Sears, Roebuck used to be the largest retailer in the

United States, with sales representing 1 to 2 percent

of the U.S. gross national product for almost 40 years

after World War II. Since then, Sears has steadily

lost ground to discounters such as Walmart and Target

and to competitively priced specialty retailers

such as Home Depot and Lowe's. Even the merger

with Kmart in 2005 to create Sears Holding Company

failed to stop the downward spiral in sales and market

share.

Over the years, Sears had invested heavily in

information technology. At one time it spent more

on information technology and networking than all

other noncomputer firms in the United States except

the Boeing Corporation. The company was noted for

its extensive customer databases of 60 million past

and present Sears credit card holders, which it used

to target groups such as tool buyers, appliance buyers,

and gardening enthusiasts with special promotions.

For example, Sears would mail customers who

purchased a washer and dryer an offer for a maintenance

contract and follow up with annual contract

renewal forms. These efforts did not translate into

competitive advantage because Sears's cost structure

was one of the highest in its industry.

In 1993, under the leadership of Arthur Martinez,

Sears embarked on a $4 billion five-year store

renovation program to make stores more efficient,

attractive, and convenient by bringing all transactions

closer to the sales floor and centralizing every

store's general offices, cashiers, customer services,

and credit functions. New point-of-sale (POS) terminals

allowed sales staff to issue new credit cards,

accept charge card payments, issue gift certificates,

and report account information to card holders. The

POS devices provided information such as the status

of orders and availability of products, allowing associates

to order out-of-stock goods directly from the

sales floor. Some stores installed ATMs to give customers

cash advances against their Sears credit cards.

Sears also moved its suppliers to an electronic ordering

system. By linking its computerized ordering

system directly to that of each supplier, Sears hoped

to eliminate paper throughout the order process and

expedite the flow of goods into its stores.

Sears was among the first major retailers to

change the way it sold based on shifting consumer

habits. For example, Sears introduced a service that

lets shoppers buy online and pick up their goods in

stores in 2001well ahead of competitors Walmart in

2007 and Target Corp. in 2013.

Despite these improvements, Sears has lagged

in reducing operating costs, keeping pace with current

merchandising trends, and remodeling its

1,725 stores, many of which are run-down and in

undesirable locations. It is still struggling to find a

viable business strategy that will pull it out of its rut.

The Sears company has continued to use technology

strategies to revive flagging sales: online shopping,

mobile apps, and an Amazon.com-like marketplace

with other vendors for 18 million products, along

with heavy in-store promotions. So far, these efforts

have not paid off, and sales have declined since the

2005 merger with Kmart.

Sears continued to pin its hopes on technology,

aiming for even more intensive use of technology

and mining of customer data. The expectation was

that deeper knowledge of customer preferences and

buying patterns would make promotions, merchandising,

and selling much more effective. Customers

would flock to Sears stores because they would be

carrying exactly what they want.

A customer loyalty program called Shop Your Way

Rewards promises customers generous free deals for

repeat purchases if they agree to share their personal

shopping data with the company. Sears would not

disclose how many customers signed up for Shop

Your Way Rewards, but Shop Your Way generates a

bigger share of sales every year.

The data Sears is collecting are changing how its

sales floors are arranged and how promotions are

designed to attract shoppers. For example, work

wear has been moved closer to where tools are sold.

After data analysis showed that many jewelry customers

were men who bought tools, the company

created a special Valentine's Day offer for Shop Your

Way Rewards members that offered $100 credit for

$400 spent on jewelry.

Sears wanted to personalize marketing campaigns,

coupons, and offers down to the individual customer,

but its legacy systems were incapable of supporting

that level of activity. In order to use complex analytic

models on large data sets, Sears revamped its

data management technology. It used to take Sears

six weeks to analyze marketing campaigns for loyalty

club members using a traditional large mainframe computer and Teradata data warehouse software.

With new technology called Hadoop for managing

very large datasets (see Chapter 6), the processing

can be completed weekly. Certain online and mobile

commerce analyses can be performed daily, and targeting

is much more precise, in some cases down to

the individual customer.

Sears's old models were able to use 10 percent of

available data, but the new models are able to work

with 100 percent. In the past, Sears was only able to

retain data from 90 days to two years, but with the

new "big data" management technology, it can keep

everything, increasing its chances of finding more

meaningful patterns in the data. Hadoop processing

is about one-third the cost of conventional relational

databases. With Hadoop's massively parallel processing

power, processing 2 billion records takes Sears

little more than one minute longer than processing

100 million records.

Sears spent several hundred million dollars

improving its stores in 2011, including technological

enhancements. Workers use iPads and iPod

Touches to access online reviews for customers

and check whether items are in stock. Working

with McKinsey & Co. consultants, Sears opened a

test store in 2009 called Mygofer in Joliet, Ilinois.

Mygofer was touted as a revolutionary combination

that would meld the convenience of the Internet

with the instant gratification of a brick-and-mortar

store. The company gutted an 80,000-square-foot

Kmart, but the store did not stock items for sale. The

idea was to have shoppers place their orders at computers

in the front of the store, then pick up their

goods at a delivery bay out back. Sears Holdings CEO

hoped to roll out hundreds of Mygofer stores if the

experiment succeeded. However, some days, more

people returned goods than bought them. Shoppers

didn't like the fact that they couldn't see and touch

things. Sears management had projected that over

four years Mygofer would eventually generate $8

million in annual sales. Annual sales struggled to top

$1 million. CEO Eddie Lampert stated that going to

a store with no products may have been weird for

shoppers, but the idea was ahead of its time.

Experts believe that experiments like Mygofer

are a diversion from Sears's overarching problems:

a deteriorating store network and a brand

image that doesn't resonate with today's consumers.

Other retailers like Macy's and Nordstrom are

also struggling to keep relevant in a world where

shopping is steadily moving to the web. But Macy's

and Nordstrom are still profitable. Sears Holdings

spends nearly $1.90 a square foot on Sears stores

and roughly 60 cents a square foot on Kmart stores,

according to Matt McGinley, an analyst with Evercore

ISI Institutional Equities. That compares with

$9.70 a square foot spent by Walmart and $5.75 by

Macy's. While Sears spent more than $1 million setting

up the Mygofer store in Joliet, the company was

starving a profitable crosstown Kmart.

Lampert wants to focus on technology projects

that he hopes will turn Sears around, acknowledging

that that today's shoppers are less likely to browse

and buy in stores. One new service lets Sears customers

browse for shoes and apparel online and

then reserve items to try on in physical stores. Sears

is also creating digital displays for products that

are more likely to engage customers with reviews,

instructional videos, and Consumer Reports ratings.

A service called In-Vehicle Pickup lets customers

order goods online and have them delivered

to them while they wait in their cars. Sears's In-

Vehicle Return/Exchange in Five enables customers

to return or exchange purchases in the parking lot

within a guaranteed time period of five minutes.

Sears improved its online ordering system so that

orders could be shipped more quickly and economically

by using Sears physical stores as well as distribution

centers to fulfill them.

Sears is refashioning its consumer electronic

departments as Connected Solutions shops that sell

"smart home" devices like a garage door that can be

opened or closed remotely with a smartphone, smart

thermostats and remotely controlled air conditioners,

smart water heaters, home security, and baby monitors.

Other "smart home" devices include a wirelessenabled

steerable riding mower that indicates when

it needs a tuneup and features an app with videos to

show you how to do the maintenance yourself along

with a smart battery charger and maintainer that

monitors voltage and keeps a car battery charged.

The company has assembled a first-rate team of tech

talent in Seattle to beef up capabilities for diagnosing

appliance problems remotely.

Sears is also piloting radio frequency ID (RFID)

tags in 15 stores in the hope of increasing sales and

margins by giving a more accurate picture of the

merchandise stores have in stock. Management said

this fall that initiatives like digital signs and radio

tags on inventory could bring in $500 million a year

in savings and increased sales.

Sears has made some headway with e-commerce.

Customers appreciate the in-store pickup for online

orders. Shop Your Way, considered a leader in creating

personalized offers, is driving more business.

Tech should be a bright spot for Sears. But what good is that if no one wants to buy what Sears has to offer?

For example Fortune reported a January 2016 survey

by Prosper Analytics & Insights that found women

preferred Goodwill stores over Sears when shopping

for clothing. Net losses in the past five years have

totaled $8 billion. The company's annual comparable

sales have not grown since Sears and Kmart

merged in 2005.

Analysts say Sears is reaping what it sowed from

years of underinvestment in stores and uninspired

merchandising. The struggling retailer spent much

of 2015 selling off valuable assets like Lands' End

and its stake in Sears Canada along with hundreds

of other stores to avoid a cash crunch. Another

50 stores went up for sale in 2016. Sears management

says these moves will give the company the

financial resources to speed up its transformation

into a more tech-driven retailer. More likely

according to critics, Sears and CEO Lampert are in

a race against time, trying to modernize retailing

as sales crater. Lampert continues in the Sears tradition

of trying to solve problems by ramping up

new technologies while at the same time curtailing

some of the mundane investments needed to keep

the giant retailer generating sales. By all accounts,

Sears remains a fading brand saddled with too

many nonperforming physical stores in undesirable

locations.

Even with better data analytics, knowledge of

customers, loyalty programs, and e-commerce

innovations, the question still lingers about whether

Sears is effectively using technology to solve its

enormous business problems. Is it truly able to offer

customers personalized promotions, and are they

working? What is the business impact? Where are the

numbers to show that Sears's big bet on technology

is making the company more profitable? Will Sears's

technological forays be able to halt its downward

spiral?

Questions:

1. What are the key facts surrounding the case?
2. What are the key issues?
3. What are the Alternative courses of Action and Evaluation?
4. Recommendation of the best point of action.