Eddie Lampert: Retail Needs to Adapt or Die
Retail needs to adapt or die.
That was the call to action sounded by Eddie Lampert, founder of ESL Partners, which controls about 60 percent of Sears Holdings, in an interview with CNBC Wednesday.
In a rare media appearance, Lampert said the changes in the retail industry have been great for the consumer, but there is a question about whether it has been great for business.
“A lot of businesses will have profitless prosperity and we’ve got to adapt, and I think that companies like Amazon, eBay, they’ve turned this into a big opportunity, and we have to be able to compete with them, not just Wal-Mart, Target, etc.,” Lampert said. His comments alluded to the fact that consumers are benefiting from increased price transparency and a shift to more online purchases.
Lampert has been struggling to revive Sears for more than seven years. Last year, the iconic retailer lost more than $3 billion, and it has suffered six straight years of same-store sales declines. In February, the company announced its latest strategy to shutter stores in an effort to raise as much as $770 million in much-needed cash. Since then, speculation has surfaced that the company is also in the process of shopping its Land’s End brand.
Many industry analysts have questioned whether these steps are the right approach, but given concerns about Sears’ liquidity, it appears they are necessary. Credit-rating firms have downgraded Sears Holdings debt to “junk” territory, and earlier this month, Lampert’s hedge fund was forced to step up to make sure its vendors would continue to supply products to Sears stores by buying “receivable put agreements,” which help protect a vendor if its customer files for bankruptcy protection before paying for goods that were shipped. This measure was taken after reports surfaced that CIT had stopped providing loans to vendors who were waiting payment for goods on behalf of Sears.
During the interview with CNBC, Lampert did not discuss Sears’ business in detail, but he said the company’s ideas “are becoming more obvious and more apparent to other companies and to I think other observers in general. The hard part is executing.”
He also said that Sears is not alone in its need to change.
“J.C. Penney is in need of reinvention, Sears is in need of reinvention, Best Buy[is] in need of reinvention,” he said. “And that means that you’re going to have to try new things. If you’re unwilling to try new things and to fail and learn, you don’t have a shot. That doesn’t mean you are going to be successful, but you have to try to change.”
Lampert cited examples such as a shift to smaller format stores and to Tesco’s decision to use some of its stores essentially as distribution centers for online order fulfillment, as an example of the innovative approaches some companies are taking to deal with changes in the retail industry.