The Antiquated Side of Sears: Its Pricing Systems
More evidence that Sears Holding Corp. (SHLD) isn't investing in its Sears and Kmart chains came this week, with the company's $1.1 million payout to settle a lawsuit that alleged the two chains charged customers more for merchandise than the prices they advertised. Though Sears didn't admit guilt, you can bet it was a real problem. This embarrassing development highlights the need for a systems upgrade at the chains if they're to have a hope of staying competitive with other department-store chains.
The suit, filed by district attorneys in five California counties, also alleged the two department-store chains overcharged customers on recycling fees, and sometimes also charging the fee on items that don't require it.
Oh brother.
This is basic, 21st Century retailing 101-level stuff. The prices your little checkout scanner comes up with for goods need to match your ads, or you can do massive damage to customers' trust. Not to mention that getting it wrong breaks consumer-protection laws. And in this economy, more people are traipsing into stores clutching those ad circulars, and checking their receipts to make sure they got the sale price, so the timing of this revelation wasn't good.
Now, to make the lawsuit go away, Sears and Kmart had to agree to conduct weekly in-store audits and submit to an independent, annual audit to make sure they're not still ripping customers off. That'll be fun.
These kind of bonehead mistakes can only be happening two ways: Either inventory and pricing systems aren't up to snuff, or company IT professionals are asleep at the wheel in programming in prices. Or both.
Sears chairman Eddie Lampert has become renowned for his stinginess with Sears and Kmart, preferring to try to leverage the Internet and slash overhead to make more profits. But it may be impossible to ignore the need for modernized systems any longer.
Some retail-watchers scoffed when Nordstrom (JWN) spent $200 million to overhaul its systems for merchandise-tracking and pricing nearly a decade ago. But the project has paid off in spades, allowing the company to reap fatter margins and increase sales.
Advanced inventory systems making it easier to locate items customers want, move merchandise to where it's selling, and improve timing on markdowns. It costs, but it also can yield a fat payoff at a big chain.
Oh, and top-flight systems also make sure customers are charged advertised prices. Sears and Kmart need to get the hang of this basic retail skill, before customer disgust sends them into a sales tailspin.
Photo via Flickr user rutlo Related: