Sears' new home store steps away from brand

FARMERS BRANCH, Texas--Sears, Roebuck & Co. has one of the most recognizable brand names in retailing. That's exactly why the 114-year-old company's newest stores are called something else.

The Great Indoors, which opened in July in this Dallas suburb, merges a home-improvement warehouse with a home-furnishings superstore. It's the third Great Indoors in the nation, after successful launches in Scottsdale, Ariz., and Denver.

"We accept the Sears credit card and we want people to know there's a company with Sears' reputation standing behind The Great Indoors," said Bob Rodgers, president of the new store.

"But the Sears brand is so strong, the customer has a clear vision for what it is. We call it something else so people will come in to experience it."

There is little overlap in merchandise with Sears, Rodgers said.

"I think there are two brands, Kenmore and Martha Stewart paint, and that's all. The rest is all different brands."

That's also true with shoppers, he said.

"We tracked customers in Scottsdale and Denver, and there was very little overlap."

That's exactly what Sears was hoping for, Rodgers said. Retailers are always trying to broaden their customer bases, either by expanding geographically or with a new concept.

The test period is over for Great Indoors.

"We know this is a great growth vehicle for us. It's clearly a niche we can do."

The company plans to open a store in Arlington, Texas, as early as next year and add 150 stores in four to five years.

The first two Great Indoors stores "exceeded our sales estimates in a grand fashion," Rodgers said. "That's why we're so anxious to get them open as quickly as we can."

This huge home-decorating and -remodeling center is an evolutionary step in retailing. And Sears is just one merchant taking a holistic approach to selling everything for creating or remodeling the kitchen, bathroom, living room and bedroom.

The Home Depot was a pioneer in developing design centers, opening its first Expo in 1991 in San Diego. The Atlanta-based home-improvement warehouse chain experimented with a few storesbefore it decided to go forward with a chain. There are now 15 Expo stores nationwide, with plans for a total of 200 by 2005.

This fall, former Home Depot executives will open their version of the design center in Atlanta under the name dekor. And in California, a regional home-improvement warehouse chain, HomeBase, plans to test five stores in four Western markets called House 2 Home.

Demographics are fueling the home-furnishings market, which brings in almost $200 billion annually. The fastest-growing demographic group, people between the ages of 35 and 54, is also the age group that spends the most for home furnishings.

So far this year, major appliance sales, for example, are up 9.4 percent, and small appliance sales have jumped 21.5 percent, according to NPD Group, a market-research firm based in Port Washington, N.Y.

People think of Sears when they are shopping for appliances or paint and carpeting, but its market share has eroded.

Just a couple of years ago, Wal-Mart Stores, which includes Sam's Clubs, displaced Sears as the No. 1 home-furnishings retailer, according to HFN, a home-products-retailing trade publication. Sears' home-furnishings sales of $12.7 billion ranked second to Wal-Mart's $18.8 billion.

But more important was the growth rate retailers had in the category. Sears' home-furnishings sales increased 0.1 percent while Wal-Mart's were up 10.9 percent and Home Depot's increased 25.1 percent to more than $7.5 billion in 1998, the year used in the latest HFN rankings.

Jeffrey Edelman, an analyst with PaineWebber, said he recently visited the Great Indoors store in Denver and was "impressed" but doesn't expect the new chain to have much of an impact on earnings until more are up and running.

"In a couple years, the potential of 40 stores doing $60 million each in annual sales would make an impact," he said.

Competitors are responding, and suppliers love the exposure.

Supplier Karastan likes the showcase treatment and the broader audience that sees its rugs and carpets.

These stores "generate a huge amount of traffic," said Phil Haney, senior vice president at Karastan, a division of Mohawk Industries. "They serve as idea centers, so we're exposing our product to customers who have never seen us or are seeing us in an environment that stimulates creativity."

Sears thinks it knows how Americans want to shop for their homes. Great Indoors is a collection of specialty stores under one big roof.

"We've tried to create a sense of order and a sense of discovery," Rodgers said. "The furniture is part of the display, but it's also for sale. So if you want that chest of drawers, you can buy it."

The 144,000-square-foot Great Indoors also includes a Starbucks and a home-theater department that sells the latest in TVs and hi-fi audio.

The store's layout is shopper-friendly, with low shelving that makes it easy to see the whole store.

More than 1,000 varieties of knobs and pulls are displayed on small drawers that are stocked with the sample inside, and shoppers can compare 50 models of shower heads at a display wall that really works.

It takes a staff of 350 to run Great Indoors.

Sales associates and designers are assigned to specific departments such as tile, home theater and appliances, said Chris Wozniak, general manager.

"But we have spent a lot of time cross-training," he said, "so that someone in tile can show some decor that goes great with what the customer selected."

Staff members are also trained to hand off customers to designers if the tile backsplash project is really an entire kitchen remodel, he said.

"And if it's a whole house that someone is working on, we have whole-house designers."

Wayne Hood, a retail analyst for Prudential Securities who follows Sears, says the two test stores have been well received by customers.

The top 5 percent of customers made 11 trips during the last 12 months and spent an average of $700 per trip, Hood said.

The average time spent shopping in the store was two hours, and the average transaction has been about $200, Hood said.

Great Indoors' price ranges are broad, even though the target is a middle- to upper-income customer, Rodgers said.

"Today people shop Wal-Mart and Nordstrom. We have to clearly relate to what they need," he said. "For example, the way you furnish your bathroom off the garage is quite different from what you'd select for your master bath."