The Sears Endgame

This week brought more bad news from Sears, with the company reporting weak holiday sales and announcing that it would close more than 100 stores and take a $1.8 billion charge.

Sears is a fading enterprise. Sales are down from $53.0 billion in fiscal year 2007 to $43.3 billion in 2011. The stock is trading today at about $33 dollars per share, down from over $180 dollars per share in 2007.

The decline isn’t likely to stop. Overall retail sales in the U.S. will probably muddle along and Sears will continue to lose share to tough competitors like Amazon, Target and Best Buy. Sears hasn’t invested in its stores, so the retail environment will continue to deteriorate. And the core problem remains: Sears doesn’t have a clear brand position in the market.

The only unknown is the endgame. What will happen to Sears and Kmart?

The company isn’t likely to be purchased because an acquisition depends on having a buyer. It isn’t clear who would want the company.

Liquidation is possible but this would be costly and challenging. And, with the soft commercial real estate market, disposing of the retail space would be difficult.

A repositioning is needed if the brands are to rebound, but this seems unlikely, too, because this would require significant investment. And a repositioning would probably involve a narrower focus, hurting short-term results.

Sears could spin-off its product brands, such as Kenmore and Craftsman. This move would make a lot of sense, but it wouldn’t fix the Sears and Kmart brands.

The most likely path seems to be more of the same: a gradual, slow decline leading to liquidation. The only question is how long it will all take.

Hilton Recovers

Last week I wrote a post about my stay at the Minneapolis Hilton and how the front desk team didn’t respond when I informed them that my visit was rather disappointing.  I used it as an example of a missed opportunity in service recovery.

Several hours after I put up my post, however, I heard from Hilton’s social media department, saying they saw it, were concerned and were looking into it.  And then a few hours later I heard from a manager at the hotel apologizing and offering a free night say if I wanted to visit again.

This is all rather impressive.

The Hilton team found my blog post and quickly moved into action.  By doing so, I never got around to posting on Trip Advisor, as I was planning to, and I’m softening my original post a bit, dropping the “avoid the Minneapolis Hilton” line.

This shows why companies should monitor social media; by watching what people say on-line, companies can identify unhappy customers and address the situation to limit the damage.  Every company should be doing this.

I suspect it is far easier to create a responsive social media team than to educate all the front line staff.  It isn’t as effective but it provides a second chance.

Hilton ultimately did a nice job responding to the situation.

Hilton’s Missed Opportunity

Service recovery is incredibly important, especially in a world with blogs, Facebook and Twitter.  An unhappy customer can do a lot of damage.

Sometimes there isn’t much you can do; the person is unsatisfied for one reason or another but you don’t find this out and so can’t address it.  It is hard to deal with a problem when you don’t know there is one.  This is why companies should encourage customer feedback: it is a far better to know about an issue than not.

But sometimes the issue surfaces and there is an opportunity to address the situation and turn an unhappy customer into a happy customer.  This is a moment of truth for any organization.  In some ways, finding an unhappy customer is a wonderful thing; it is an opportunity to excel.

Of course, this assumes your people are willing and able to take action.

Yesterday I spent the evening at the Hilton in Minneapolis.  It was a disappointment.

Now I’m not a very demanding hotel traveler.  I just need four things: an adequate room, internet service, a wake-up call and a key that works.  The Hilton went one for four.  The hotel had no internet service all evening, my key didn’t work and I never received a wake-up call.

When I checked out, the woman at the front desk dutifully asked “So how was your stay?”  I replied, “Well, actually it was really disappointing: no internet, no wake-up call and a key malfunction.”

I would like to say this is when she quickly called in the troops, summoning the front desk manager and offering a room discount, credit for a future stay or at least a free donut.  Unfortunately, she just looked astonished and somewhat terrified, and mumbled, “Oh, I’m sorry to hear that.”

Any service organization should make sure that employees look for unhappy customers and have the tools to try, at least, to address the situation.  Hilton can do better.