Sear's Sizzling New Vitality
By John S. DeMott
COVER STORY
Sears' Sizzling New Vitality
Once frumpy but now fashionable, the largest retailer turns style into big profits
Forget Sears, Roebuck. Nowadays Sears, Tiegs might be more appropriate. In 12 million American homes, the first image Sears customers are seeing as they flip through the new fall-winter catalog is the cover picture of Model Cheryl Tiegs, wearing a cardigan sweater and an autumn plaid skirt, her smiling face and long blond tresses beckoning potential buyers into the magic world of America's largest retailer. Sears has taken a fancy to Tiegs, embracing her in its catalog and TV commercials and identifying itself with her wholesome all-American looks. The chemistry has been sizzling. Just two years short of its 100th birthday, the once staid and conservative Sears is showing the friskiness of a teen-ager who has won a date with Tiegs. In fact, some people would say that Sears has become downright sassy.
That new image is a result of the vitality that is reinvigorating one of America's most famous companies after a period of drift and uncertainty. Last month Sears changed its logo to something resembling slanted racing stripes, only the second redesign in its history and the first in 21 years. In addition to the Tiegs cover, the "catalog of the future," as Sears now calls it, contains twelve pages of Tiegs in color and, in one 24-page section, appeals to the upwardly mobile young woman of the '80s with sexy models sporting slightly punk hairdos and clad in leather skirts, silk dresses and wool blazers. "Come share the excitement," teases the copy. "Looks that say you're going places." For the homey image with a difference, the catalog also carries twelve full-page photographs that are wry takeoffs of Norman Rockwell's paintings of American family scenes.
Change is also sweeping the aisles of Sears' 806 retail stores in all 50 states, where some 39 million American families shop. Under Chairman and Chief Executive Edward R. Telling, Sears* boss since 1978, the company has launched a $1.7 billion capital-improvement program to build 62 new stores, remodel 600 others and update the company's whole approach to selling. By October, Sears will have 107 "stores of the future," which will depart sharply from its traditional selling places. They have a friendlier, more welcoming look than the Sears stores of old, with more aisles, lower ceilings and merchandise displayed with flair and style at eye level. Fashion labels with big names--Arnold Palmer, Joe Namath, Diane von Furstenberg, Johnny Carson and Evonne Goolagong--stare back at the customer. To make self-service shopping easier, products will have clearer, more informative labeling. A new cash-register system decreases the average check-out time from three minutes to 90 seconds.
At Sears Tower in Chicago, the world's tallest office building (110 stories), executives are busily devising ways to entice Sears shoppers into buying more and more with each visit to a store--"leveraging off the customer base," in Sears jargon. In the ultimate one-stop shopping, it is now possible at many Sears stores to buy a house, pick all the needed furniture and appliances and then take out insurance on the whole bundle. On a more usual level, says Edward Brennan, 50, who is in charge of the giant merchandising division, "our strategy is to make the store so appealing that the customer walks out with a bath ensemble instead of just a towel, or a pair of jeans as well as a lawnmower."
Sears aims not just at the selective shopper but at people who will buy nearly everything at its stores--and keep on buying practically forever. It is out after more customers like the Don Martins of Houston. For three generations, going back to Sue d'Amico, 75, Don Martin's mother-in-law, the family has bought nearly all its important goods at Sears, from a new roof to a garage-door opener to countless appliances, clothes and Cabbage Patch dolls. Says Lola Martin, Don's wife: "It's always been there, and it will always be there. When we shop at Sears, we say, 'We're going to Sears.' When we go somewhere else, it's just a store."
Such loyalty, bolstered by Sears' more up-to-date image and its merchandising innovations, is producing impressive earnings reports. Sears in the first half of this year earned $570 million, up 21% from the same period last year, on revenues of $17.8 billion. The merchandise group did even better, earning a record $213 million, up 42% from January to June. Those performances came on top of the company's 56% earnings gain, to $1.3 billion, in 1983 over 1982. Sales last year reached nearly $36 billion, more than Du-Pont, General Electric or Gulf, and just behind IBM and Texaco.
When Sears does well, the ripples spread throughout the economy. As merchant to the millions, the company is the grand marshal of the American material parade. Sears sells 37% of America's replacement car batteries, 22% of its paint, 39% of its clothes dryers, almost half of its portable flush toilets. It reaches its customers not only through its more than 800 retail stores but through 2,389 catalog-sales centers in localities that range in size from Los Angeles to Arkville, N.Y. (pop. 600), and Muleshoe, Texas (pop. 4,842). The largest Sears stores are in Troy, N.Y., and Roseville, Mich. The most profitable one is in Honolulu. The smaller catalog stores like the one in Lawrence, Kans., have only a counter stacked with the latest "wish book," other catalogs, a few appliances on display and a life-size cardboard cutout of Tiegs.
The merchandise in Sears aisles and in the catalogs constitutes a breathtaking array of how Americans are spending their money in the waning years of the 20th century. In a mixture of utility and Middle American chic, there are gas barbecues and girdles, personal computers and auto-ignition analyzers, draperies, fake-fur coats, electric generators, two-stage oxyacetylene welding outfits, lingerie, swimsuits, exercise equipment, Franklin stoves, blood-pressure monitors, telephones, 718-piece mechanics' tool sets, portable drills and socket wrenches. Sears sells queen and worker bees, dairy and livestock equipment, horse blankets and saddles and, for $1,200, a pair of majestic swans to "transform your pond or lake into an enchanting, romantic setting."
The most intriguing thing about Sears is that so many Americans buy so many things there, and have been doing so for so long. Sears is a fixture of Americana, like baseball, the Rotary Club or the Boy Scouts. In Robert Redford's baseball movie The Natural, set in the late 1930s, the Scoreboard bears an ad for Sears. Thirty-eight years ago, on their radio program, George Burns and Gracie Allen used Sears for one of their routines.
Gracie: All successful people start at the bottom. Look at Sears and Ro.
George: Sears and Ro?
Gracie: When they started, they didn't have a buck to their name.
Sears customers span every socioeconomic level. Says Chairman Telling: "The Sears customer is everybody." Raymond Kennedy, vice president and general credit manager, says, "We are the telephone book." And a fat one. Three out of four American adults, 128 million in all, will enter a Sears store some time this year. Sixty-three million people have a Sears credit card, and 26.6 million use the card regularly. Average charges per year: $500.
Sears plastic is held by 70% of households with incomes of $50,000 or more. The typical Sears credit customer earns $34,000, about $3,000 above the U.S. average for a family of four. A survey of millionaires by two professors at the University of Georgia showed that the most frequently held credit card in that group is not American Express or Diners Club but the Sears card. One of the first customers of the financial center at the Sears store in Cupertino, Calif., in the heart of the Silicon Valley, was a man who opened a $ 1.9 million account at Dean Witter Reynolds, the stockbroker that Sears bought in 1981. At the other end of the scale, a third of American households earning less than $10,000 are Sears customers too. Sears studies show that 86% of its customers are married, 54% have children, 54% are white collar, 28% blue collar and 18% retired or unemployed.
Many customers are famous. Jimmy Carter's staff gave him a set of Craftsman power tools as a farewell gift when he left the White House. Said Carter: "The Sears people came down here and told me how to set up and adjust all the equipment." In May, in Rochester, Treasury Secretary Donald Regan was in a Sears store with his son-in-law when a salesman came up to him and tried to interest him in Sears financial planning.
The new gusto at Sears is a surprising change from the dowdy, even depressed company of only a few years ago. During the 1970s Sears was wandering. Recession, inflation and a plunging birth rate were assaulting its good, sturdy and traditional markets. Sears, like many of the American families that were its customers, was suffering an identity crisis. It was being squeezed between the pricey specialty shops and discounters like K mart and Wal-Mart. A secret document known as the "Yellow Book" that leaked out of the Chicago headquarters in early 1978 admitted the company's shortcomings and warned that Sears had to get back to its roots. Said the study: "We are not a fashion store; we are not a store for the whimsical nor the affluent. Sears is a family store for middleclass, homeowning Americans."
Sears had been stepping up its efforts to lure younger, wealthier shoppers, offering them higher-priced, more stylish merchandise, from clothing to sporting goods. But it did so under the Sears brand name, which was doubly deadly. The label turned off buyers who could afford higher-priced items but did not want the middle-class image of a Sears product. Customers stayed loyal to Sears for big items like refrigerators and air conditioners but deserted the company for such staples as clothes and small kitchen appliances. At the same time, the steeper prices confused traditional customers, who had always looked to Sears for good values. The result: Sears' share of the U.S. retail market dropped from 9.3% in 1967 to 8.2% by the late '70s.
Shoppers kept coming into Sears stores, but they were buying less and less. At the same time, catalog sales were losing ground to newer, slicker competitors. Profit on retailing so dwindled that the Allstate Insurance division, started in 1931, accounted for more than half of Sears' earnings from 1979 through 1982. In 1981 "the merchant," as the merchandising group is known around Sears Tower, was hit by recession and squeaked out only $285 million in profits on sales of $20 billion.
Upon being named chairman, Telling, a 32-year Sears veteran, went after the problem like a skilled mechanic equipped with Sears Craftsman tools. His remedies were swift and drastic. Unprofitable stores in Europe and Latin America were sold off, as well as older stores in the U.S. and an almost new suburban one in Northbrook, Ill., that did not measure up to sales expectations. Between 1978 and 1982, a total of 201 smaller and older outlets were closed, some of them in black urban areas. In June, Sears' very first retail store, opened in 1925 in Chicago's Lawndale section, joined the casualty list.
Telling put a crisp business philosophy to work. Says he: "Taking chances is a fact of economic life.
Business must risk to grow. Fear of what may or may not happen is no excuse for avoiding challenges." He heeded the advice of a consulting team from McKinsey & Co., which had been called in by his predecessor, Arthur Wood, in a rare departure from Sears' policy of keeping its own counsel. McKinsey's recommendations included trimming back bloated management ranks and centralizing authority. Telling slashed the Sears work force by 82,180, about 20%; he got 1,500 merchandise-group managers to take early retirement in 1980 alone. He truly astonished entrenched Sears executives by giving Brennan, then only 46 and an executive vice president, full responsibility for reorganizing the merchandising division.
As the new head of the Sears Merchandise Group, Brennan came up with the "store of the future" concept. A third-generation Sears employee whose father and grandfather were Sears buyers, Brennan began a program to renovate Sears stores and redesign the company's product line. In Burlington, Mass., not long ago, he showed the whirlwind, cheerleader style that has become his trademark. He raced through the aisles, arranging displays, holding meetings, complimenting managers and clerks at registers. He stirred up intramural rivalry by telling the manager in the automotive section of his visit to a Sears store in California. Said he: "I've been out in Torrance." The manager's competitive comeback: "We have them on our target list." Brennan's retort: "They have you on their target list to beat."
Not everything that Telling touched turned a profit. Sears World Trade, which was launched in 1982 as an American version of the powerful Japanese trading companies like Mitsubishi and Mitsui, is still struggling. Based in Washington, it markets the company's expertise to retail chains in other countries, and had farfetched notions of arranging huge barter trade deals, like selling 5,000 swine to the Dominican Republic. Its expertise has not been as much in demand as was hoped, and few deals have come off. Last year the subsidiary lost $12 million. About 150 of its 1,000 employees were laid off in early August.
Telling's most distinctive innovation during his remodeling of Sears was to steer the company into the financial-services business. Within a single week in 1981, Sears moved to buy Dean Witter for $610 million and Coldwell Banker, a California real estate firm, for $202 million.
Sears was already in the money business through its credit operation and its Allstate Insurance division, which was founded in 1931, as well as a Sears Savings Bank in Glendale, Calif. But the new subsidiaries put Sears squarely into the mad swirl of financial services. Sears intends to compete not only with banks like Citicorp and Chase Manhattan but also with Merrill Lynch and American Express in offering services like lending and selling stock. Last year the Sears financial-services divisions earned $703 million.
The big Sears move into financial services concerns some people. Federal Reserve Chairman Paul Volcker has said bluntly, "We don't want Sears, Roebuck in the banking business." He believes that nonbanks like Sears would have an advantage over a federally controlled bank or savings and loan. Bankers are worried about the power of a rival that has won such deep consumer loyalty. Outgoing Citicorp Chairman Walter Wriston has long complained that while Sears is free to enter his business, Citicorp is restricted by a mass of state and federal regulations.
Wriston is right to worry. Telling says that a large number of Sears financial customers are "men and women who have been unwilling to venture into traditional securities brokerage and real estate offices, but who trust the integrity that Sears has established over time." About 60% of Dean Witter's new clients at the 234 Sears Financial Service centers are first-time brokerage accounts. Overall, these clients are younger, with slightly lower household income than Dean Witter's traditional customers. Says David Wells, 37, a Chicago engineer and experienced investor who has opened a brokerage account at a Sears store near his home in Roselle, Ill.: "I'm a big believer in Sears. In fact, half my house is made up of Sears products. So when I read that they were introducing financial services, I decided to go with Dean Witter because of their affiliation with Sears." His portfolio consists of stocks, bonds, tax-free municipals and stock options.
The Sears strategy for expansion into financial services is bold, and Sears is now aggressively going after this market. While it has let go a few analysts, Deari Witter nonetheless plans to add 1,200 account executives this year, at a time when other brokers are holding firm or cutting back. Merrill Lynch, for example, has laid off 1,000 people, and 1,500 more are scheduled to follow by year's end.
Meanwhile, an internal Sears committee is looking into all sorts of new financial ventures. One plan would turn the company's credit card into a debit card that would automatically deduct the price of purchases from a savings account. Speculates Stuart Greenbaum, a professor of finance at Northwestern: "The Sears credit card overnight could be a major tool for collecting deposits, selling certificates of deposit and maintaining checking accounts." Sears is also actively looking to buy more savings and loan associations to add to the one it owns in California. It was a bidder in 1983 for Chicago's First Federal Savings and Loan, which was finally bought by Citicorp.
Just how far Sears plunges into the financial arena depends on Congress. Legislators, in the current fuss over banking deregulation and rising worries over the stability of the banking system, might force Sears out of some of the new fields it has entered.
Sears is still working to broaden its business horizon. The company has set up the Sears Communications Network, which is going to sell computer-data transmission and communications services. The company is already offering long-distance telephone services through MCI Communications, one of the new competitors of A T & T. Customers may charge calls to their monthly Sears bill. In California the company is experimenting with a telephone bill--paying service linked to its credit card. In February, Sears launched a joint venture with IBM and CBS to develop a home-information service called Trintex, which will probably involve bill paying, banking and shopping and other services through home computers.
A far-flung Sears was very much on the mind of its founder, Richard W. Sears. A supersalesman, he saw no reason why Sears could not sell anything. He even set up a banking department with savings and checking services in 1899 that paid 5% interest on deposits, then folded the operation in 1903. But that was later. In 1886, then a restless 23-year-old railroad-station agent in North Redwood, Minn., Sears bought a consignment of gold-filled pocket watches that had been rejected by a local jeweler, resold them to other station agents at a $2 profit apiece and founded the R.W. Sears Watch Co. A year later he added a watch repairman, Alvah C. Roebuck, to his staff. In 1888 came the initial catalog, containing only watches. In 1894, though, the first real Sears, Roebuck catalog appeared. The cover of its 507 pages blared: "Cheapest Supply House on Earth. Our Trade Reaches Around the World."
Not quite, but it did reach at least to American farmers. At the time they did most of their shopping at inefficient, local general stores, where they paid high prices and had limited choices. But a growing rail and post office network, with Chicago as the hub, was beginning to turn farmers into a cohesive market. Montgomery Ward had published a catalog for them since the 1870s, but Richard Sears perfected the technique beyond anyone's imagination. Using the expanding rail system that he knew so well and capitalizing on the rapid growth of post-Civil War America, Sears turned his catalog into a powerful link between makers of goods and customers.
Sears talked to farmers in simple and earthy language that sometimes stretched reality. In 1902 the Seven Drawer Drop Head Minnesota Sewing Machine was described as "the highest of high grade in everything." Couches and sofa beds were the "greatest values the world has ever seen." Dr. Rowland's System Builder and Lung Restorer was described as the "greatest vegetable medicine of the age for the thousand ailments common to the masses." Some copy was thorough to a fault. A detailed, literate description of a $2.25 Schmuck mop wringer, which has "no equal," goes on for about 200 words. Writes Gordon L. Weil in his 1977 book Sears, Roebuck U.S.A.: "Even the hyperbole was designed to cater to their dreams of the greater world that most of them would never see."
Sears did not hesitate to call his goods the "best in the world" because he knew his customers would never be able to judge him by that standard. But at the same time he backed up his claim by assuring buyers of "satisfaction guaranteed or your money back." As early as 1911, Sears offered credit.
Small-town store owners were threatened by the upstart. Some of them held burnings of Sears catalogs and denigrated the company at every turn, ridiculing it as "Shears and Sawbuck." In self-defense, the company began sending its catalogs in plain brown wrappers.
Alvah Roebuck was quickly worn down by Sears' energy and sold out to him in 1895 for a mere $25,000. Roebuck went into other ventures, including early movies and Florida land, but then rejoined Sears in the 1930s as a traveling promoter. Local Sears managers discovered that the presence of one of the founders was a good Depression-era drawing card. At Roebuck's death in 1948 at 84, he was again the holder of Sears shares he had acquired as a member of the employee stock-ownership plan.
By the turn of the century, Richard Sears' store was America's largest mailorder house. Sears, who died in 1914, was succeeded as president by Julius Rosenwald. In 1928 the era of Robert Wood began. Wood, who went to West Point (class of 1900) because he could not afford Yale, his first choice, became a brigadier general at 39 and ran the Army's Quartermaster Corps in the waning months of World War I. That was good training for large-scale retailing. One of his civilian aides, Robert Julius Thorne, was president of Montgomery Ward, and he invited Wood to join the company after the war as a vice president. Wood and Montgomery Ward, however, did not mix, and in 1924 he jumped to Sears.
Between 1928 and his retirement in 1954, Wood was the absolute ruler of Sears, hammering out all aspects of the modern firm. Sears had opened the first retail store in 1925, but Wood pushed the company toward selling from stores as well as through the catalogs. The general led Sears into insurance with Allstate, arousing the ire and suspicion of traditional insurance companies. Sears actually sold houses in its catalogs from 1908 until 1939, at prices ranging from $600 to a then princely $5,000, and even provided mortgages. But it got out of that business because it was foreclosing on too many of its own loans during the Depression. Wood had Industrialist Henry J. Kaiser produce the short-lived Allstate automobile, which was sold in Sears stores for only two years, from 1951 to 1953.
After World War II, Wood's strategy was aggressive expansion. Sears followed customers to the exploding suburbs. At this point, the company left rival Montgomery Ward behind. Ward Chairman Sewell Avery believed that a postwar depression was inevitable, just as economic decline had followed so many previous wars. He held back on investing in new stores, and his company lost out to Sears on prime postwar suburban locations.
Sears today resembles in many respects the company Wood left behind: huge, studied, deliberate, sometimes surprisingly innovative. It is not only the world's largest retailer but something of an industrial conglomerate as well.
About 11,000 companies make products for Sears. Some of the firms are well known. France's Michelin makes Sears RoadHandler steel-belted radial tires; Hamilton Beach supplies many of its tabletop kitchen appliances; Sunbeam provides irons; Singer makes Craftsman electric drills; Sanyo, Hitachi and Toshiba produce Sears television sets, stereos and videocassette recorders. Most of the suppliers, though, are unknown outside their industries, firms like Irwin B. Schwabe of Great Neck, N.Y., a shirt supplier and the largest maker of flannel shirts in the U.S.
Sears has 366 buyers and 302 assistant buyers, each assigned to a Sears product line, to watch over its purchases. Department 622, for example, is cooking-center appliances. Five buyers deal with three rangemakers, two dishwasher sources, one garbage-compactor company and one microwave-oven maker.
Sears is such a large and welcome customer to many U.S. companies that it can breed an unhealthy dependence. In recent years Sears has encouraged its suppliers to seek other markets. Sears takes 43% of Whirlpool's $2.7 billion annual sales of dishwashers, dryers and clotheswashers, which it sells under its own Kenmore name. Whirlpool has a Sales to Sears department that caters to the retailer's specifications. The relationship has gone on for 65 years, with no written contract. Says Donna McLean, a Whirlpool official: "Any customer who represents 43% of your business is going to carry a lot of weight." Sears owns no factories outright, but it does own large shares of some of its suppliers. It has 33% of Roper, its range-maker, 31% of De-Soto, which supplies paints, and 20% of Swift, its textiles provider.
The suppliers' products must meet the standards of the Sears product-testing labs, which are in the company's original headquarters on Chicago's West Side and in the Sears Tower. The labs were started in 1911 with a single chemist, but have evolved into a full-fledged testing organization that employs 138 engineers and technicians who run evaluations on 10,000 products annually. Mattresses are rolled over 100,000 times with a 225-lb. wooden cylinder. Leather boots spend hours dunked in pools of water or strapped to automatic walking machines. Toilets are flushed 100,000 times--once a minute, day and night--to assure dependability. Last year 2,239 products were field-tested.
The lab conducts exhaustive quality-value reviews, reacting sometimes to customer complaints about socks that fall apart or water-softening systems that turn on when they are not supposed to. Sometimes tests are run for no particular reason and turn up problems. The test lab has just completed a review of eight pieces of Sears luggage, plus 20 more from competitors, including Samsonite and American Tourister. The luggage was frozen to 20DEG below zero and then dropped two feet. Result: one of the Sears bags was rated "below grade."
Technicians in the labs come up with ideas of their own that find their way into Sears products. Engineer-Manager Jim Roach estimates that 1,000 patents have been granted to Sears since 1930. Few innovations have been startingly new or involved complex technology; they were just nice and convenient. Example: medicine cabinets that light up when touched. Still another: a hot-air popper for gourmet popcorn. Earlier models did not work with such popcorn because of extra moisture in the corn.
The company watches over its loyal suppliers and rushes to their assistance when they need help. The Sears relationship with Globe-Union, which manufactures DieHard batteries, goes back 59 years. In 1972 Sears bought $8.5 million worth of the company's preferred stock to allow it to expand. Now known as Globe Battery and a division of Johnson Controls, last year it sold Sears $176 million worth of batteries.
While it can be helpful, Sears is also exacting. Says Milton Zilis, vice president of Johnson Controls: "Sears carries very heavy muscle, and it is constantly demanding innovation." This year Sears introduced Globe's DieHard Incredicell battery, which is smaller, lighter and more powerful than the previous model. In addition, the battery sounds a buzzer when a motorist shuts his engine off but leaves on the headlights. A set of indicator lights shows if the battery's charge is strong or fading.
The care and feeding of Sears' suppliers is an art. This year 80 of the best suppliers received awards at the company's annual "Partners in Progress" dinner, presided over by Merchandising Boss Brennan. The winners of trophies and crystal prisms are not just big companies. This year Gear, Inc., of New York City, with Sears just since 1983, was praised for the stylish looks of its country-furniture designs, now on display in half of Sears stores. Gear earned design royalties in 1983 on the $500 million of its creations sold by Sears and other stores.
By and large, Sears targets its products for Middle America. Nowhere on any Sears shelf are there to be found such items of acknowledged excellence, but high price, as Dunhill cigarette lighters, Rolex watches or Leica cameras. Sears does not try to lead the customer to new and esoteric, and sometimes useless, products. Says Joseph Batogowski, senior executive vice president of merchandising: "We are a mass merchant. We strive to carry not avant-garde goods, but the current state of mass America."
The company has learned to trust its customers' judgment. In 1926 Sears ran a contest for a name for its tires. One suggestion: Allstate, later adopted by the insurance subsidiary. The company and its public have an intricate, almost passionate relationship. In the minds of executives in Sears Tower, customers are always present. At Batogowski's staff meetings, an empty chair sits among the participants. On it is a sign with the words THE CUSTOMER. Americans, in turn, respond to that attention. Sears gets letters all the time asking its advice on almost every human problem, from marital to technical. Politicians have even tried to get Sears on their side. In the 1930s a storied Georgia Governor told voters that they could count on "God Almighty, Sears, Roebuck and Eugene Talmadge."
Sears executives realize that customer loyalty is their greatest strength. Says Chairman Telling: "As large as it is, Sears remains highly respected for fair dealing and honesty. That's something invaluable. You couldn't buy it."
Much of the positive feeling toward Sears comes from its pledge of "satisfaction guaranteed or your money back." Sears will take almost anything back, for almost any reason. In a company with so many products, some defective ones naturally slip through, no matter how stiff the controls. Sears has won a reputation for taking back goods without an argument. "I bought a sweater at May's, had it wrapped at Bullett's, got my change at Mandon's, left by way of Desmond's, and when I found it didn't fit, the only place I could return it was Sears, Roebuck," quipped Radio Host Phil Baker of a jostling Christmas-shopping session in the 1940s.
Sears sometimes gets taken itself in the process of taking back goods. Shoes that have obviously been worn to shreds have been accepted with a smile. Tools that have been misused have been replaced. Last year a customer in rural New York suddenly became dissatisfied with foam furniture he had bought at Sears-six months earlier. He complained and got a credit. If buyers occasionally abuse the policy, Sears does not mind too much; it counts on those very customers to buy other products that they will not return.
With all those whirring blades, moving belts and spinning drills on so many of the things it sells, Sears is vulnerable to being sued by customers in product-liability cases. But it also moves to head off suits --and injuries--by telling customers about defects. Says Chief Counsel Philip Knox: "We had recalls long before there was a Product Safety Act." In the 1960s, for example, the company recalled a children's swing set, informing all buyers by certified mail of a weak weld.
Sears is constantly searching to learn who its customers are, what they like, what they are avoiding, how they are changing. It is a vast constituency that Sears kneads, reads, tries to listen to, examines, interprets. Through one of the largest systems of IBM computers outside the U.S. Government, the company keeps track of what is.being bought and where. Each morning just after 7, Merchandise's Brennan enters his office and calls up a display on his computer terminal that can tell him the dollar volume of all Sears stores the previous day. He can also look at sales figures by region, specific store or product line.
Those figures would show him what people like Lisa and Terry Ford of Jonesboro, 17 miles south of Atlanta, are buying. When they were high school students, the couple hung out at the local Sears mall because it was the best place in town to have fun and meet people. As teenagers, they bought Halloween costumes at Sears. By the age of 16 they were going through the store and pointing to things that they would some day have in their home. Married five years ago at 18rthey outfitted their new two-bedroom house at Sears. Lisa got a Kenmore washer and dryer as birthday and Christmas presents. The couple also bought a blender, a mixer, a coffeemaker, a toaster, an iron, a shower curtain and living-room curtains from Sears. When they needed to fence in their yard, they got a Sears fence. Now the Fords are planning a family, and they are starting to visit the Winnie-the-Pooh collection of children's clothes.
Of such are great retail empires built.
At a time when many companies cannot resist the temptation to take the money and run, Sears continues to show how to succeed in business by really trying. It is tough to beat the offer that Richard W. Sears made to his customers almost a century ago: "Satisfaction guaranteed or your money back." --By John S. DeMott. Reported by J. Madeline Nash/Chicago
With reporting by J. Madeline Nash