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Prema od 106 wa VEY can LAT D BUSINESS PROBLEM SOLVING CASE Will Technology Save Sears! Scars, Rocbock used to be the largest retailerin in stores well bead of competitors Walmart in the United States with sales representing 2007 and Target Corp, in 2013. Sears has also been out front with the introduction in 2011 of a service percent of the US press national product for almost that lets shoppers reserve poodi online and pay cash steadily low ground to discounters such as Walmart for them in store in 2012, it launched online layaway. and Target and to competitively priced specialty Despite these improvements, Sears has tagged in reducing operating costs, keeping pace with current retailers such as Home Depot and Lowes. Even the merchandising trends, and remodeling its 2429 stores merger with art in 2005 to create Scars Holding many of which are run down and in undesirable Company failed to stop the downward spiral in sales locations. It is still struggling to find a viable busi and market share Over the years, Scars had invested heavily in ness strategy that will pull it out of its rut. The Stars information technology. At one time, it spent more company continued to use technology strategies to on information technology and networking than revive naging sales online shopping, mobile apps all other noncomputer firms in the United States and an Amazon.com-like marketplace with other except the Boring Corporation. The company was vendors for 18 million products, along with heavy in noted for its extensive customer databases of 60 store promotions. So far, these efforts have not paid million past and present Sears credit card holders, off, and sales have declined since the 2005 merger which it wned to target groups such as tool buyers, with Kmart. The company posted a loss of nearly appliance buyers, and gardening enthusiasts with 51.4 billion for 2013. Total losses between early 2011 special promotions. For example, Sears would mail and November 2014 amounted to almost 7 billion customers who purchased a washer and dryer an Sears continued to pin its hopes on technology offer for a maintenance contract and follow up with aiming for even more intensive use of technology annual contract renewal forms. These efforts did not and mining of customer data. The expectation was translate into competitive advantage because Sears's that deeper knowledge of customer preferences and cost structure was one of the highest in its industry buying patterns would make promotions, merchan In 1993, under the leadership of Arthur Martinca. dising, and selling much more effective. Customers Sears embarked on a $4 billion five-year store would llock to Sears stores because they would be renovation program to make stores more efficient, carrying exactly what customers want. attractive, and convenient by bringing all transac- A customer loyalty program called Shop Your Way tions closer to the sales floor and centralizing every Rewards promised customers generous free deals store's general offices, cashiers, customer services, for repeat purchases if they agreed to share their and credit functions. New point-of-sale (POS) ter personal shopping data with the companySears minals allowed sales stalf to issue new credit cards, would not disclose how many customers signed up accept charge card payments, issue gift certificates, for Shop Your Way Rewards, but loyalty-marketing and report account information to card holders. firm Colloquy estimated around 50 million people The POS devices provided information such as the are members. status of orders and availability of products, allowing The data Scars is collecting are changing how its associates to order out-of-stock goods directly from sales floors are arranged and how promotions are the sales floor. Some stores installed ATM machines designed to attract shoppers. For exampie, work to give customers cash advances against their Sears wear has been moved closer to where tools are credit cards. Sears also moved its suppliers to an sold. After data analysis showed that many jewelry electronic ordering system. By linking its computer- customers were men who bought tools, the company ized ordering system directly to that of each supplier, created a special Valentine's Day offer for Shop Your Sears hoped to eliminate paper throughout the order Way Rewards members that offered 5100 credit for process and expedite the flow of goods into its stores. $400 spent on jewelry. Scars was among the first major retailers to change Sears wanted to personalize marketing campaigns the way it sold based on shifting consumer habits coupons, and offers down to the individual cus For example, in 2001. Scars began testing a service tomer, but its legacy systems were incapable of sup- that lets shoppers buy online and pick up their goods porting that level of activity. To use complex analytic n Sh ay models on larve data sets, Sean revamped its data management technology. It used to take Seara si products may have been wand for shoppers, run the weeks to analyze marketing campaigns for loyalty Idea was bead of time Lampes in the club members, using a traditional large mainframe Sears tradition of trying to solve problems by tamp- computer and Teradata data warehouse software ing up new technologies at the same time curtains With new technology called Hadoop for managing some of the muninvestments icoded to keep the very large datasets (see Chapter 6), the processing ant retailer generating sales can be completed weekly. Certain online and mobile Experts believe that experiments like Myglice commerce analyses can be performed daily, and are a diversion from Sear's overarching problems a deteriorating store network and a brand image targeting is much more precise, in some cases down that doesn't resonate with today's.com to the individual customer Other retailers, such as Macy's and Nordstrom, are Scars's old models were able to use 10 percent of also struggling to keep relevant in a world where available data, but the new models can work with 100 shopping is steadily moving to the web. However percent. In the past. Scars could retain data from only Macy) and Nordstrom are still profitable. Scars 90 days to two years, but with the new big data man Holdings spends nearly SL 90 a square foot on Sears agement technology, it can keep everything, increasing stores and roughly 60 cents a square foot on Kmart its chances of finding more meaningful patterns in the stores, according to Matt McGinley, an analyst with data Hadoop processing is about one-third the cost Evercore ISI Institutional Equities that comptes of conventional relational databases. With Hadoops with $9.70 a square foot spent by Wal-Mart and 5575 massively parallel processing power, processing by Macy's. Although Sears spent more than Si mil- 2 billion records takes Sears little more than one min- lion setting up the Mygofer store in Joliet, the com- ute longer than processing 100 million records. pany was starving a profitable crosstown Kinart Sears spent several hundred million dollars Lampert still wants to focus on technology proj improving its stores in 2011, including technological ects that he hopes will turn Sears around, acknowl- enhancements. Woodfield Mall Sears, one of several edging that that today's shoppers are less likely to hundred that was recently remodeled, reflects the browse and buy in stores. Onc new service lets Scars new approach. Outdoor clothing from Lands End customers browse for shoes and apparel online and dominates the area near the main mall entrance, and then reserve items to try on in physical stores. Scars pastel-colored women's tops from Covington line is also creating digital displays for products that the main hall. (Sears owns both of these brands.) are more likely to engage customers with reviews, Workers use iPads and iPod Touches to access online instructional videos, and Consumer Reports ratings reviews for customers and check whether items are in A service called In-Vehicle Pickup lets custom- stock. Ron Boire, who oversees Sears merchandisingers order goods online and have them delivered to and store formats, believes that with a little more them while they wait in their cars. Sear's In-Vehicle time and customer information, he can make the Return/Exchange in Five enables customers to re- store experience much better turn or exchange purchases in the parking lot within Working with McKinsey & Co. consultants. a guaranteed time period of five minutes. Sears Sears opened a test store in 2009 called Mygofer in improved its online ordering system so that orders Joliet, Illinois. Mygofer was touted as a revolution- could be shipped more quickly and economically by ary combination that would meld the convenience using Sears's physical stores as well as distribution of the Internet with the instant gratification of a centers to fulfill them bricks-and-mortar store. The company gutted an Sears is refashioning its consumer electronic 80,000-square-foot Kmart, but the store did not departments as Connected Solutions shops that sell stock items for sale. The idea was to have shoppers devices such as a Craftsman garage door that can be place their orders at computers in the front of the opened or closed remotely with a smartphone and store, then pick up their goods at a delivery bay out baby monitors that can connect to the Internet. The back. Sears Holdings CEO Edward Lampert hoped Connected Solutions shops are being tested at three to roll out hundreds of Mygofer stores if the experi- Chicago stores before being rolled out more widely. ment succeeded. However, some days, more people Sears is also piloting radio-frequency tags in returned goods than bought them. Shoppers didn't 15 stores in the hope of increasing sales and margins like the fact that they couldn't see and touch things. by giving a more accurate picture of the merchandise Sears management had projected that over four stores have in stock. Management said this fall years, Mygofer would eventually generate $8 million that initiatives like digital signs and radio tags on in annual sales. Annual sales struggled to top S1 inventory could bring in $500 million a year in sav- million. Lampert stated that going to a store with no ings and increased sales. Part Information Systems in the O 109 to show that Sears's big beton the company more Source "How Sears Holding Company Optimized Online Rebound. Tenth Avenue Portfolio Manager, thestreet.com January 23 Say Carlin January 27, 2015, Mark Nacinovic, "Sears so wwwcars.com, accessed January 21, 2015, Suzanne kan Sears Get into the Data Services Gamelage. Aprill 2011 M on Technology." Win Se Journal, December 16, 2014 Kate Kaye, Bastillo, "The Phanto Rescue Sears, Wall Street Journal March 12.2002 What is the business impact? Where are the nu personalized promotions and are they working technology is way According to Don Ingham, a portfolio manager at Tenth Avenue Holdings, Sears Holdings is poised profitable? Will Sear's tech to benefit from its moves to cut its physical space and increase its e-commerce operations. Sear's poor cal forays be able to halt its downward spiral? financial position prompted it to start embracing e- commerce much earlier than other retailers to reduce its physical storefront presence. Sears' efforts should pay off in a few years. Other experts disagree. Despite bold attempts to innovate with technology, execution is where Sears has stumbled, according to Credit Suisse analyst Gary Balter. Balter believes the company didn't invest enough in systems to make sure all its ideas 3-13 Analyze Sears, using the competitive forces worked properly, and it has not attracted younger tech-savvy customers who want to shop that way. By 3-14 What was the problem facing Scars? What you all accounts, Sears remains a fading brand saddled with too many nonperforming physical stores in ple, organization, and technology factors undesirable locations. Even with better data analytics, knowledge of cus- 3-15 What solution did Sears select? What was tomers, loyalty programs, and e-commerce innova- role of technology in this solution? tions, the question still lingers about whether Sears 3-16 How effective was the solution Sears selecter is using technology effectively to solve its enormous business problems. Is it truly able to offer customers Case Study Questions value chain models. tributed to this problem? Explain your