As Sears fails, who will buy its brands?

Twitter finds the best acquirer for Kenmore appliances

Pradeep Chintagunta

Pradeep K. Chintagunta | May 24, 2017

Sections Marketing

When a retail chain such as Sears is in trouble—and Sears is in trouble, by its own admission—the usual levers to examine to improve performance are location, assortment, price, and, most importantly, the overall quality of merchandise.

Over the years, Sears has tried to move the needle by engaging each of these levers. For example, it experimented with location by opening a store in downtown Chicago in 2001, to serve the clientele coming to that area to shop at neighboring stores including Macy’s, Old Navy, Gap, and Target. But the downtown store failed to generate enough traffic and sales to justify the premium location, and Sears closed it in 2014. It also experimented with assortment when it tried to return to its catalog roots by acquiring Lands’ End, a higher-end clothing, luggage, and home-furnishings catalog retailer. That did not end well either: Sears spun off Lands’ End in 2013. 

Back in 1989, Sears tried to move from a high-low pricing policy, where merchandise sells at a higher regular price coupled with occasional discounts of varying depths, to an everyday-low-price strategy, where stores have lower regular prices but offer fewer discounts. This also resulted in failure, as the customer who came to Sears missed feeling the thrill of having discovered a quality product at a low price. 

So over the years, Sears has been declining. It lost out to Walmart and Target in the bricks-and-mortar era, unable to compete with Walmart at the lower end and Target at the slightly upper end. More recently, the online assault mounted by Amazon.com has largely decimated what was left of the “Great American Store.”

Unlike many other retail chains, however, Sears owns several brands that are well known and trusted by American consumers. These include Kenmore appliances, Craftsman tools, and DieHard car batteries. Recently the company sought to raise money by selling these iconic brands. It sold the Craftsman brand to Stanley Black & Decker, another, larger tools manufacturer. While Craftsman products will still be available in Sears stores, ownership will pass to the purchasing company. 

Sears has also been interested in selling Kenmore. Clearly there are other manufacturers—including Whirlpool, Electrolux (a Swedish manufacturer), Haier (a Chinese appliance maker), and Samsung and LG (Korean manufacturers)—that could potentially be interested in acquiring the Kenmore name. Obviously there are financial, operational, and other considerations that go into the decision to acquire a brand. Here, to analyze that decision, I take a limited perspective by focusing on the consumer to see if the Kenmore brand provides a good “fit” for these other players; ignoring the two big Korean manufacturers from the analysis, since these are large conglomerates with interests well beyond appliances; and looking at what consumers say on a specific social-media platform, Twitter. Limiting my analysis to one platform provides an incomplete picture, but also some insights.

I looked at data from the two-month period from November 7, 2016, to January 7, 2017, and I began by looking at “buzz,” the amount of activity being generated on Twitter by the various brands. Kenmore is generating buzz, so if you are a brand that is currently not front and center in the consumers’ minds, it might be beneficial for you to acquire Kenmore to increase “top of mind” awareness. 

We see that Whirlpool and its subsidiary Maytag already control over half of all the conversations in this market. So while adding Kenmore to the mix would significantly expand coverage, it would provide less of a benefit to Whirlpool than it would to another manufacturer (but since Whirlpool already manufactures some Kenmore products, an acquisition argument could be made from an operations perspective). Both Electrolux and Haier would benefit significantly from adding Kenmore to their portfolios, as they currently have very little buzz—or access to the US market.

My analysis seems to suggest that Kenmore would make a good purchase for Haier or Electrolux, but perhaps for different reasons.

Does the volume of conversation also carry over into the sentiments associated with these brands? 

We see that the brand likely to benefit the most is Haier, since the sentiments associated with its tweets are less positive than those for the other brands—except Whirlpool, which ranks lowest in sentiment. Electrolux in this case is already generating fairly high positive sentiments, although Twitter users’ negative sentiments are also high for this brand. From that perspective, Electrolux might benefit from an association with Kenmore.

Next I looked at the content of tweets about the various brands via word clouds—looking at what people tweeted about or retweeted from the brands. I wanted to see whether there were some complementary features or other attributes that Kenmore would provide the other brands. But it appears from the tweets that the brands are all very similar, and the refrigerator appears to be the big appliance that generates the most tweets across all the brands. And the word clouds indicate that Kenmore’s product line of small kitchen appliances, such as blenders, could potentially benefit other brands. 

To dig deeper into the perceived commonalities between the various appliance makers, I constructed a similarity matrix that provides the extent of word overlap between brands. With this similarity matrix as an input, I used standard statistical methods to come up with a perceptual map. 

Tweets about Whirlpool and Kenmore appear to be quite similar, reinforcing the point that combining the two brands may provide limited benefits. On the other hand, it appears that both Haier and Electrolux would benefit, given their limited overlap with Kenmore.

To learn more about the brands’ underlying attributes, I also created a map that provides information on tweet topics, and I interpreted these topics in terms of the features of interest to consumers. This reveals interesting differences across brands in terms of the features most closely associated with them. In particular, tweets about Whirlpool reflect product features, performance, and quality, but also issues that consumers may be having with the company. (Recall that this brand is associated with Twitter users’ high negative and low positive sentiment.) Tweets about Maytag reflect design, quality, and service, and those about Kenmore are associated with the brand, energy efficiency, and the environment. On the other hand, Haier seems most strongly associated with price and promotions (and design, to a lesser extent), and Electrolux seems most associated with innovation, design, and service. On this basis, it does appear that Haier may be the company that would benefit the most from being associated with a strong brand that also emphasizes energy efficiency.

My analysis seems to suggest that Kenmore would make a good purchase for Haier or Electrolux, but perhaps for different reasons. For Electrolux, Kenmore would bring more visibility in the US market. For Haier, the benefits include visibility and positive sentiment, as well as the chance to be associated with something beyond price and promotions. Both brands would benefit from Kenmore’s strong association with the environment and energy efficiency. These considerations should play into any potential bidders’ acquisition and integration strategies. 

Pradeep K. Chintagunta is Joseph T. and Bernice S. Lewis Distinguished Service Professor of Marketing. He was assisted in this analysis by Chicago Booth MBA student Yogesh Kansal and University of Chicago student Shweta Desiraju. This essay is adapted from a blog post at kiltscenter.tumblr.com.