Experts: Sears’ Future in Mexico Remains Bright, Implications for U.S. Hispanic Market

What: Sears has filed for Chapter 11 bankruptcy in the U.S. as the retailer struggles to maintain operations while saddled with $5.6 billion in debt and after closing more than 1,000 stores.
Why it matters: Experts tell Portada the downfall of the storied retailer won’t affect the Sears franchise in Mexico where better merchandising and e-commerce under the management of Grupo Carso, owned by Mexican billionaire Carlos Slim, have built the franchise into a big hit with Mexican consumers.

The Sears franchise in Mexico may have some temporary image problems, but its success won’t be hobbled by the Chapter 11 bankruptcy filing of Sears in the United States, retail experts tell Portada.

Sears in Mexico is “booming,” retailing expert Jorge Lizan said. “I don’t see any impact for Mexico from the situation in the U.S.”

“Sears in Mexico doesn’t depend on Sears in the U.S.”

The Sears franchise in Mexico has been operated for more than 20 years by billionaire Carlos Slim’s Grupo Carso which operates the Saks Fifth Avenue franchise in Mexico as well.

Sears (Mexico) is something very different from the operation in the U.S.. It has its own merchandise strategy and independent supply chain. It has brands not available in the U.S. The merchandise quality in Mexico is better than it is in the U.S.,” Lizan said.

Sears’ decline in the U.S. can be tied to its failure to adapt to fashion trends and consumers’ growing preference for online shopping, according to Lizan.

“They never cracked the code of online sales and e-commerce, something that other department stores have been able to do.”

Online visits to Sears fall short of the top 15 most-visited online retailers in the U.S., which include Macy’s, Wal-Mart, Kohl’s, Target, Home Depot, and Lowes, according recent comScore e-commerce rankings.

Once a favorite of Hispanic shoppers

Sears in the U.S. has traditionally enjoyed a positive relationship with Hispanic shoppers, especially among older generations. But its merchandising strategy aims at lower-income groups, a distinct difference with Sears in Mexico.

The Mexico franchise targets higher-income groups and has placed stores in well-off neighborhoods like Santa Fe in Mexico City, and in the new, up-scale shopping mall Averanda in Cuernavaca.

Sears in Mexico is more comparable with Macy’s in the U.S., Lizan said, although the franchise may find its image tarnished by the U.S. bankruptcy filing.

“Sears in Mexico may have to take measures to protect the public image of its brand given the wide news coverage of the bankruptcy filing in the U.S.”

Lost luster, fewer store visits in the U.S.

Outdated stores, complaints about poor service, and the pursuit of undocumented immigrants by U.S. authorities have contributed to a decline in Hispanic shoppers’ visits to Sears in the

Juan Jose Nunez, CEO, Vertical3Media
Juan Jose Nunez, CEO, Vertical3 Media

U.S, Juan Jose Nuñez, founder and CEO of Vertical3 Media  told Portada.

Visits by Hispanic shoppers to Sears stores close to the border with Mexico have also declined in recent months which Nuñez said could be a result of “hardened immigration laws and raids.”

The impact of the Trump administration’s immigration policies is affecting in-store visits to other retailers as well, Nuñez said.

Moreover, younger Hispanic shoppers love to shop online, but Sears’ e-commerce offerings in the U.S. are “very poor.”

“Hispanic shoppers, especially younger ones, are shopping more online. They are visiting physical stores less.”

Better online offerings in Mexico

The Carso Group operates almost 100 Sears stores throughout Mexico, invests in their modernization and renovation, and is expanding product offerings with a focus on fashion.

The consumer in Mexico is also directed to Sears’ online site in Mexico, Nuñez told Portada.

Sears in the U.S., however, will have to go through a “profound change” to attract younger shoppers and Hispanics should it successfully emerge from bankruptcy, he added.

“Other retailers have adapted to the new big consumers: millennials. They have the money and the knowledge and you have to know how to attract them.”