfall of Sears. 
  • Lack of Sufficient Investment in Rebuilding- sustainability of a company arises out of investment in critical infrastructure and other systems. There was poor asset management by Sears where selling and getting rid of liabilities such as underperforming stores to stay afloat was prioritized, rather than investing in rebuilding the company. 
  • Merger with Kmart- it is undoubted that the merger with Kmart was a smart decision on paper. Things however went sour very quickly due to the inability to manage a large number of stores. The inability and business decisions resulted in the reduction of the number of stores from 3500 in 2010 to 182 in 2020. 
  • Investment in R&D- despite Sears’ investment in research and development being well above the average in the industry, they happen to be growing at one of the lowest rates in the industry in terms of innovation. Leading competitors in the retail industry are far ahead in this aspect. The entrepreneurial spirit of risk-taking is missing in the company’s matrix. 
  • Inability to Estimate Demand- demand forecasting is one of the weaknesses of Sears Corporation. There have been several missed opportunities due to their lack of accurate demand forecasting. This results in higher inventory costs due to prolonged storage. 

Opportunities

The set of opportunities that Sears can capitalize on are:

  • The exploitation of e-commerce- despite the late entry into the e-commerce platform, it is never too late to come up with innovative strategies to gain a strong foothold. The number of online shoppers is still on the rise thus providing more opportunities to Sears to capitalize on that to resurrect its glory days. With investment into providing for the needs of the online customer base, new sales channels shall open up, benefitting Sears.
  •  Market Expansion- penetrating markets other than the highly competitive US retail market is a very pressing opportunity. It is a fact that they are struggling in the current market they are in and they can thus use the profits they make in a less competitive market to rebuild and once again become a giant competitor. 
  • Switching focus to the Younger Generation- Since e-commerce platforms are majorly used by the youth, their targeted customer base should be those under the age of 45. They should cater to the wants and needs of the younger generation as that is where lies immense growth potential. 
  • Apparel vs Appliances- the focus must be brought back to appliances rather than simply focussing on apparel. Dependency on apparel can substantially decrease if sub-outlets can be opened which focus on selling only appliances. Considering that appliances are the highlight of the 21st century, Sears must not give up on the opportunity to profit off of that. 
  • Inflation Rate- the current trend of a low inflation rate can be used to the advantage of Sears. A low inflation rate can be equated to market stability and credit can thus be received at lower rates. 
  • The Aftermath of the Pandemic- the end of the pandemic may bring economic boons to dying companies such as Sears. Capitalizing on slow economic growth and coming out as a major competitor should be the focus of Sears. It would be a great opportunity to captures new customer bases if they play their cards right. 

Threats

The following are the threats that Sears shall be faced with:

  • The Pandemic- the current pandemic has devastated the global economies. Assessing the financial situation of Sears, it is evident that they are ill-equipped to make it out of this economic crisis. This happens to be the biggest threat to not just Sears’ future but also a lot of other companies. 
  • Intense Competition- one of the persistent threats to Sears is the level of competition that is evergreen in the US retail industry. Competitors such as Walmart, Target, Best Buy, and Home Depot pose a substantial threat to the future of Sears. 
  • Rising Costs of Production- with the rise in the cost of labor as well as raw materials, Sears faces a huge threat to not just returning to its past glory but also staying afloat. 
  • Counterfeits- counterfeiting is a huge threat as there has been a hike in such instances. The products that are made by sears are highly susceptible to it and accounting for the counterfeiting becomes another issue altogether for the company. 
  • New Technologies- modern technologies are being adopted by Sears’ competitors which puts pressure on Sears to spend more capital on adopting such technologies. All this combined severely affects the long-term stability of the corporation. 
  • Currency Fluctuations in Other Countries- owing to the wide operation of Sears in other countries, the threat of currency fluctuations always looms over the company, considering the volatility of political conditions across the world.

Conclusion

It can be conclusively stated that after the SWOT analysis of Sears Holding Corporation, there exists a substantial threat to the sustenance of the company, despite the multiple strengths that the company possesses. There is a requirement of strong leadership to guide the company to take calculated but required risks to bring the company back into the fray. An understanding of market conditions is of prime importance and capitalizing on the opportunities must be done. Further, the company has the potential to live up to its name and past glory only if there is the right implementation of an ideal business model that is tailor-made for the company’s survival.

Frequently Asked Questions

  1. Why is Sears now called Sears Holding Corporation?

After the merger with Kmart in 2005, Sears came to be known as Sears Holding Corporation.

  1.  What is the biggest strength of Sears?

Sears Holding’s brand recognition across the country and the world is considered to be one of its greatest strengths.

  1. What is the biggest opportunity that Sears is yet to capitalize on?

The e-commerce industry is a relatively newer platform for Sears when compared to giants like Amazon. Making use of this platform was already delayed and thus remains to be the biggest opportunity.

  1. What is considered to be the most substantial risk faced by Sears?

The ongoing pandemic is a major threat to not just profit-making but also the survival of the company. 

Sears SWOT Analysis- All About Sears

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