It is official — Craftsman is getting a new owner, and I hope buyers remorse doesn’t set in.
Today (as you already know) it was announced that SBD has agreed to buy the Craftsman brand from failing Sears in a deal valued at $900 million. What all the investment websites are not telling you about is the train wreck and backlash that is coming when we look at the Craftsman warranty “No matter how bad you abuse it — we WILL 100% of the time exchange the tool & eat the cost“.
So what will happen now?
Initially everyone will be talking about how great of an idea this deal was. You will read that it is bringing two “giants” together and they will be stronger than ever. The investors will label this as one of the most undervalued deals that they have ever seen. This is all untrue of course, but it will get you to buy into it — and will prevent the SBD stock price from dipping.
Once the honeymoon is over, reality is going to set in. Do you know the problem with having a pet dragon? You have to feed it.
Although the outdoor lineup (mowers, weedeaters, etc) & power tool lineup (drills, saws, etc) do not have some unquestionable warranty — over 50 YEARS worth of hand tools do! When Harry Homeowner (or Mr eBayer) bring in a bucket of rusty tools they found in the back of the garage, they want brand new shiny ones at no cost to replace them. Just because you now decide that is not a good reason & it is clearly abuse, neglect, or wear from normal use….and those reasons are NOT covered under the “updated warranty terms”, it is not going to change the fact that for decades those terms did not exist.
Here come the lawsuits…
Not only are you going to anger countless Craftsman owners and turn them into spokesmen against your brand(s), you are also opening yourself up to class action lawsuits from the tens of millions of people who own Craftsman tools which will now want to be paid (well….in reality, they won’t be paid much……but the lawyers sure will).
This will be one of those “career making” cases for the lawyer/law firm who organizes the suit. I would imagine they are already shopping for the yacht they want once the suit is over — Probably the S.S. Craftsman.
Since you did not buy the brand out of bankruptcy, you are 100% obligated to all contracts/warranties/agreements made by the previous company. Remember, this was not a “SEARS Lifetime Warranty”….it is a “Craftsman Lifetime Warranty”.
Craftsman has long been the poster child of a good brand gone wrong. Other than name recognition, the quality aspect has eroded fully. Those who were once self-described “brand loyalists” to the Craftsman line now hate it — and only talk about the tools in good terms when describing the memories from years long past.
Rather than stick with the American worker, Sears sold out completely and went full China on us. With very few exceptions, if it didn’t cross the Pacific on a freighter — the shelves would be empty.
Unfortunately for Sears, especially these days, is the resurgence of American pride & the desire to see your neighbor employed VS saving $0.05 on the cost of your new pliers. Don’t believe me? Ask yourself why so many huge companies are now trying to label as much as they can “Made in USA with global materials” / “Made in USA with foreign components” / Built in USA / Assembled in USA — they are trying to capitalize on the American pride & the American wallets.
What is your advice to fix this?
Aside from backing out of the deal completely (best choice), there are a few things you can do in order to make some lemonade out of these lemons you bought.
- #1 – Kill the Craftsman hand tool lineup & do not sell any new tools with that branding. People will always want to exchange an old tool for a new tool — and if you let them, you will be eating the costs.
- #2 – Honor the warranty, BUT make them mail it in (at their expense) in order to be evaluated. This will cut back on claims by 95%, since no one in their right mind will waste $5 to mail in a $2 socket. This is the classic trick that companies use to prevent warranty claims & it obviously works since so many of them do it.
- #3 – Make Craftsman merge with the Black & Decker line — meaning the batteries/chargers/parts are interchangeable. This would be across the power tool & outdoor power equipment lineups — and would allow you to expand into stores/retailers which currently don’t have your bottom-tier brand in stock. It will also prevent “price matching”, since retailer #1 will run a sale on Craftsman & retailer #2 sells Black & Decker (same tool, different branding).
- #4 – Offer a “trade in/trade up” event for people to convert from the Craftsman line to another Dewalt, Stanley, etc series of tools — getting the Craftsman tools off the street & removing potential lawsuits later on. A straight exchange would be insane, so I think a “by the pound” event or something similar may work better. If the customer brings in 50 lbs of Craftsman tools, they get 500 “points” that can be redeemed for other SBD tools — hand tools, power tools, etc. (Think of the Marlboro miles on cigarette packs).
So smart guy….do you like anything about this deal?
In fact, from the business point of view the only real positive here is that you can now undercut your competitors which currently are the OEM providers for many of the Craftsman tool lines. That may hurt them in some way, but it will be very insignificant. Most likely they are under cut & dry contracts with Sears/Craftsman for the foreseeable future, and any negatives can be offset well in advance of the contract expiring.
If you choose to go that route, and phase in your own tools (rebranded as Craftsman), then it will end up costing you more money than you stand to gain. The added expenses of additional inventory (in your warehouses, shipping, storage, employees to handle them, unions, etc) will far outweigh the markup that you will have between the production cost & sales price.
Looking at it from that standpoint, you are technically helping your competitors, since they can utilize those same machines, people, warehouses, etc to produce brand expansions for their other lineups/new contracts/new tool lines. They will make the announcement that they chose not to continue to Craftsman partnership due to low sales & are instead focusing on their “fast growing” segment of “product X”.
Basically they will kick you on the way out the door, increasing their stock price, and hurting yours. To add insult to injury they will most likely announce “new USA jobs” along with it to be a win-win for them the whole way around.
You are wrong…this is all speculation…
Perhaps you are right. I highly doubt it, but I guess anything is possible. I do know that the people who pushed this idea through obviously had a big financial gain in mind when doing so, since otherwise they would have been laughed out of the board room.
Do this — call a class action lawyer, and pretend you are a really angry old man who just found out that Sears won’t honor his warranty anymore. Say that you bought them because of that warranty, and you (and millions like you) are now getting screwed over by SBD — “how dare they tell me rust, abuse, and neglect are not covered!”.
Here is what will happen…..the greedy lawyer will see dollar signs & pretend that they care. They will then evaluate the potential windfall for them if they successfully win, and best of all — they will look like the good guy!
Ask your lawyers (who also will make big bucks defending you for YEARS) what they think. You will be told “It is our position that you have a very strong case, and the class action suit is without merit”. Let me translate that — “You should tell us to proceed….We just found out about a new Yacht sale that started last week”.
SBD stands to not only alienate the already angry, undercut, and forgotten masses of Craftsman buyers — they stand to turn those same people into walking/talking/ranting spokes mouths against the entire SBD line of tools. Be very careful when you play with fire.
Lets face it, Sears is dying….the fact that they could maneuver this sale of Craftsman (without entering bankruptcy) is amazing. Bravo Eddie Lampert.