Sears's Dueling Inventories Handicap Customers And Kneecap Associates

Poor Sears. On June 9, The Consumerist shared the story of a customer who went to a Sears store to exchange a faulty dehumidifier and was told the store was back-ordered on that model and couldn't swap the lemon for another one. The customer got his refund, went home, ordered the same model for in-store pickup, got his E-mail confirmation, returned to the store and collected the dehumidifier. The customer's conclusion: "And that's why I try to avoid Sears."

It's easy to knock Sears, with its long history of making customers unhappy with out-of-stock items, whether they were actually out of stock or not. (In a comment to The Consumerist post, a Sears representative blamed the associate for being unable to find the item in stock, then lied to cover his incompetence.) On the other hand, maybe the problem isn't as human-centric as that. It could be that Sears' dueling inventory systems are to blame.

What actually happened at the store, according to the customer, is that the associate first checked the inventory system, which showed there was one dehumidifier left in stock. Then the associate disappeared into the back and returned to announce that there were none in stock, telling the customer that was no surprise: "I just sold 2 of that same model today."

Then, after the customer asked whether more dehumidifiers would be in within a few days, the associate reportedly checked the computer again and announced, "Oh, no—it's back-ordered!" If that was a lie, it wasn't just elaborate—it was pointless. Why would an associate make up a back-ordered status for an item if it was actually going to show up at the store in a day or two?

What's at least as likely is that two different inventory systems came into play here—one for stores, the other for online. In-store inventory is easy to reconcile in real time: An associate can walk to the back, check the stockroom and, if necessary, flag that an item is out of stock. And that works fine (except for the unhappy customer who can't make the purchase)—but only until online inventory and same-day in-store pickup gets involved.

For example, if the Web site says there are five dehumidifiers at a particular store, and that number can't be updated in real time, then the store has to hold out five dehumidifiers against the possibility that five people will buy online and want to pick up the product at that store right away.

Sears is reportedly in the process of merging its inventory systems so that everything shows up in one inventory (it's supposed to be the online inventory). Apparently that hasn't quite happened yet, which would explain why a dehumidifier showed up in a store's inventory but could only be sold to a customer online.

A mess? Sure, and it's one that's almost impossible to explain to the customer.A mess? Sure, and it's one that's almost impossible to explain to the customer. It looks for all the world like the associate is pointlessly lying and that Sears doesn't actually have a working inventory system at all. But what's the associate to do—tell the customer the product he wants is in the store, but he can't have it?

Ironically, Sears solved this problem three years ago. In 2008, Sears Vice President of E-Commerce Imran Jooma was touting Web site kiosks in Sears stores. "For example, if a customer is in a Sears store and is looking to buy a DVD, and the product is not available, the customer can order the DVD from a computer kiosk in-store and the shipping fees are waived," Jooma said.

Or, presumably, the customer could use the kiosk to order the item for in-store pickup.

Or the associate could use the kiosk to "buy" the item for the store for in-store pickup and then sell it to the customer. Yes, that's almost as messy as trying to explain that there are two different types of inventory. The difference: The customer doesn't really care which inventory the item came from. He's just happy to have his dehumidifier.

Sears isn't alone in failing to figure out that dueling channel inventories are bound to make customers unhappy. Best Buy, with its self-defeating online-veruss-in-store price-match policies, puts associates and customers in a similar position.

Unfortunately, resolving that conflict is both an IT and a business challenge. On the IT side, developing a single inventory system isn't easy. It took Nordstrom four years to get a unified inventory system working. JCPenney will end up having taken about that long, too, when that chain's enterprise-wide inventory system is complete. Both retailers say having a single view of inventory will deliver big advantages, both in-store and online. But getting there is a long haul.

Just as challenging is the fact that big retailers' E-Commerce divisions are still typically competing with stores, each with separate performance goals and strategies. That made a certain amount of sense back when the two channels were completely separated. But those days are long gone. Now, with Web site kiosks, in-store pickup and the ability of one store to locate out-of-stock merchandise for a customer at another store and then sell it and have it shipped, those lines have effectively been obliterated.

Those dueling business units still exist, but only as bureaucratic process, not as retail reality. They may still make sense in terms of aging IT systems and management org charts.

But to customers and associates, they make no sense at all.