Sears Is the Latest Retailer to Test Mini Shop-in-Shops

Sears Holdings is hoping that two is better than one when it comes to reviving its stores. Over the weekend, it opened a miniature Kmart inside a larger Sears location in Brooklyn, New York, and also plans to test the reverse, with Sears appliance shops coming to full-size Kmarts.

The shop-in-shop concept is one of its newest strategies aimed at luring in customers as its fends off dimming brick-and-mortar sales sales. In the past year, it has shuttered nearly 400 unprofitable stores, and announced another 72 closures during its last earnings presentation, most of which are already underway.

Brooklyn’s new mini Kmart is just 10,000 square feet and focuses on convenience items like groceries, health and beauty products, cleaning supplies, and pet gear, according to CNBC. Certain full-size Kmart locations, meanwhile, will soon see higher-end appliances than the budget retailer typically carries, as the company brings Sears inventory into the stores.

Rolling out smaller-format stores has become a popular tactic among big-box retailers who want to reach new customers, make up for lost foot traffic, and move away from costly excess real estate. Target, Kohl’s, Walmart, and Macy’s have all placed bets on new shops with shrunken footprints, even as they shutter some of their larger locations. (Macy’s, like Sears, is making use of its real estate by opening off-price Backstage shops within existing stores.)

While turning Sears and Kmart locations into one-stop shops à la CVS or Walmart sounds like a smart idea at a time when customers price convenience, the company is facing an uphill battle: with its heavy debt load and declining sales, it hasn’t turned a profit since 2010. For the first quarter of the year, it reported a $424 million loss, with sales at $2.9 billion compared with $4.2 billion during the previous year. It’s also considering a sale of certain assets to CEO Eddie Lampert’s hedge fund, ESL Investments Inc.

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