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Will The Great Indoors live up to its name?

By Mark Seavy

Sears’ The Great Indoors offers an upscale mix of home furnishings and decor products.

Sears Roebuck & Co. is finally preparing to expand its Great Indoors format stores, but it remains to be seen whether the giant chain can expand its three-year-old experiment beyond a handful of locations while also finding success with a host of other concepts it is currently working on.

While The Great Indoors format — 133,000-square-foot stores that carry an upscale mix of home furnishings and decor-related products — has been slowly nurtured since Hoffman Estates, Ill.-based Sears opened the first one in a suburb of Denver, it’s now readying a nationwide rollout. Stores in Dallas and Novi, Mich., are soon expected to join those already in Denver and Scottsdale, Ariz. And, by the end of the year, Sears expects to have secured leases for 35 other locations, CEO Arthur Martinez told investors in June during a conference held by investment management firm Sanford C. Bernstein & Co. in New York City. For the most part, all The Great Indoors stores will be located in power centers.

Martinez conceded in a presentation to investors that Sears didn’t “execute The Great Indoors concept as well we should have’’ during the early testing of the format in Denver and maintained that “execution will be a challenge’’ as the format is rolled out. Among other things, The Great Indoors has a separate management and buying staff from its mall-based brethren, and the format features more areas where consumers can sample products. For example, The Great Indoors store in Denver has a section where consumers can test showerheads before buying them and a custom installation section of consumer electronics that is operated by local retailer Showcase Entertainment.

Overall, The Great Indoors carries more than 50,000 items, almost all of them displayed in a dizzying array with an emphasis on lifestyle settings. Among these are kitchens replete with flooring, countertops and major appliances that have a decidedly upscale image, with brands such as Thermador, All-Clad and Calphalon.

Complementing the kitchen displays, there are bedroom settings stocked with products from Haywood, Magique and Tivoli, and bathrooms that offer Moen plumbing fixtures, Wamsutta towels and custom-built Jacuzzis.

“I think they can succeed as long as they continue with the concept of displaying the upscale products in a setting that allows the consumer to get an idea of how they will fit into their homes,’’ said Michael Blumberg, an executive vice president at Sound Advice, a Florida-based consumer electronics chain that recently purchased Showcase and plans to continue the Sears relationship.

In seeking to avoid competition with the core Sears stores, The Great Indoors outlets don’t carry their parent company’s logo. And the targeted customers are more upscale — about $70,000 in annual household income — than those who shop the standard Sears store, where the average is $40,000, according to Martinez.

Seven of eight customers who shop The Great Indoors don’t frequent Sears’ department stores, providing the retailer with access to new customers, he said. To further underscore the differences, The Great Indoors, for example, only carries 27-inch and larger-size televisions and also sells Sony’s upscale XBR television products, while the mall-based Sears stores do not.

“I think they can execute it as long as they keep the identity separate and maintain a separate management,’’ said Paul Frederickson, a vice president of marketing at Sensory Science Corp., which sells both Go-Video dual-deck VCRs and Loewe brand TVs through Sears and The Great Indoors, respectively.

The Great Indoors’ upscale clientele is what makes the format attractive to developers of the 630,000-square-foot Promenade at Scottsdale (Ariz.) Mall, which opened last fall with the chain as an anchor tenant. While the super-regional center draws from a 10-mile radius, the average household income within three to four miles is $93,000, said Margaret Lloyd, vice president of marketing at the Phoenix-based Pederson Group, which owns and operates the center. “Their upscale image and customers have enabled us to attract similar retailers that complement them,’’ Lloyd said.

The need to achieve a separate identity will be the key to making the concept work, especially since Sears is continually experimenting with a range of other “off-the-mall formats,’’ said Ursula Moran, an analyst at Sanford C. Bernstein.

The chain opened smaller, 70,000-square-foot versions of its typically 85,000-square-foot mall stores in North Carolina several years ago in an effort to target markets with populations of less than 100,000. And it continues to expand both its Hardware and HomeLife furniture stores, while at the same time laying out plans for both 15,000- to 18,000-square-foot outlets that could sell appliances or consumer electronics and home design and decorating superstores.

“These stores all have or will have the look and feel of a Sears store, although a slightly smaller one,’’ Martinez said at a press briefing in the spring during the grand opening of Sears’ 70,000-square-foot stores in Wilson and Statesville, N.C.

As Sears opens and expands the various retail formats, some analysts have questioned whether the company will be able to effectively manage them all. The retail industry is rife with companies that strayed from their original concept and ended up paying for it, analysts said. Among the most prominent was Fort Worth, Texas-based Tandy Corp., which has changed its name to RadioShack to reflect the 7,100-store chain that has been its lifeblood. Tandy at various times operated McDuff’s, Video Concepts, Computer City and Incredible Universe, all of which sold consumer electronics and computers and were later either sold (CompUSA bought 100-store Computer City and has in turn been sold to Mexican retailer Grupo Sanborn) or closed. Incredible Universe was a chain of 170,000-square-foot electronics stores that never generated enough store revenue to cover the costs of running it, analysts said.

“An ill-conceived retail concept is a bad idea and what Tandy did was try a lot of things that didn’t play to their strengths,’’ said Moran, noting that RadioShack has achieved profitability as a stand-alone business. “I think Sears will do well as long as they keep to the areas in which they have some skill. They’ve done well in areas that stick closely to their core competencies such as home and hard goods, but they’ve struggled with those that do not, such as soft goods.”