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TheStreet Open House

Sears Needs New Leadership Immediately, if Not Sooner

Stock quotes in this article: JCP, SHLD, WMT, TGT, BBY, EBAY, AMZN, GS, AAPL, BBY

A few weeks ago, my wife purchased a $1,500 LG washer and dryer set. Sears offered a competitive price with free delivery (she paid extra for the setup). In all fairness to my wife, she suggested either Best Buy (BBY) or a local dealer instead of Sears. She argued that Best Buy or a local store might price match. I countered that it was a hassle to try to get a price match, and that while Sears dropped the ball, they came through in the end. But I should have listened to my wife.

The installers refused to position the dryer door to the correct orientation, insisting that it should have been changed before leaving the store (as if that matters to a customer). During the first load, a light bulb died. I'll skip all the details about each attempt to make it right, but it took several phone calls and a second store visit to achieve a resolution which resulted in a refund of the setup fee (although they didn't volunteer it). It wasn't much consolation, because we still needed to get a handyman to correct the door.

All retailers make mistakes from time to time. Its how you handle mistakes that sets you apart. Any marketing teacher will tell you: ensuring that existing customers are happy and return to buy again is more cost effective than gaining new customers. Amazon will pay the return shipping cost and give a full refund for items you don't want. In comparison, Sears is willing to allow their ideal customers to stew in frustration. Is it any wonder that it's losing sales when customer service is given such a low priority?

Any retail chief worth his or her salt knows that unless you have customers singing your praises about your products and business, everything else becomes inefficient. Every dollar spent on advertising to unhappy customers is wasted. In-store promotions don't perform well if no one is shopping in the store. Lampert should go back to Goldman Sachs or buy an investment bank and let someone like Johnson who lives and breathes retail take the helm.

Sears can get back to serving customers, with effective procedures for checkout and for when a sale doesn't execute well. Customers will regain faith again (albeit slowly), the company will become profitable, and Lampert, ESL, and other shareholders will finally realize a return on their investment. It's too bad Ackman didn't pick Sears instead.

In fairness to Ackman and, unfortunately for shareholders and customers alike, Sears isn't a candidate for an activist investor to whip it into shape. Lampert and ESL have de facto control. Until that changes, don't expect Sears to change.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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