Customers Don’t Buy Stores - They Buy Brands

When I was a kid, every household had a Sears catalogue. It was as fat as two phone books and filled with everything a kid could wish for at Christmas time. Sears was America’s most iconic store chain for half a century, originating the mail order catalogue business in 1896.

They sold watches, sewing machines and clothing. You could order a motorcar from their catalogue and it was shipped to your house or farm in a crate. Over the decades, Sears built hundreds of major nationally recognized brands: Kenmore in 1913, Craftsman in 1927 and Diehard in 1967 to name a few. This was Sears heyday, when Sears owned the brands America trusted, and America shopped at Sears. Every shopping mall was pinned with a Sears big box outlet, and things were good. So it was no surprise that Sears headquarters was the world’s tallest building.

But today things are different. Decades of focus on building stores as opposed to building brands has bleed red ink for the big box retailer, who is now closing another 150 stores and selling off its family jewels. The Craftsman Tool brand was recently sold for $900 million, and Diehard and Kenmore are on the block for the highest bidder. According to Moody's, Sears must raise $1.5 billion to stay in business through 2017. Recently Sears (SHLD) reported a loss of $471 million in the first quarter, worse than a year ago. Sales fell more than 8%. The company said it is looking at strategic alternatives for its Home Services installation and repair businesses as well.

But history repeats itself. Enter rival Kmart, who bought Sears for $11B in 2004. Aside from their “Blue Light Specials” where flashing blue lights inside Kmart stores would alert customers to limited time savings on isle 2, Kmart was most famous for launching and building The Martha Stewart Living brand.

Kmart gave away the distribution, shelf space and feature displays to help launch the Martha Stewart brand, converting Martha from a cooking TV show hostess into a blockbuster national retailer of consumer products goods overnight.

The Martha Stewart Living brand brought customers to Kmart in droves, but the store-focused Kmart didn’t see the value in owning the brand. Eventually the MSL brand outgrew the retailer itself. And Martha was out courting larger and more prestigious retailers like Macy’s. While Kmart was focused on building stores and traffic, Martha was building a brand. The home goods mogul said she regrets not buying Kmart before the discount chain went south.

You see, customers don’t buy stores- they buy brands. But both Sears and Kmart are failing because they were focused on building retail stores and generating store traffic, when they should have been focused on building the brands that were the reason customers walked through their doors.

Customers went to Kmart to buy Martha Stewart products. They went to Sears specifically to buy a Diehard battery, a Kenmore washer or Craftsman tool. Many Millennials have never stepped foot inside a Kmart or Sears store. Without these and other great brands, they never will.