Friday, May 08, 2009

Sears Holdings (SHLD) is Stuck in the Middle

Eddie Lampert, the reclusive hedge fund manager and Sears (SHLD) chair, made his annual public appearance yesterday at Sears annual meeting.

At the meeting, he said that the he was going to increase SHLD's investment in the Internet, including social networking. He also said they'd be investing in a concept called MyGofer within Sears stores which would allow shoppers to pick up merchandise they bought online.

To me, SHLD appears to be in what Harvard's Michael Porter would call a classic "stuck in the middle" problem of strategy. They're too expensive to compete with Walmart (WMT) on cost and they're not specialized enough to compete with other specialized niche retailers (except maybe on appliances or tools). Now, on top of that basic business model problem, they're trying to be good at Web retailing and social networking. Somewhere in Seattle, Amazon (AMZN) execs are rubbing their hands together with glee. Also, the MyGofer concept is already standard at most Walmart stores.

There's more work ahead for SHLD. It will take more that a better website to convince shoppers that they need to pay attention again to this tired chain.

Position: None.

Originally published in on 5/5/2009 10:45 AM EDT

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