Looking For Luxury Items? Look No Further Than… Sears?

By Sam Lewis

Struggling retailer hopes to improve by adding luxury items to its third-party marketplace

Sears’ Chairman and CEO Edward Lampert is making improvements to the struggling company in a rather peculiar way. He believes having Sears facilitating the sale of upscale merchandise on the Marketplace section of Sears’ website — which features third-party vendors — will help the e-commerce side of Sears’ retail, and subsequently, the brick-and-mortar portion (which accounts for 97 percent of its sales).

Lampert, who combined Sears and Kmart stores in 2005 to make Sears Holdings, created Marketplace in 2010, and it has grown to include thousands of different vendors selling more than 85 million products of all types. Lampert’s vision with Marketplace was to offer “the best and widest assortment for our members,” but the most recent additions to Marketplace — luxury items — harshly differ from Sears’ traditional mainstay items like tools, washing machines, and basic clothing.

The addition of high-end items may be hurting more than helping. Many shoppers are shocked and confused when they are directed to Sears.com after completing general Internet searches for luxury items. Worse yet, many shoppers question the integrity of these items, wondering if they are fraudulent due to the high-end item’s association with Sears. Having been conditioned for years to know what types of items Sears carries, some shoppers are having difficulty accepting that Sears would even carry luxury brands. According to this article from the Wall Street Journal, a string of members of an online forum for handbag aficionados questioned the authenticity of a Gucci purse listed on Sears’ Marketplace. “Sears would be the last place most would think to purchase high-end bags from,” one member of the forum posted. Another member wrote, emphatically, “Gucci @ Sears? Hmmmmm don’t think so!”

Despite the trepidation of many shoppers, Mr. Lampert hopes to put Sears in a position to better compete with online marketplaces operated by Amazon and eBay. Sears’ Marketplace is the third-largest online vendor, by number of visits, but it still has a lot of ground to make up to catch the two giants. According to June statistics from comScore, Amazon had 98 million unique visitors, eBay had 69 million, while Sears collected 18 million visitors.

In addition to the huge margin in unique visitors to overcome, Lampert’s Sears’ Marketplace still has the competitive-pricing hurdle to clear. Marketplace only offers free shipping on orders $59+ and comes with a $39.99 monthly subscription cost, along with commission costs — 7 to 20 percent — of each item, depending on the item. This is significantly higher than both Amazon’s and eBay’s subscription rates and commission percentages.

While Sears experiments with e-commerce endeavors and a new-found adoration of high-end merchandise, its core operations continue to writhe in pain. Since the merger of Kmart and Sears in 2005, profits have steadily declined, falling from $53 billion in 2006 to $39.9 billion in 2012. Its 2013 first-quarter profits showed the continuing trend of decline with profits down 2.4% from 2012 year’s end, according to the first quarter report. While the Marketplace and other Web enterprises can be a great benefit in aiding businesses to grow when done right, it may be a better idea for e-commerce to take a back seat for the time being while the struggling retailer acknowledges and addresses issues in its brick-and-mortar stores.