Sears Department Stores to Improve After-sale Service

Case Type: business competition; improve profitability.
Consulting Firm: Capgemini Consulting first round job interview.
Industry Coverage: retail; general merchandisers.

Case Interview Question #00420: The client is the CFO of Sears (NASDAQ: SHLD), an American chain of department stores headquartered in the Chicago suburb of Hoffman Estates, Illinois. Sears Department Stores carry a wide range of goods including clothing, jewelry, home appliances, furniture, hardware, lawn and garden supplies, lawn mowers, paint, sporting goods, automobile repair, office supplies, electronics and school supplies.

One year ago, Sears major competitor Macy’s (NYSE: M) opened a store down the street from one of Sears Chicago’s suburban locations. Since then, the client’s store has experienced a loss in profitability. Why has the Sears store lost profitability? And what recommendations would you give to the Sears CFO to increase profitability?

Additional Information: (to be provided to candidate if asked)

• Although both competitors (Sears, Macy’s) operate nationally, we are only concerned with the local market in this case.
• The client’s sales are down by 30%.
• Both the client Sears and the competitor Macy’s service the same clientele. The clientele is comprised of 50% yuppies and 50% retirees.
• The competitor Macy’s store has:
  • Same size store
  • Same product mix
  • Same prices as the client
  • Parity in all other areas
• The client’s product mix consists of:
  • Clothing (no change in sales)
  • Appliances (35% decline in sales)
  • Furniture (35% decline in sales)
• The competitor Macy’s bundles an after-sale service contract into their price.

Possible Answers:

This is a classical “improving profitability” type of case. The first step is to exploring the exact cause of the client’s loss in profitability: declining sales? increasing costs? It turns out that the decline in sales of appliances and furniture is causing the problem.

Next, the candidate should determine why there is a loss in those areas. Investigate if the competitor Macy’s store offers different brands of products or different services (services contract).

Upon realizing that the competitor is beating out the client Sears on after-sale service, recommend that the client make changes to its operations.

Possible recommendations to client:

• Motivate and/or rehire the sales staff, i.e., hire better skilled sales representatives or improve the sales incentives for sales in the poorly performing areas.
• Change the displays and layout in the store.
• Match or beat the competitor’s service policy.