1. What is Sears trying to accomplish with the introduction of the Elf program?
The canadian retail trade is an important industry for the Canadian economy with an overall growth of an average of 5.1% from 2002 to 2006 with trade groups such as, clothing stores, department stores and other general merchandise stores allcontributing to the overall growth (exhibit 4).
In a marked contrast, Sears Canada was not only not growing its revenue during that period but, as shown in exhibit 5, Sears Canada - Statement of Earnings, the total revenue earned in 2006 (5,932.8 million) was lower that the total revenue earned in the previous four years (6,237.6 for 2005; 6,230.5 in 2004; 6,222.7 in 2003 and 6,535.9 in 2002). Theretail market was also becoming increasingly more competitive as it also included existing players and new entrants in the traditional full-line department stores, big-box stores, specialty retailers and on-line merchants
Therefore, Sears was under pressure to develop strategies that would help them grow revenue as Sears wanted to regain and keep its place as a major player in the Canadian retailmarket. Sears had embarked in a long-term productivity drive aimed at attaining a cost structure that could compete with the best of Canadian retailers. The initiative of creating personal shoppers (characterized as elves) resulted from identifying a customer need to address the stress of Christmas shopping that some customers may experience. The goals of the program included to increase thenumber of new shoppers, build customer loyalty and increase average transaction value leading ultimately to an increase in overall sales during and after the holiday season.
2.- Can the Elf program help Sears to increase its sales revenue or profitability? How?
The program has the potential to help Sears increase its revenue if it generates an increase in consumer spending by increasing thenumber of transactions and the average cost of the transactions. The program can also help advertise those products in the “recharge” (category women’s and men’s wear, home furnishings and decor, appliances etc.) that Sears was committed to invest on.
An important aspect of the program is its ability to build customer loyalty and increase the number of new shoppers. By providing more value thatits competitors, there is a higher probability that the customers may comeback to Sears outside the holiday period and thus there is the potential of increase sales revenue throughout the year.
Does the Elf program represent a competitive advantage? Explain your answer.
Sears positioning in the retail industry is in the mid-level end of the pricing spectrum when compared to the high-endstores (Holt Renfrew, Bloomingdales and Saks 5th Ave.) or the low-end players such as Walmart. Personal shopper programs had been successful in the high end stores cited above. The Elf program does offer a competitive advantage as Sear’s competitors at the mid-level pricing do not offer such service and allows Sears to better compete with the high-end Canadian retail stores (Holt Renfrew). This programcertainly contributes to increasing a) the customer perceived value as the elves can substantially improve the shopping experience by providing one-on-one personalized assistance for those target groups of customers (higher customer benefit) and it is offered free of charge (no customer costs) and b) the total customer satisfaction and potentially loyalty.
How likely is it to succeed? Whatmetrics would you use to monitor the Elf program and evaluate its success?
Internal market research conducted by Sears in 2006 had identified four types of holiday shoppers: Keener - about 70% of Canadian women; Gambler - about 34% of Canadian; Slacker - about 40% of men and Avoider - about 10% of Canadians (exhibit 1). This program seem to targets mostly the Avoiders and Slackers with the...