Recognizing Brand Power

Editor's Note The importance of licensing and brands as a core corporate strategy for global retailers is certainly apparent among the five retailers profiled in this month's Cover Story, "Lifestyle Leaders"

April 6, 2018

Editor's Note

The importance of licensing and brands as a core corporate strategy for global retailers is certainly apparent among the five retailers profiled in this month's Cover Story, "Lifestyle Leaders" but it is also evident in the recent 14-page letter to shareholders from Eddie Lampert, chairman of Sears Holdings Corp.

Lampert's letter, which he began by congratulating quarterback Eli Manning and the New York Giants for winning Super Bowl XLII and comparing the victory to the performance of Kmart since he acquired the company in 2002, analyzed the retailer's past performance and outlined the key initiatives for the future.

"Like Eli Manning, we know what it's like to be underestimated and questioned, but we intend to keep working on our game to achieve our full potential," wrote Lampert.

But one of the most important statements within the letter and the one with the most significant ramifications in retail licensing is buried on the 10th page of the memorandum under the subhead "Resources." Lampert

reviewed the company's game plan, which identified brand equity and value as the most important assets and he raised the possibility of selling the brands to other retailers.

"One of our most important resources is the great brands we own, in particular DieHard, Craftsman, Kenmore, and Lands' End. All four of these brands have significant equity with customers and provide tremendous opportunity for value creation...," Lampert wrote.

"Based on brand recognition studies, DieHard leads in customer recognition among car battery brands by a wide margin, but it lags dramatically in market share. Why? We believe it is due to fewer points of distribution. As a proprietary brand, DieHard is only available in 900 Sears Auto Centers and 1,400 Kmart stores. Yet it is competing with other batteries that are available in thousands of locations across the country. Further, a car battery purchase is a duress purchase event, in which the customer is looking for the nearest, most convenient solution. Unfortunately, it is not always us, but there is an opportunity for us to rethink our brand distribution strategy to create value."

The possibilities to market and merchandise the venerable Sears and Kmart brands are endless. Consider the following:

DieHard:

It's possible to license the battery brand to car dealerships, auto specialty retailers, or even extend the line into traditional batteries and related auto products.

Craftsman:

The longstanding line of tools is a tremendous asset that could give any competitive DIY retailer a stronger position in the category, or even consider extending Craftsman tools for women and merchandising in a home design store.

Kenmore:

While Sears has lost market share in the appliance category, consider the potential of the Kenmore brand in specialty electronics or DIY chains or licensing the brand into other home appliance categories.

Lands' End:

This popular apparel brand with international appeal could easily be extended and licensed to other retailers.

Furthermore, there are several additional brands including Covington, Canyon River Blues, Apostrophe, Joe Boxer, Jaclyn Smith, Route 66, and Structure that could be licensed or sold to other retailers.

Lampert's letter also reminded shareholders that fourth quarter fiscal net profit was down 47 percent, inventory was high and gross margins were down, and shareholder value dropped—although the exec pointed out that Sears Holdings is "still one of the top-performing retail stocks over the past five years."

Most importantly, Lampert's statement should have almost every retail licensing, brand, and merchandising executive scrambling to schedule a meeting with the Sears Holdings chairman and his management team. Just the thought of acquiring the rights to the venerable brands of the Sears-Kmart family is intriguing, opportunistic, and a potential win-win-win proposition for Sears Holdings, the retailer who will license and/or buy the brand, and the consumer.

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