Sears, Roebuck, and Co.
Legendary retailer responds to modern challenge by successfully updating its revolutionary delivery model and unique brand value online

by Demir Barlas, Line56

Behind many success stories in American business lies an innovation. In the case of Sears, Roebuck and Co., the innovation was the mail order catalog. At the time the company began in the late 19th century, rural general stores were squeezing their customers, often charging 100 percent markups on their goods.
 

Rural folk -- the majority of Americans at that time -- rebelled against the avaricious markups by spending their dollars with mail-order pioneers, notably Sears, whose model supported cheaper prices and higher volumes than the rural stores. With improving postal service and irresistible momentum, Sears' future was assured.
 

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While Sears was founded on a bleeding-edge innovation, the company seemed to resist the tide of progress in the mid-90s, when many companies were investing heavily in the Internet. Sears didn't sell anything online until 1997, and didn't have more than one product category until 1999. It might have been a train wreck, but the late start didn't doom Sears to e-business irrelevance, and the company in fact had a strategy up its sleeve -- a strategy whose full value is becoming more apparent as time goes by.

Data Supports Strategy

Sears' strategy, from the beginning of the Internet revolution, was to maintain one face and one identity -- in other words, to make sure there was no chasm between the "online" and the "offline" Sears. The company took its time layering in online items and features in order to make certain that this strategy would be implemented. Thus, despite the late start, Sears today is ahead of the retail game in several respects.

To begin with, Sears.com is profitable, and offers a research outlet for one in eight offline purchases, a testament to what Sears likes to call its multi-channel approach. Sears lets products bought online be picked up at stores; it lets those very products be returned at stores, if necessary; and it has real-time inventory visibility across all stores, a visibility that research group Forrester says has only been achieved by 12 percent of retailers.

One of the ways in which Sears has been able to achieve its goal of a single channel for customers -- as well as the goal of automating supplier relationships -- has been to pay the utmost attention to data quality.

Ken Tackett, director of supply chain data for Sears, explains the goal in this regard is to concentrate data in one location. "We have one repository for all product information, which drives the financial, logistics, and legacy systems. We have one vendor master file that holds payment terms, contact information, EDI [electronic data interchange] routing and setup information, insurance requirements, et cetera."

In the field of product information, Sears works closely with e-business software vendor QRS, a company that addresses the problem of data synchronization between retailers and suppliers. QRS, which keeps a file of 90 million Universal Product Codes, is the bridge between disparate product information protocols used by suppliers and the single repository Sears prefers.

Overshadowing even these two repositories in importance is Sears' strategic performance reporting system. "It's the biggest thing we manage," says Tackett. "It has sales and inventory information by location, vendor, and product." Visibility of this kind lets Sears analyze the data, set performance goals, and tweak regional and national strategies.

While such initiatives are definitely valuable, Tackett concludes by turning the spotlight on hard savings. "Bad data can cost the company a lot of time and money," he says. "What we do with data provides us competitive advantage."

Going forward, Sears will take advantage of top-down direction from CEO Alan Lacy, who has stated that, "Our next technology priority is getting our legacy systems to integrate properly and eliminate manual workarounds." In a relentlessly tougher retail environment, Lacy is betting that e-business initiatives of this kind will preserve margins, improve efficiency, and continue to please customers.

Snapshot: Sears, Roebuck, and Co.
Industry: Retail
Employees: 310,000
Sales: $42B
Home Office: Hoffman Estates, IL
Corporate website: www.sears.com

Line56 Media is becoming the leading source of global news and analysis on e-business technology and strategy. Through its integrated media platforms - magazines, websites, web events, research & custom publishing, and buyers guides & directories - the company delivers information on e-business and enterprise technology to corporate executives from all industry sectors. Line56 Media has headquarters in Los Angeles, and a publishing office in New York.