Take a look at any suburban shopping mall, and you’ll see that Sears (SHLD) has been in a slow-motion death spiral. And while Amazon’s announcement last week that it will begin selling Sears’ Kenmore-branded appliances might shield Sears from the Grim Reaper of Retail for a few more years, it may be too little, too late. But there’s no doubt that the new partnership is a win for Amazon (AMZN).
On the surface, the partnership between Amazon and Sears appears to be about distribution. The agreement temporarily helps Sears with its goal to get its products into the hands of consumers without the encumbrance of expensive real estate holdings. Amazon gets access to the Kenmore brand’s equity, Sears’ valuable distribution network, and the ailing retailer’s knowledge of and experience with the logistics of handling large items. However, when you probe deeper into the part of the deal that focuses on Amazon’s deployment of Alexa technology in connected home appliances, it appears that the impact for Amazon could be even more profound.
While Sears struggles as a retailer, its 104-year-old Kenmore brand is among the most-recognized and respected brands in the appliance industry. The Kenmore brand first appeared on sewing machines in 1913, and according to independent research firm Lifestory Research, despite the parent brand’s financial challenges, it’s still among the world’s most trusted kitchen appliance brands. With a familiar name, a storied history as one of Sears’ flagship brands, and a consistent legacy of strong brand equity, the Kenmore brand may have the power to kick-start Amazon’s dominance in a category where it currently doesn’t play. The move to offer Sears’ valuable Kenmore home appliance brand fits with Amazon’s systematic disruption and dominance of an array of categories, from books to cloud computing to grocery to meal kits.
Well-known, big box retailers like Home Depot and Lowe’s currently lead sales of home appliances. Appliance sales also contribute significantly to Best Buy’s (BBY) impressive growth in an industry that’s told very few positive stories as of late. But these retail brands are virtually indistinguishable from one another with regard to appliance selection and shopping experiences. With the Amazon-Kenmore partnership, consumers will soon be able to purchase their preferred home appliance brand from their preferred online retailer.
Acquiring semi-exclusive rights to distribute the Kenmore brand is a minor coup for Amazon, but the e-commerce giant still holds all the power in this relationship. While the Amazon-Kenmore deal struck fear among appliance retailers and their investors, this current brand partnership should daunt everyone from traditional consumer packaged goods to grocers to appliance brands like Whirlpool (WHR) and Samsung, as it does much more than provide consumers a convenient way to buy large home appliances.
Alexa is Amazon’s Trojan Horse. With the right equipment, the Alexa platform allows users to control lamps, thermostats, and other connected devices with their voices. Sears says it will add a Kenmore Appliance “skill” to its lineup of home appliances. (Imagine being able to control your air conditioner’s settings or adjust your laundry cycles from your couch.) Today, many current Amazon users place automatic replenishment orders for key household items like Tide laundry detergent and Cascade dishwasher detergent using Amazon’s Dash technology. Tomorrow, envision these two capabilities combined: Your Kenmore refrigerator senses you’re out of milk and automatically places an order directly from Amazon, circumventing the need to ever go to a physical store location or use another shopping site.
The Amazon-Sears partnership doesn’t just present new opportunities for Amazon to call “first dibs” on consumers’ day-to-day household purchases; it could finally make the vision of the smart home a reality. In the race to automate every function in the home through connected devices, the smart home category has many players, but few stand-out brands. With Amazon’s help, Sears and the Kenmore brand have an opportunity to differentiate and ascend to leadership in the connected appliance and home automation category.
Sears was the original retail business selling “everything from A to Z.” With a 120-plus year history that originated from a catalog business selling everything from undergarments to the very homes they lived in, we can credit Sears with inventing the business that Amazon currently dominates. Amazon is not Sears’ savior; it’s the struggling retailer’s successor.
Deb Gabor is the author of Branding is Sex: Get Your Customers Laid and Sell the Hell Out of Anything, and founder of Sol Marketing.