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OM in the News: Sears Suffers as it Skimps on Maintenance

November 19, 2011

The Wall Street Journal (Nov.17, 2011) writes: ” In a holiday season when all retailers are worried about luring customers into their stores, Sears faces an extra challenge: Some of its stores are dumpy”. It turns out that the chain has skimped on maintenance at its aging stores since it merged with Kmart six years ago. “No one really comes here anymore”, says a customer at a Dallas Sears store, as she walks around an empty store devoid of any sign of holiday cheer. By contrast, the Macy’s store next door was festooned with fake presents, oversized bows, and prominently displayed Christmas stockings. Customers were streaming in.

Maintenance, our topic in Chapter 17, is important for a fresh atmosphere that signals to shoppers that products are up-to-date and worth buying. Even Wal-Mart, known for its Spartan operations, spent billions on renovations in recent years. And Macy’s just announced a $400 million renovation of its flagship NYC store. By comparison, Sears spent only $441 million maintaining all of its 3,100 stores last year. That comes out to about $1.90 per square foot. Store chains typically spend $6-$8 a foot on annual maintenance, so Sears is sitting at about 1/4 of what it needs to spend to keep stores an acceptable level at which to shop.

Consumer Growth Partners, a consulting firm, rates the Sears fleet as the most rundown in US retailing. Adds  Columbia U. Prof. Mark Cohen: “There is no viable retail strategy here. In retailing, when your stores get dark, dirty, and grim, you are past the point of no return”.

Discussion questions:

1. Why is Sears spending such a small amount on maintenance?

2. Why is maintenance one of the 10 decisions operations managers deal with?

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