It is always engaging to observe the strategic role that trade marks play for a struggling company. A particularly notable example is the changing strategic role of trade marks owned by Sears, the giant U.S. retailer. The head trailer to a recent article, "Stuck with Sears", which appeared in the 5 April 2010 issue of Bloomberg BusinessWeek, sets the scene:
"Five years ago, when [Edward] Lampert merged Kmart and Sears into a mega-retail holding company, the hedge fund guru was hailed as the Next Warren Buffett, Sears Holdings was going to be a retail empire, a real estate play, and a new Berkshire Hathaway--a vessel for all the acquisitions Lampert would make. Then came the crash, putting those dreams on hold and leaving Lampert ... stuck with Sears. "What is particularly relevant is the trade mark aspect of this tale. In a word, what can be done to right the "Sears once-venerated brand?" For generations, the Sears mark came to be identified as a trusted platform for the sale of products, either through its iconic catalogue or its seemingly omnipresent storefronts. The success of the Sears mark was a textbook example of how a retail service mark sucessfully transcended the individual branded items that were being sold under its the auspices.
Well, it turns out, not exactly. That is because, in addition to the house mark "Sears", the company had also successfully branded product lines sold in the stores, most notably under the labels of "Kenmore" (refrigerators), "Craftsman" (lawn mowers), and "Diehard" (with apologies to Bruce Willis, car batteries). The upshot was that the company managed to create both a powerful service mark brand, which at its zenith connoted both a positive customer experience, and a general sense of product quality, reliability and affordability. At the same time, the company also managed to create separate goodwill in various product labels.
The only major retailer that I can think of that approximated this was the UK retailer Marks & Spencer at its highpoint in the middle third of the 20th century. There, however, in contrast with Sears, virtually all M&S goods were sold under the "St Michael" label. (I am told that for a while "St Michael" had a sister brand, "St Margaret", which was used for certain female-directed products, that label was ultimately jettisoned in favour of the single "St Michael" brand.)
Cons--Selling the branded products outside of the Sears family platform risks cannabilizing sales of these products at the Sears stores themselves. As Gary Balter, an analysist at Credit Suisse observed, "Kenmore is Sears. The moment they take that outside the store, they could lose a big, big part of their traffic." A more biting observation was made by Professor James Schrager of the University of Chicago Booth School of Business, who observed that "if he [Lampert] has a strategy other than cutting costs, I haven't seen it. What is their concept"?
4. I do not know the current status of this arrangement (a lot has certainly happened in the financial world since 2007). At the least, however, it points to a recognition by the company of the potentially separate and distinct value of the company's principal product labels. Moreover, if the arrangement is still in place, it does suggest the possibility that the current moves to market major company product labels separately through third parties might in some way be related to it.