Kmart-Sears: A Surprising Strategy?

I think this is surprising to pretty much everybody. I assumed, like most people, that Lampert had no intention of actually trying to revive Sears and Kmart as retailers.

Changes are on the way for Kmart and Sears stores following the merger of their parent companies, but widespread store closings won't be part of them.

So declared Edward Lampert, architect of the $12.3 billion merger that became reality Thursday and gave birth to Sears Holdings Corp., which he now chairs.

Minutes after a rancorous shareholders' meeting where Sears, Roebuck and Co. retirees denounced the 119-year-old retailer's sale to Kmart Holding Corp., Lampert stated his intent to reinvigorate the two faded retail icons and "transform them into a great company."

I am not a big fan of the retailing sector because there is intense competition. To be successful, Kmart and Sears need to find (or establish) a niche and fill it. I don't see them beating WalMart at low prices. I don't think they can beat Target at cheap chic, and they are too big to mess with a small retailing niche. Where will they end up? What competitive advantage do they have? I don't see it. I'm doubtful they will survive, but then again Lampert seems to be a smart guy. We'll see what happens.