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Kmart and Sears - Defying Botton-Line Gravity
By Rick Weaver

Every once in awhile someone comes along to rewrites the accepted rules of their business.

Henry Ford rewrote the rules of auto making when he decided to have partially assembled cars move through stationary workers, reversing the accepted way of manufacturing large products.

In 1879, Franklin Woolworth opposed retail rules with his concept of pricing an entire store at a single discounted price - 5 cents. When the store failed to attract customers, closing a few weeks after opening, retail critics said it was proof the concept of a low-priced retail operation would never work. Woolworth would defy their opinions when he opened a second store later that year, adding a second price, 10 cents. The new store was a hit and led to 1,000s of stores under the Woolworth banner and dozens of copycats.

Today, Eddie Lampert is boggling analysts by completely ignoring the leading retail indicator, comp-store sales (a comparison of sales this year to last year in stores open at least a year), and growing his company anyway! Lampert led K-mart Corporation out of bankruptcy, craftily building a cash reserve large enough to purchase rival Sears. Both companies were losing market share at the time of the merger, leading analysts to comment that Lampert would sell the real estate assets of the new company and then liquidate it. As comp-store sales continued to decline, analysts were positive realty sell-off was the only salvation for the company.

Now four-years later the company continues to produce a steady stream of comp-store decreases, although the double-digit drops have calmed to single digits. Although analysts continue to scratch their heads, Lampert’s once again building a bankroll as profits are up significantly. Lampert’s position is that producing fewer sales at a higher margin is a recipe for success.

Lampert’s secret to success

Lampert secret to success defies another business belief of traditional management. Lampert is running a discount organization with no discount experience. Traditional logic states plainly that someone is unable to run a company without a working knowledge of that industry.

Malcolm Forbes once said, “Education’s purpose is to replace an empty mind with an open mind.” Lampert knew finances, how to generate profits, and how to produce cash reserves. Yet Lampert’s mind was empty to retailing. As he learned from the best minds at K-mart and Sears, Lampert was able to maintain an open mind as a fertile field for developing a strategy to rejuvenate the company.

His plan, replace low-gross sales with high-gross sales. His formula generates fewer transactions, but still enough transactions to offset expenses. It is almost the exact opposite of the Wal-Mart philosophy. Or is it? Could it be that Lampert is simply refining the Wal-Mart concept?

Consider that Lampert has seriously reduced the number of temporary price reductions, just like Wal-Mart - but with higher entry price points.

Relating Eddie’s success to you

Lampert’s success is only unusual because others do not key into their need for learning. Here are some important points to consider:

1. Recognize your shortcomings. Sure you know your products, but do you need help understanding the sales or negotiation process? Perhaps you know how to do your job, but do you have the skills to teach others how to tap into their own talent? Surround yourself with experts.

2. Don’t be afraid of admitting you need to know more. Nobody is so smart they cannot learn more or benefit from the fresh viewpoint of another. Set pride aside and find help in the form of a mentor or professional coach.

3. Think differently. Sometimes success is simply a matter of turning a deaf ear to the experts and go with you gut. If you try it, you have to believe in yourself or you will give up too soon. Woolworth’s first store failed. He believed he was right and proved himself on the second try. Success takes confidence and time.

Summary

Only time will tell if Lampert is correct - and if he is in the same league as Ford and Woolworth. Regardless, we can all learn from his success and use his lessons for our own benefit.

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Rick Weaver is an accomplished business executive with a wealth of experience in retail, market analysis, supply chain enhancement, project management, team building, and process improvement.

Rick career began in retailing as a stockclerk, eventually becoming the Director of Vendor Development at K-mart Corporation during it’s heyday. In this position he worked with hundreds of K-mart’s suppliers to improve mutual processes, procedures, and profits.

As a consultant, Rick has worked with companies in various industries to develop leadership and business strategies.

As an entrepreneur, Rick has founded or co-founded six successful organizations, including non-profit and for profit.

Now in his role as president of MaxImpact, Rick uses his vast experience helping individuals connect to their dreams and teams connect to a common vision.

Rick’s presentation style of blending humor, real life examples, and easy to implement ideas has made him a popular speaker at seminars, workshops, and conferences in in 43 states, Canada, and Puerto Rico.

(c) Max Impact Corporation

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