Here are the problems with Sears' plan:
- Not enough presence. The toy stores are appearing in less than 10 percent of the chain's units. They're scattered about in a few major markets, including Chicago, Philadelphia, and San Diego. This is a marketing nightmare. The company can't do a national campaign about it, and even regional advertising may not work. Expect getting the word out to only the customers who can shop Sears for toys -- without disappointing others not near the right stores -- to be a challenge.
- Tough category. Sears says it's responding to customer requests for more toys in the mall. But toys are a notoriously tough category to succeed at in a mall environment -- just ask KB Toys...oh, whoops, they went bust. Or FAO Schwarz...or what's left of it. Even the most seasoned players in toys have lost buckets of money betting wrong on which toys will be hot for the holidays. Not sure what Sears thinks they know about managing a toy department that these top players didn't.
- Big competitor. Toy giant Toys "R" Us is already all over the vacuum in mall toy stores. The toy chain is opening 600 pop-up stores in malls this holiday season. At this low level of commitment, Sears' foray into toys will hardly be noticed, while Toys "R" Us can blare its mall presence out with a big national ad campaign.
- Lack of expertise. Toys have never been a successful core category for Sears' stores. They partnered with KB Toys at one point to run their toy departments, and even that didn't work out. The Reuters story ends with a few paragraphs on Kmart's top toy picks this year...perhaps a subtle hint that Sears is borrowing some expertise from its sister company. Which might be better than starting from scratch, but Kmart has been beaten handily by Walmart (WMT) in this category for ages.
- Overpromising. Sears is saying the new, 1,800-square-foot toy departments are permanent additions to the 85 stores. But it's a good bet that if toys stiff for Sears over the holidays, they'll close the departments again. Maybe they needed to tell toy vendors that to get better pricing for the chain. But it would have been smarter to wait and see how this experiment fared before announcing an ongoing move into the toy business.