We Reach Out to SEARS

Last week we sent a letter to SEARS CEO Calvin McDonald offering a chance for us to sit down and discuss a resolution to the financial and personal struggle that dealers face every day.  This is the letter we sent:

1291079 Ontario Limited

o/a Sears Woodstock

July 17, 2013

Sears Canada Inc.

290 Yonge St, Suite 700
Toronto, ON

M5B 2C3

ATTENTION:                        Calvin McDonald, CEO

Dear Mr. McDonald:

My wife Linda and I own the Sears Woodstock Hometown Store.  We are the plaintiffs in a class action lawsuit on behalf of 260 Hometown Stores across Canada that alleges unfair dealing by Sears.

I am writing to explain in my own words how desperate the situation affecting the Sears Hometown Stores is and to request that we meet in person to discuss a resolution.  It is my sincere hope that you will carefully consider everything that follows.

First, let me say that I am proud to represent Sears.  When we entered the Sears Dealer Program 6 years ago, we were excited to be part of a brand that was rated #1 in trust among consumers.  We were new to retail (a common trait among dealers) and we trusted your claims in the Ownership Program Brochure that:

·         “This business model is brilliant.   You partner with Sears and own one of our prestigious community stores.”

·         “Sears wants you, our partner, to succeed.  In fact, we take a personal and financial interest in your success.”

We met a lot of great people within the Sears organization.  We were honored to represent the company in our community.  During this time we worked very hard and made an average middle class income.

However, this is no longer possible for us or for the vast majority of Sears Hometown dealers. 

The business model is heavily skewed to favour Sears, placing the bulk of the expense on Dealers.

This spring, under the direction of Hometown Stores V.P. Terri Lowe, things got even worse.  I attended our regional cluster meeting in Kitchener and was shocked by the attitude I saw and heard.  The highlights of the meeting:

·         Advertising subsidies would be cut off to 116 stores in Tier 4.  How do we sell if we don’t advertise?

July 17, 2013

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·         A new group of corporate trainers was presented to help improve our “poor management skills” and provide “on-boarding” for new dealers.  We were told that under the new contracts being released in July, we would all be re-evaluated as dealers before our contract was renewed.  We were told that the ideal candidate for a dealer store is now modeled after a corporate store manager.  This is deeply offensive to us as we bring skill sets and perform tasks that corporate store managers would never consider part of their job.  Nor would any corporate store manager accept our paltry compensation and heavy debt load.

·         We heard from Ian Lam who explained our financial picture in great detail.  In this package was a chart showing that 169 stores did not make an average household income.  The average income of a dealer store was revealed to be $33,000/year.  Given the 50-60 hours per week that owner managers put in, this amounts to less than minimum wage for the average dealer.  In fact, many dealers I have spoken to pay themselves nothing. 

·         A chart was also included showing an average decline in commission from 2009-12 of 15%, while our NET income has declined a whopping 45%.  Notice the disparity here…our costs are rising, and commissions are falling at the same time.  However, Sears still makes money on our stores, without offering a single cent to help with rising costs.

The figures are from Sears’ own documents.  The information was generated from extensive store audits on selected stores (we were forced to participate) performed by an independent accounting firm. 

We were told that anyone who didn’t like the program could leave. There was no thank you for investing hundreds of thousands of dollars.  No thank you for running the most efficient channel in the company with the lowest returns, lowest shrinkage, and pure profit margin (as you well know from your P&L’s).  After hearing this and more, I assumed there was no other recourse than to seek legal counsel, because Terri was speaking on your behalf.

This is not how partners talk. This is not how partners treat each other.

Sears has re-defined our relationship without our consent and has taken away the profit that we need to survive.

I can only assume that you are fully aware that the dealers are not financially viable.  You watch dealer after dealer throw their life savings into these stores and then walk away with nothing, only to hand it to the next one and repeat the cycle.  There have been 5 such stores in Eastern Ontario alone in the last 12 months, all of which are still open for business.  If the channel is not profitable for Sears, why is it opening new stores and continuing to pursue new dealers?  We know there is profit to be shared.  You know this, and yet refuse to offer anything of consequence to help us.  You refuse to share the pie.

As soon as the lawsuit became public, I was inundated with support from the dealers. I heard from a person who was using his retirement pension to fund his Hometown store.  I heard from parents of young children who must bring them to the store because the store does not generate enough money for them to pay for a babysitter.  I heard from one individual who told me that he wept with relief when he saw that the claim had been started.

July 17, 2013

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They have told me such things as:

·         “We are fighting a losing battle trying to use our personal monies to keep the business afloat hoping things would turn around.”

·          “The Sears business has never generated enough income for me to make a living. I feel Sears has profited while I have tried to “stick it out” in hope of better days ahead, but instead I have gone further into debt with less and less support from Sears.”

·         “Not only have we suffered financially, but our family has suffered as well. With the amount of hours we have had to put in to just make ends meet, it has been hard to maintain a healthy family life. I understand that when you get into business that you have to expect to put in lots of hours and that’s fine, but I expect to be fairly compensated for the hours I am putting in.”

How long will you sit and watch people lose everything to support your bottom line?  Do you really believe this is “just business”? 

Although you ignored our initial requests to talk before involving the courts, we would like to offer you this opportunity to sit down with us to explore solutions to these problems.  Although your public statement is that Sears will vigorously defend this lawsuit, we both know that this is hardly an option for the long-term.  Many dealers are hanging on in the hopes that positive change will come about.  Every month, dealers are exiting the system with crushing debt.  Attempts to find new dealers willing to take their place will be hampered by the publicity surrounding the lawsuit and the forthcoming efforts to bring our situation to the attention of the public.  It is not realistic to expect that the Hometown dealers will sit back quietly while they are being starved of funds.

The lawsuit is a response to a dire problem.  How Sears Canada chooses to handle that problem is up to you.  We ask that you contact us or our legal counsel by no later than 5 PM on July 24 if you wish to meet. 

Sincerely,

1291079 ONTARIO LIMITED

Jim Kay, President

JK/ldk

cc:        David Sterns, Sotos LLP