Posted: June 2nd, 2015
Address the following questions: Include at least 3 APA references
1. Based on the information presented in the case, which shoppers are the best targets for the Elf program? In other words, who is the primary target? Provide rationale.
2. What other target groups (secondary targets) may benefit from the Elf program?
3. Is the Elf program a cross-selling program or more of an attempt to create a better customer relationship management system? Provide rationale and explain your response.
4. Create a bonus program for the Elves. Provide rationale for your program.
PERSONAL SHOPPERS AT SEARS: THE ELF INITIATIVE
Case adapted from Personal Shoppers at Sears: The Elf Initiative, Topic: Sales & Marketing
In October 2006, Ethel Taylor, senior vice-president (Corporate Store Sales), Sears Canada (Sears), was reviewing a new retailing initiative scheduled for launch in early November in all 123 Sears full-line department stores across Canada. For the 2006 holiday shopping season, Sears was to offer the services of an Elf — the equivalent of a personal shopper — to customers in its full-line department stores. The time for execution was nearing, and Taylor wondered, as she examined the new service offering, how customers would respond to this novel concept in Canadian retailing.
The idea had surfaced at Sears headquarters, in Toronto, only three months earlier. It was motivated by internal market research that indicated 60 to 70 per cent of Christmas shoppers at Sears shopped at its stores only during the Christmas season, not during the rest of the year. In addition, a national survey conducted for Sears in 2006 found that 70 per cent of women in Canada shopped for gifts up to a year before the holidays as compared to 13 per cent of men. Thirty-four per cent of Canadians began their holiday shopping one month before Christmas. An estimated 40 per cent of men started purchasing gifts in the 14 days before Christmas. About 10 per cent of Canadians avoided shopping during the holiday season.
A department store is widely perceived as the best place to shop, particularly for gifts. Its main attraction is the convenience of a one-stop shop. But, often, customers feel intimidated in a department store. The size of the store, the variety of merchandise on offer and the volume of traffic are daunting for them. Invariably, they postpone shopping until the last moment. They are, as a result, stressed while shopping and could, therefore, do with some help. We see a customer need here and a business opportunity for Sears in building repeat customers.
Personal shoppers had been operating in Canada for some time, but on a limited basis at higher-end stores, such as Holt Renfrew. The practice was more widespread in the United States, at stores such as Bloomingdales and Saks Fifth Avenue. The basic idea was that by providing customers with a level of individual attention and service beyond what retail associates would normally offer, personal shoppers could add to the ambience of the retailer. In doing so, personal shoppers could have a positive effect on the brand and help to draw traffic to the store. They could re-energize the shopping routine, making it more enjoyable, while saving time for customers. Personal shoppers offered a new level of service and interactivity designed to enhance the shopping experience. Their involvement was wide ranging and could include presenting an array of items for review in a private setting at the store, identifying consumers’ preferences and suggesting items tailored to specific personal tastes. Some personal shoppers specialized and became experts in a particular area, such as shopping for busy families or wealthy individuals, buying groceries for senior citizens, purchasing gifts for corporate clients or holiday gift giving.
Sears Canada had designated its personal shoppers as Elves, building on the word’s use in folklore to describe magical or mystical beings who do good and help others. Elves at Sears were chosen from among the 9,000 associates, currently employed at the full-line department stores (i.e., those stores that were “primarily engaged in retailing a wide range of products, with each merchandise line constituting a separate department within the store”). After a rigorous process of selection and training, the company had identified approximately 1,000 associates as Elves.
Customers looking for an Elf in a Sears store could find one at a “wish station” that would be easy to locate within the store. From there, the Elf would help customers with whatever they were shopping for, keeping an eye out for complementary merchandise and matching the customers’ needs to products across departments throughout the store. In addition, Elves were trained to move consumers through the entire sales process, including finalizing the sale and accepting payment. Elves were compensated by the hour, similar to other sales associates; however, being an Elf meant more hours and, in many cases, the opportunity for more interesting work. Before entering the store, customers could call ahead and have Elves set aside recommended products or even complete a purchase and have the merchandise ready for pick-up. Although the Elf program would only be in full swing during key holiday shopping seasons —e.g., Christmas, Valentine’s Day, Mother’s Day and Back-to-School — at least one Elf would be available in each store throughout the year. Although the role of the Elf was still evolving, Sears was committed to ensuring that the program provided customers with a superior level of service and a more enjoyable shopping experience.
The Elves represent the best among Sears’ associates, with a track record of excellence in identifying customers’ needs and wants, and achieving sales goals.
One of their mandates is to convert a gift-purchasing visit to a Sears department store from a chore to a pleasurable experience. The launch of the Elf program during the 2006 holiday season will be followed by a phased introduction, during 2007, at specific times, including Valentine’s Day, Easter, Mother’s Day, Father’s Day, and Back-to-School. At each department store, a dedicated Elf leader and designated associates will execute the program on an on-going basis. In all of Sears’ full-line department stores in Canada, 350 Elves will be deployed throughout the year, while an additional 700 will be drafted to cope with the demands of the holiday season. Sears saw the selection of Elves and their ongoing education as the two factors that would be critical for a successful program. To date, the company had made a significant investment in human capital for the Elf program: in addition to paying elves for training (a total of 9,225 hours: 123 stores × 10 Elves × 7.5 hours), 114,000 incremental hours had been budgeted to staff the program.
BUILDING CUSTOMER LOYALTY IN A COMPETITIVE RETAIL MARKET
The Elf program represented the beginning of a new service at Sears Canada, at no charge to the customer. The new strategy was motivated by a number of factors. In the month of December, the number of transactions at Sears department stores was approximately double the average of the other 11 months of the year. During the holiday season, the stores were attracting both new and existing customers who were visiting Sears with a clear intent to make a purchase. However, the average transaction value was not as strong as the company would like it to be. Sears believed that an opportunity existed to increase the average transaction value and, ultimately, the overall sales volume, during the holiday season.
Sears had redefined merchandising as its core business in 2005. The company had divested its Credit and Financial Services operations to JPMorgan Chase Bank in November 2005. Subsequently, it had consolidated its buying offices at one location, reduced staff by 2,200 (including 1,000 associates relocated to Chase) and pared down non-customer-serving activities. Sears aimed to be a more focused, efficient and profitable retailer. The benefits of higher consumer spending in the United States in 2005 had been enjoyed primarily by firms situated at either the high end or the low end of the pricing spectrum. The mid-market U.S. department stores had, on average, underperformed their high-end and low-end competitors. A similar trend was affecting Sears in Canada, which, as a mid-level player, was competing with discounters such as Wal-Mart at one end and specialty retailers at the other end. Sears was also competing with local department stores, such as Canadian Tire.
Sears had embarked on a long-term productivity drive aimed at attaining a cost structure that could compete with the best of Canadian retailers. This drive, to be completed in 2008, was expected to generate pre-tax annualized savings in the order of $100 million. Improving the productivity of store associates, a major company resource, was thus an integral part of the drive. The average sales per hour of noncommissioned associates were $231 at Sears Canada stores. The sales per hour of Elves were expected to be considerably higher.
Sears Canada was committed to “recharge” (as the company called it) various product categories with continuous investments. It was particularly targeting categories such as women’s wear, men’s wear, home furnishings, major appliances, home décor and cosmetics and accessories. These areas were considered “destination” categories in which the company had established an authority position with customers. Aimed at building on and growing in these areas of strength, investments were made to launch new products, increase selling space, expand in-store departments, increase catalogue pages, improve the product knowledge of salespeople and generally enhance the in-store customer experience. The introduction of Elves fit well with this strategy.
Sears had four types of full-line department stores, classified on the basis of sales volume, store size, location and market demographics. It was also experimenting with new store formats in response to research indicating that “customers wanted an easy-to-shop environment with exceptional customer service.” In 2003, the company had unveiled a new department store prototype, as part of a multi-year strategic plan. The prototype consisted of an easy-to-shop interior with wider aisles, clear and bright sightlines and color-coded departments allowing customers to navigate through the store more quickly and easily. Customer service centers had also been set up next to fitting rooms to allow associates to better serve customers. As of February 2006, Sears had 14 full-line department stores utilizing this design.
Said Yvette Corriveau-McGee, manager of Workforce Development, Corporate Store Support:
There is also recognition at Sears that it is not enough to have satisfied customers. We believe that satisfaction and loyalty do not, at a deeper level, move in tandem. A loyal customer is necessarily satisfied, but a satisfied customer would not necessarily be loyal. It is not enough to satisfy customers. To win, we have to astound them with products and services that exceed their expectations. The introduction of Elves is consistent with the objective of providing a high-quality customer service at the stores, resulting in very satisfied customers that are likely to shop at Sears again and more likely to recommend Sears to others. For Sears, Customer Experience is a key retail value proposition. The dimension of Customer Experience is inclusive, as opposed to other retail value propositions like, for example, Price, Convenience or Selection. It encompasses all of the many ways in which a retailer can not only satisfy but delight customers. Delighting customers is central to customer loyalty as we see it at Sears. The launch of Elves is a step in that direction.
THE CANADIAN RETAILING INDUSTRY
According to the Retail Council of Canada, in 2004, more than 227,200 retail locations in Canada provided more than 11 per cent of all jobs in every community across the country and representing Canada’s second largest labor force. Valued at about $366 billion in 2006, the Canadian retail market had grown by an average of 5.1 per cent since 2002. Sales from general merchandise stores, which included both department stores and other general merchandisers, were about $46.5 billion.
The Canadian retail market was competitive. Existing players and new entrants were both fighting aggressively for market share. Global retailers were continuing to target and expand into Canada. Sears was facing competition from not only the traditional full-line department stores but also from ever expanding big-box stores, specialty retailers and online merchants. The company’s competitors ranged from general purpose Wal-Mart stores to niche outlets, such as Reitmans (for women’s wear), Best Buy (for electronics), The Home Depot Canada (for hardware) and Shopper’s Drug Mart (for cosmetics). Established in 1953 as an equal partnership between Sears Roebuck, Co. of Chicago and Robert Simpson, a mail-order company in Toronto, Sears Canada (as it became known in 1984 on acquisition of majority holdings by Sears Roebuck) had been a major player in the evolution of Canadian retail. Sears Canada reached $1 billion in sales for the first time in 1973, and it became the largest general retailer in Canada by 1976. In 2006, Sears had a presence in all Canadian provinces and territories, with a Sears location within a 10-minute drive of 93 per cent of Canadians. In 2005, the company sourced goods from more than 3,000 suppliers, resulting in 2006 sales of nearly $6 billion. As per its vision statement, “Sears is committed to improving the lives of our customers by providing quality services, products and solutions that earn their trust and build lifetime relationships.”
The company’s merchandising strategy was fourfold: recharging destination businesses, improving category productivity and profitability, securing strategic sourcing and delivering “Sears Value.” The full-line department stores, featuring national brands, were located primarily in suburban enclosed shopping centers. Their merchandise consisted of two broad categories in nearly equal proportions: home and hardlines (comprising appliances, home furnishings, home décor, lawn and garden, hardware, electronics, leisure and seasonal products) and apparel and accessories (comprising women’s, men’s and children’s apparel, cosmetics, jewelry, footwear and accessories). Some Sears department stores offered home installation products and services, and served as pick-up locations for catalogue merchandise. Many of the stores leased space to other businesses, such as optical centers and photo studios.
The company had a multi-channel distribution model — known as “Click, Call or Come In” — consisting of the Net, Catalogue and Retail stores respectively. The Elf program was limited to the retail channel and, specifically, to the full-line department stores within it. The day-to-day objective at the store level was to maximize the stores’ productivity and profitability. Sears Canada was therefore tracking two key metrics: sales per square foot and return on net assets. It had opened its first off-mall, free-standing department store (of 108,000 square feet) in Charlottetown in 2005. The company’s Product Repair Services business, which serviced Sears’ products and products sold by other retailers, was designed to enhance customer relationships and contribute to a “helpful” brand image.
Prior to the Elf program, Sears Canada had taken several steps to increase both the attractiveness of its stores and demand for its products; now these individual initiatives were being included under the umbrella of the Elf program and aimed at enhancing the overall in-store experience. In June 2006, the company had relaunched its website, in partnership with Amazon, to offer a more user-friendly interface. It introduced a broader assortment in women’s apparel and created specialized merchandise shops in men’s wear. The advertising was modified to be simpler, easy to understand and focused on compelling offers. The company was also working towards a reduction in the frequency of out-of-stock situations and the number of product returns. In addition, the retailer had expanded its electronics assortment to appeal to younger customers. Sears had launched five “specialogues” — smaller and more seasonally relevant catalogues. Sears Canada had also launched “Operation Wish,” a partnership between Sears Canada and the Canadian Armed Forces, to offer its catalogue (with a special discount) to Canadian soldiers serving overseas. This initiative had not only increased sales but generated a great deal of satisfaction among associates. Pricing at Sears was built around what the company called its Value Strategy, offering everyday value for a major portion of its product offerings. The focus was on solutions for the customer — from coordinating a particular look to providing easy-to-understand product benefits and features. This strategy also helped to increase the size of the average transaction.
To be faithful to the overall objective of enhancing the customer experience, Sears had refrained from adopting some of the current trends in retailing. For example, it would not offer self-checkouts — costcutting tools popular with some big-box retailers — because they shifted the burden of tallying prices and packing merchandise onto the customer. Similarly, no price detectors were available on the shelves; instead, each Elf carried a mobile point-of-sale device that would scan the material, print out the bill and even accept payment. In addition, when the Elves were away from their desks, they would be available to customers through an “on-call” pager system.
Said Donna-Lee Waymann, events promotion coordinator, Corporate Store Support:
The success of the Elf program depends to a large extent on individual associates. Elves are not new hires. Selected from among the best associates within the company, they are trained to get to know the clients, understand their needs, budgets and time constraints, and generally develop a knack for matching people with products. Their selection and training is an ongoing process at Sears. Elves have opportunities to earn extra hours. This is a financial incentive. They are perceived as having strong leadership potential within the company. That is an incentive in its own right.
THE BIG ISSUES
As Taylor reviewed the Elf strategy on the eve of its execution, she realized that some important issues still needed to be resolved. The company planned to track the following metrics to monitor the progress of the Elf program: sales per square foot, sales per hour per associate, traffic count, number of transactions and average transaction size. What else should be measured and monitored as a part of the Elf program?
Employees were very excited about the program, particularly the new Elves. Could the momentum be maintained over time? Would Elves lose focus as the novelty wore off? How could the freshness of the program be retained in the months and years to come?
Sales varied by store size, merchandize and location. Stores experiencing the greatest sales were classified as being in the Core category. These 76 stores were located in key market areas with high traffic. Satellite and Small category stores (numbering 33 and 14 respectively) were seeking sales through community involvement by interacting with local retirement centers, schools and businesses. Could the Elves play a role in these stores?
The company’s customers were largely the middle-income group who were attracted to the value offered at Sears stores. Whether these customers would seek the help of personal shoppers who were associated with promoting fashions at high-end stores was uncertain. How could the Elf program ensure customer buy-in?
Historically, associates at each Sears department store enjoyed a great deal of specialization. Each associate was focused on a particular category; the Elves, however, were generalists. Chosen from among existing associates, they were taken out of their product categories to serve the general needs of a particular set of customers. The new deployment would likely be seen by store managers as the loss of a valuable resource at the store. Would this reassignment lead to any significant problems?
Finally, after associates became Elves, they would experience a shift in roles. Traditionally, an associate provided a service to the customer in terms of finding the right product suited to a particular requirement. Elves would be “closing the sale,” which required a different mindset.
Sears was launching an innovative retailing initiative to ensure it remained competitive in a dynamic marketplace. The Elf program was an aggressive strategic decision that had been developed very quickly and was being introduced during the critical Christmas season. Taylor wondered what, if anything, they might have been overlooked.
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