Shares of Sears Holdings soared as much as 19 percent Thursday to their highest level this year, after the limping retailer announced plans to sell its Kenmore appliances on Amazon.com.
The chain, which is in the process of closing hundreds of stores, pitched the partnership as a way to reach new customers and drum up sales for its 100-year-old flagship brand. Customers will also be able to control the company’s smart appliances using Amazon’s voice-controlled assistant, Alexa.
“This is part of our plan to unleash the power of the Kenmore brand outside of Sears,” Tom Park, president of Kenmore, said in an interview. “We already have the best appliance bricks-and-mortar stores, and now we’re partnering with the best online retailer. This will expand our reach and introduce new customers to the brand.”
But some seemed unconvinced that the deal could do much to reverse Sears’ misfortunes. After all, these sorts of Amazon partnerships have sometimes not ended well.
“At the end of the day, Amazon gets a huge advantage and Sears gets to stay afloat for another week,” said Lee Peterson, executive vice president of brand, strategy and design for WD Partners. “It’s just a slow squeeze until goodbye.”
The announcement comes just three weeks after Nike said it would begin selling its products directly through Amazon, joining a number of big-name companies including Samsung, Microsoft and Bose in doing business on the site. (Jeffrey P. Bezos, the founder of Amazon.com, owns The Washington Post.)
More than half – 55 percent – of Americans now begin their online shopping trips on Amazon.com, according to a recent survey commissioned by BloomReach, a marketing research firm. And even if shoppers don’t begin their search on Amazon, they often end up there, with roughly 90 percent of consumers checking Amazon before they make a purchase, the survey found.
“Large, household brands that had previously viewed Amazon as a fierce competitor that was eating everyone alive, are now viewing them as a necessary partner,” said Pat Petriello, a senior strategist for digital marketing agency CPC Strategy, and former account manager for Amazon. “They’re saying, ‘Our customers are there, our competitors are there, so we need to have a presence there as well.'”
The partnership would also offer Amazon an in-depth look into the home appliance business, giving it valuable data about the industry’s operations, its pricing structures and seasonal fluctuations, analysts said. And perhaps most importantly, they said, it would give the company a way to tap into longtime Sears customers.
“These are people over 50 who live in the suburbs – a demographic Amazon has never done well with,” said Lee Peterson, executive vice president of brand, strategy and design for WD Partners. “Now they’ll have their names, their phone numbers, their addresses. This is a way for Amazon to break in to classic Walmart territory.”
Kenmore appliances will be available in Los Angeles beginning next week, Park said. From there, the company plans to expand to the rest of the country, and hopes to eventually offer two-day delivery for Amazon Prime customers.
Park declined to disclose the financial terms of the deal, but Petriello said third-parties that sell on Amazon typically pay a commission of about 15 percent.
A number of large brands have famously linked up – and sometimes cut ties – with Amazon. In 2009, the online giant agreed to pay $51 million to settle a bitter, five-year battle with Toys R Us after the toy company accused Amazon of breaking their contract by allowing other companies to sell their toys, games and baby items on the site. Amazon later counter-sued Toys R Us, alleging “chronic failure” to keep products in stock.
Sears, once the country’s largest retailer, dominated the industry for years by building a collection of well-known brands such as Kenmore and DieHard as well as Craftsman, which it sold to Stanley Black & Decker earlier this year for an estimated $900 million. Recently, though, the 124-year-old company has struggled to stay relevant as customers increasingly buy clothing, furniture and appliances online.
Sears has not turned a profit since 2010, and last year it reported losses of $2.2 billion. So far this year, the company has announced the closure of more than 260 Kmart and Sears stores. (It has about 1,100 locations left.) In March, Sears executives said they had “substantial doubt” about the company’s financial viability, sending shares of Sears plunging by nearly 13 percent.
On Thursday afternoon, shares of Sears were up about 10 percent to $9.60. The company’s stock has lost nearly 95 percent of its value in the past decade, from a peak of $195.18 a share in 2007.
(c) 2017, The Washington Post · Abha Bhattarai