Sears Essentials Stores Pair Retailers

Palatine, IL, June 20-- What do you get when you cross Sears with Kmart and add convenience items? Given the retailers' mixed reputations and lagging sales, that sounds like a setup for a one-liner. But the answer is Sears Essentials, a new midsize store concept born amid questions about whether two struggling merchants will perform better as one. More than two dozen Kmart stores in 13 states have switched to the Sears Essentials format since late April, a first wave of the conversions that are planned for 400 of the 1,500 Kmarts by the end of 2007. It's visual confirmation that Sears has top billing in this pairing, even though it was Kmart Holding Corp. that acquired Sears, Roebuck and Co. in March for $12.3 billion. Among the latest is one in an otherwise-empty strip mall in the Chicago suburb of Palatine, just 10 miles from parent Sears Holdings Corp.'s headquarters in Hoffman Estates. Ahead of Saturday's official opening, a greeter reminded shoppers of the changeover with a cheery "Welcome to Sears!" Boasting wider aisles, bigger signs, a revamped layout and a different mix of goods, Sears Essentials provides an off-the-mall showcase for top Sears brands such as Kenmore home appliances, Craftsman tools and Lands' End clothing. They retain health, beauty and convenience items from Kmart, offering everything from milk to deli meats to a pharmacy -- a first for Sears -- to try to be a one-stop shopping destination. If the concept works, it could influence the broader overall strategy of Sears and stem the steady loss of market share to fast-expanding rivals such as Wal-Mart Stores Inc., Target Corp. and Kohl's Corp. "We really think that by combining the best of Kmart and the best of Sears, we have a compelling shopping experience," Sears spokeswoman Corinne Gudovic said at the 72,000-square-foot store. The concept, however, is still under construction. The most popular Kmart brand, Martha Stewart Everyday home fashions, isn't part of the initial lineup at Sears Essentials or the remodeled Kmart stores offering Sears merchandise. And the newly enlarged company, now the nation's No. 3 retailer after Wal-Mart and The Home Depot Inc., doesn't yet have a long-term vision for its 3,800 stores. "We're looking at ways to maximize the company and come up with a format that makes sense for our customers," Gudovic said. Sears Essentials stores are much smaller versions of the jumbo Sears Grand, which offers grocery and convenience items in addition to traditional Sears fare. They also join a lineup anchored by 870 Sears department stores and featuring hundreds of Sears specialty stores. Some analysts fear that might be one too many Sears formats. "I think there's going to be some confusion in the marketplace," said George Whalin, president of Retail Management Consultants in San Marcos, Calif. "In this competitive marketplace, you can't afford to confuse the customer." Lois Karlstedt, a Palatine resident who has frequented the store for years, likes the new look but fears bargain prices might have gone the way of the removed Kmart goods. "It's laid out nice and it's clean, but their prices are higher," she said, emerging with a small bag of items. "Most people are concerned about the price, and that's where they're not good. It's not a discount store." Company officials said Sears Essentials prices are consistent with those of Sears and Kmart, but there are more high-end items available. That means, for example, that tool sets are still available for $15 but they have been joined by $2,000 rider-mowers. Shoppers in search of lower prices could migrate to a Target or a new Wal-Mart, both located nearby. But Gudovic said the company is confident its new format will work and that it won't confuse customers. "I think people are familiar with the concept of big-box retailers having multiple nameplates," she said.