Sears Aims to Woo Back Customers. Price cuts reflect battle to win market share that retailer lost to upstart discounters
BOSTON — IT has been a week since Sears, Roebuck & Co. opened its doors with everyday low prices and the company says that the response has been ``extremely gratifying.'' ``Customer response was beyond expectations,'' said Gordon Jones, a spokesman for the Chicago-based retailer. He declined to be more specific.
In cutting prices from 10 to 50 percent in its 825 stores nationwide, Sears is hoping to lure back some business.
``What caused Sears to slash their prices was an effort to regain the very large chunk of market share they've lost over the past decade,'' says Kurt Barnard, publisher of Retail Marketing Report.
About a decade ago, the company had a market share of about 18 percent of total general merchandise sales in the United States.
That share has dropped to 13 percent today.
Far more aggressive companies offered everyday low prices - discount department stores like Wal-Mart and K-Mart and superstores like Circuit City, Highland, and Home Depot. And customers flocked to them.
``I think consumers are telling retailers that they prefer everyday low pricing,'' says Joseph Ronning, an analyst with Brown Brothers Harriman in New York.
For example, he says, between 1983 and 1987, Sears increased its sales by $2.5 billion. During the same period of time Wal-Mart, working from a much smaller retail base, boosted sales by more than $11 billion.
Analysts say that Sears will probably succeed in holding its present market share, as a result of last week's move.
``They have a very good recognition with the American consumer as being solid and trustworthy and having high-quality products,'' says Margo McGlade, an analyst with PaineWebber in New York.
``If they also offer value and the convenience of nearby stores, as they do, I think they can certainly maintain a strong foothold in the industry.''
But when it comes to improving market share, its prospects are bleak, says Mr. Barnard. ``Marketing experience really would indicate they face a steep uphill battle.''
In fact, if Sears does not convince its stockholders that the company is on the road toward success within a year and perhaps even sooner, says Barnard, it can be considered a very serious and vulnerable takeover target.
``If it did go,'' adds another analyst, ``it would go at prices considerably above where the stock is currently trading - 50 percent premiums at least.''
But, this analyst asks, ``Who's really big enough to do it?'' Sears' market value is $15.6 billion.
Further discouraging takeover, says N. Richard Nelson Jr. of Duff & Phelps Inc. in Chicago, is the fact that ``whoever would acquire the company would be faced with the same challenges Sears has.''