The future of Craftsman? R.I.P. Sears, the end is coming in 2017

What has been a long, slow, and agonizing train wreck — the once-mighty Sears & more importantly, the iconic brand Craftsman are about to grind to a halt — marking the end of an era.  The question is…..will Craftsman live on?

News just came out that Sears is officially soliciting bids for the Craftsman brand, and from what is being reported there are major industry leaders bidding against each other for it.  A couple of them already have a large presence in the hand tool market, but one thing is clear — not many brands out there have the instant name recognition that Craftsman can provide them.

On the surface this may seem like a no-brainer to the execs that are interested in this bidding war, but what I see is another scenario that can & most likely will play out for them (in the event that they are successful).  The long-term liabilities will far outweigh the assets.

Here are the 4 major bidders :

From purely a logistical standpoint, SBD & APEX have the best operations already in place to acquire another hand tool brand.  SBD owns many unique/iconic brands already such as Stanley, Dewalt, MAC, Proto, & Blackhawk.  APEX also owns many brands such as Gearwrench, Armstrong, & Wiss.

On the opposite side would be Techtronic Industries & Husqvarna.  TTI currently owns the huge power tool brands such as Milwaukee, RIDGID, & Ryobi.  Husqvarna manufacturers chainsaws, outdoor power equipment, and drilling/cutting machines.  On a wide-spread scale, neither have massive hand tool operations (outside of the Milwaukee line of hand tools which is relatively new).

However, logistics aside — the overall value of the companies need to be looked at.  All 4 conglomerates have massive market caps & could definitely afford to purchase additional brands.  The most-valuable of the bidders would be Stanley Black & Decker — it has a market cap of more than 18 billion USD.  Second place is TTI coming in at just over 7 billion.  Third goes to Husqvarna at roughly 5 billion.  The value of APEX is not known (since it is privately held by BAIN Capital), but is was acquired in 2012 for 1.6 billion.

Now for the hype…..

“Rumors” are floating around that the Craftsman bids may reach 2 billion dollars — billion with a “B”.  Makes you wonder exactly who are making these rumors….

In what reality does this make sense?  I know….but the execs aren’t going to like it.  There are three groups of people who would be in a position to win with a massively inflated value for a dying brand — the Sears shareholders, the lawyers charging fees to make the deal happen, and the lawyers who will make even more after the sale by suing the new owners over denied warranty claims.

On it’s face, it might make sense to buy such a well known brand.  I might even agree with you if Sears had not actively lowered the quality of the long-running tool line over the course of the last decade.  Here are the 3 reasons that you should NOT buy the Craftsman brand :

  • Quality – Craftsman has gone from a Made in USA icon to a cheap “Made in China” knockoff.  The former “pro-sumer” level tools that loyal end-users grew up using are long gone & other than identical product SKUs, the tools are not the same.
  • Inflated Sales/”Club” Members – Years ago, Sears made a big push to get people to sign up for “The Craftsman Club” & “Shop Your Way” lists…..these in turn would give you “free points” and special coupons that could then be used specifically at Sears in-store and online to get the user to buy, buy, buy.  The problem with this is, it loses money.  Read online to see MANY people claiming “I got product X for free/almost free because I had surprise points in my account“.  This carrot in front of the horse was simply to create huge marketing lists of “active/engaged” users which could then be used in future marketing schemes and/or to inflate the overall footprint of their customer base.  (This is identical to the schemes of small cell phone companies in the early 2000’s to get massive user-bases signed up under cheap “unlimited plans”, then selling their company to AT&T, Verizon, T-Mobile, etc at a huge profit — don’t believe me?  Check out Suncom).
  • Warranty – This is the poison pill.  While I do agree with hand tool manufacturers warrantying most non-power tool items against manufacturer defects — I do not agree with the “no questions asked/no receipt needed” policy that Sears has had from day one.  It is so liberal, that you can bring in a socket with a scratch on it (no defect) & get a new one because it “doesn’t match” the others.  I have seen this in person at the store, and I have also seen people bring in buckets of rusty sockets/wrenches from yard sales, exchange them for brand new units, and leave without buying anything — only to go to eBay & relist the “new” tools at a massive discount.

To be clear, the warranty is what will kill your profits.  Much like any government assistance program — once you give it to them, you can never take it away.  By purchasing the Craftsman brand outright, you WILL be responsible for the last 50+ years of old rusty/broken tools that will inevitably return to your store looking for a replacement.  When/if you decide to limit these, ask for a receipt, or deny claims — the backlash will be severe & very loud.  It will not only drag the Craftsman brand down further in the public’s eyes, but it will also drag your other brands down with it.

Here come the class-action lawyers….

Now, there is a way for you to buy the brand & not be obligated to the former warranty which was so carelessly handed out in order to further sales.  Just wait for Sears to enter bankruptcy & buy it from the court.  You would not be liable (legally) for any of the former tools — but you will still have to deal with the negative feelings towards the Craftsman brand & in-turn your other brands which would then be associated with it.

Sears is a house that is on fire…..dont buy the furniture for full price.

%d bloggers like this: