Last year Sears quietly announced that the Craftsman, DieHard, and Kenmore brands are for sale. Last week on January 5th Stanley Black and Decker (a very large tool company formed over the past 15 years of various mergers, acquisitions and spin-offs) has acquired the Craftsman brand. Stanley B&D, or Stanley for short, will pay 525 million this year plus additional payments over the next 15 years totaling 900 million. This sounds like a bargain not considering possible inflation that may be coming the next 4 years. But after sleeping on the news I’ve realized that the figurative “wrench” in the deal may make this deal not as good as it looks: Stanley only purchased the brand, not the distribution or existing network of manufacturing relationships. Stanley is not even getting any of the employees from the Sears Craftsman department. Stanley has to start from scratch with the brand name. Actually without seeing the fine print of the deal, they may not even have the rights to use the current logos!!!
The Craftsman brand is such a good brand it is hard to explain to someone who does not care about tools its relevance. Essentially everyone who has ever worked on a car, home, bicycle, or something mechanical has had a Craftsman tool in their hand at one point or another. It is recognized beyond the occasional tool user as well, something that other great tool companies such as Wright or S-K do not have. Mention “Craftsman” to a young couple who just bought their first house and they will say “we’re going to need those tools as we improve our home”. When someone thinks “Craftsman”, usually pictures of a red sign with white letters comes to mind, or shiny diamond plated steel. I personally have memories of my dad changing spark plugs and my grandpa fixing the kitchen sink. This is recognition the brand has earned over time and apparently can be bought for 900 million dollars.
What does Sears get out of the deal?
The deal allows Sears to sell their own existing Craftsman tools in their stores for the next 15 years without paying royalties to Stanley, the new owner of the brand. Sears will continue to get their tools they sell through their current suppliers during this period. After 15 years, Sears will have to pay 3% royalty to Stanley for using the Craftsman brand on what ever products they develop beyond 2032 with the brand. This is all moot though if you are like me and believe Sears will not exist as a physical retailer beyond the year 2020. If Sears is still around after year 2032, they will have to pay Stanley a 3% royalty for products they sell branded Craftsman. Of course they can always simply sell Stanley’s Craftsman tools like any other retailer and avoid this 3% royalty fee.
Sears and Craftsman 5+ years from now
Sears could take a deep look into its history for an idea how to make it through
Sears has a reputation for acquiring companies and brands. When they acquire brands like Craftsman, they have been quite successful, but when they acquire companies, they usually run them into the ground. One that stands out to me is the acquisition of the Western Auto chain. If you are not familiar, in the 70’s and 80’s Western Auto was a very popular store to not only get auto parts from but also TV’s and other electronics. As I was told up until the Sears acquisition, they were very competitive and in many small towns, the place to get your new TV or VCR. Once Sears purchased them, they were setup for failure, Sears did not want Western Auto stores to have better sales and products. Regardless, it’s gone but what Western Auto had in the 70’s and 80’s is want Sears needs now, small stores and product focus.
If I was Edward Lampert (CEO of Sears), I would be much more aggressive at closing existing stores and instead focus on the hardware size stores or smaller. I would drop most of the crap Sears sells today and focus on tools, appliances and things related to that. In a perfect world, Sears stores would be the size of a Radioshack or slightly bigger, offer some stables but primarily be a store front for picking up online orders. Sears can re-position itself as an online retailer with the ability to provide convenient pickup at store locations. I have a lot more ideas to expand on that but well, hire me as a consultant if you want to learn more! 🙂 One thing is obvious though, Someone other than Walmart needs to provide an online shopping experience tied to a store but provide it in a much more efficient way that online-to-store shopping can become mainstream. Amazon is about to test this in some markets, but I suspect this is where Sears could have an advantage with its existing experience in retail. Who ever does this will not have a big box store presence. Instead they would need many small stores providing the possibility for counter staff to learn the names of their customers in the communities they service. This brings us back to the importance of the relationship between the vendor and its customer, something I have witnessed we’ve lost over the last 30 years. I don’t want rotary phones to come back, but it would be nice to go into a store and actually be recognized for more than the plastic card in my wallet.
Prediction of what will happen with Sears and their versions of Craftsman Tools
Sears will eventually morph into an online only company, similar to what happened to stories like Linens and Things and CompUSA. If Sears makes this transition slowly and/or because of bankruptcy, they will loose the ability to do anything significant with the Craftsman brand. An online commerce store such as this will not have the profit margins let alone the staff to be able to continue the research and development to create new Craftsman products without the direct help of its vendors. I also highly doubt vendors such as Apex Tool Group will develop new tools to sell exclusively for 1 relaunched online commerce site.
As contracts wind down that Sears currently has with vendors creating Craftsman tools, Sears will replace those products with the ones that Stanley Craftsman makes, well assuming Stanley makes those particular products.
More than likely an online only Sears will not have the ability to handle warranty claims for the guaranteed for life tools. It is possible though that they offer a limited warranty like what GM or Chrysler did when they went bankrupt. If Sears survives without going bankrupt though we should all assume they will continue to honor the guaranteed forever warranty up until they no longer produce their own sourced tools.
Stanley Black and Decker’s immediate future with the Craftsman brand
Stanley will develop and sell tools under the Craftsman brand. Immediately after the deal is completed, presuming this summer of 2017, Craftsman tools sold at non Sears holdings such as Summit Racing and Ace Hardware will change to tools made by Stanley branded as Craftsman. Stanley will more than likely have a plan in only a few short months to have existing Stanley tools made where they are made currently to produce Craftsman branded variations. Stanley sockets are currently made over seas, one can assume those will be the same sockets re branded Craftsman. Stanley has to do this in order to ramp up supply quickly.
It is possible for Stanley to use existing US factories to produce Craftsman sockets and wrenches, but doing so may disrupt supplies for their other brands such as Proto. I personally would love to see Stanley re-launch a Craftsman hand tool line that is strictly made in the USA, they could charge a premium and make them overly chromed (like current Proto tools). This could make a lot of sense as it would allow them to leave the Stanley hand tools as a budget line.
What we will not see for up to 5 years is the complete line of Craftsman products that Sears sells. We will not see lawn tractors or snow throwers this fall from Stanley and if we do, it will not be at any significant volume.
We should also expect in the 2017 Holiday season Craftsman memorabilia in all stores such as Target, Walmart, etc… This is low hanging fruit for Stanley to quickly make a buck on the brand.
Stanley Black and Decker’s long term goal with the Craftsman brand
Stanley can do a lot with the “brand”, including re-launching every single Craftsman product that Sears sells and/or launching brand new Craftsman branded products.
It is possible and likely that they split the brand into divisions for future spinoffs (This is the way of a stock market held company after all). I see the tools division sticking around, while a home/lawn and garden division being built up over 5 years then spinned off in order to make the board and CEO look good and shareholders lots of money.
I also foresee Stanley Craftsman licensing out the brand in order to quickly expand the product line and capitalize on the brand as quickly as possible. Similar to how you now see SnapOn stuff (officially licensed products) that has nothing to do with the SnapOn tools at places like Menards. I could see a deal with someone like Samsung to make a Craftsman tablet perfect for use in the garage or just for guys who want a diamond steel plated tablet just because it is cool. A pretty Craftsman logo on the top would easily add a few bucks to a sale.
Stanley could make a lot of money from the brand. Time will tell.
Made in USA Stanley Craftsman, I doubt it but it is possible
Stanley has associated the idea that a new 35 million dollar factory will produce US made products and along with the acquisition of the Craftsman brand. This doesn’t mean all new Stanley made Craftsman tools will be made in this factory or all will be made in the USA for that matter. I personally doubt the factory is only for Craftsman tools. I don’t think you can even build a nice size building for 35 million, let alone the tooling to make tools in it. Either it will be a very modest sized factory or it will be very large and serve as a facility that does not require expensive tooling.
Was this a super good deal for Stanley, no!
Stanley has a lot of work to do. They now have to start vendor relationships where they never have created products before. Again, Stanley bought the brand, not the relationships or the employee staff that has these relationships. This will take time and may result in quality as well as random supply issues for various products. This will be all of the products which Stanley today does not produce themselves, such as lawn mowers, snow throwers and other lawn and garden products. Attention to detail and picking the right vendors to partner with will be key at every step to replicate what Sears has built up since 1927. I think it will take at least a year to list all of the products and come up with a plan to re-create them let alone start new contracts for producing them.
Just to clarify, when I refer to “Craftsman products”, I do not just mean hand tools, but everything from the lunch boxes to the riding lawn mowers. You cannot just re-create all these products over night.
One other major problem is that Sears can further damage the brand while Stanley tries to rebuild it. For example, Sears could marketing the same titled 200 piece mechanics tool set as the Stanley version. If the Stanley version is $100 and the Craftsman version is $50, that’s a big problem. Stanley has 2 solutions, either they follow the same formula Sears has now for supplying the Craftsman tools over seas, or Stanley has to distinctively market their new Craftsman hand tools in a different way to stand out from the Sears imported versions. Again, I would put my money on stamping “Made in USA” on Stanley’s versions just so they stand out.
One other scenario is that Stanley could produce 2 lines of Craftsman hand tools, one that aligns with the current pricing and products sold at Sears and a new line like the old “Craftsman Professional” line that is branded Made in USA.
Stanley Black and Decker owning Craftsman Conclusions
- Craftsman products sold at Sears/Kmart will remain as we know them today so as long as Sears is still in business. More than likely how it is now will not change, the tools that switched to made in China (e.g. sockets, ratchets, wrenches, etc…) will remain, and the classic screwdrivers and pliers made by exising US suppliers will remain until those contracts expire. At this point Sears made all the cost cutting they could do to save money, any other changes now to widen a profit margin to help Sears itself is not worth the time.
- Craftsman products sold in other outlets into the future (such as Amazon.com, WalMart, etc…) will be developed by Stanley. They will most likely be re-tooled products that currently have the yellow Stanley brand on them, most of which are made in China and Taiwan with some specific tools like tape measures made in USA with global stuff. It is possible, and I am hopeful, that Stanley instead uses their existing US based tool factories to launch Craftsman Made in USA tools.
- It is unclear if Stanley Black and Decker will honor Craftsman hand tool guaranteed forever warranty. Technically the products from Stanley will be “new” products so it can be assumed that if you want your Craftsman ratchet warranted you will need to go to a Sears store to get a Sears made Craftsman replacement.
- The deal does not indicate that Sears is giving Stanley Black and Decker access to their existing suppliers or that the employees of the Craftsman division will transfer to Stanley. One can assume that a “Brand with Suppliers” and or “Brand with Suppliers and Staff” deal would have been much higher than 900 million.
- Stanley will capitalize on the Craftsman brand immediately using their current resources to produce Craftsman products. Any product under Stanley B&D and its family of brands could be re-branded Craftsman in short order.
- Stanley will take time to setup contracts with new suppliers for products they do not already produce such as lawn mowers and snow throwers. Do not be surprised if Stanley does not offer nearly as many products branded “Craftsman” as Sears does today.
Questions about the Stanley Black and Decker Craftsman deal
Will we see Sears Craftsman tools in stores soon?
No! The deal ends the ability for Sears to distribute Craftsman branded tools outside of their stores. Sear’s developed Craftsman tools will only be available at Sears stores. Stanley will not be distributing the current Craftsman products sold as Sears to other retailers. If there is a specific Craftsman tool sold today at Sears, you will have to go to Sears to buy it.
Will Stanley Black and Decker honor the Craftsman guaranteed forever warranty of tools sold by Sears?
I doubt it. Based on the fact that they did not mention that in the initial announcement one can guess that the answer will be no. The fact that Stanley will develop new tools that they sell with the Craftsman brand implies that they will more than likely have new part numbers purposely so it is easy to identify Stanley’s versions to Sear’s versions.
Latest news (see February 2, 2017 update below) Stanley will continue to warranty existing Craftsman tools, so that is great news for us that have made the investment with that in mind.
Will Stanley Craftsman tools be guaranteed forever like Sear’s Craftsman?
I think so. Between the marketing advantage that gives along with the competition having a similar warranties one can only expect this to be the case. Wright Tool, H.J. Williams, Stanley, and S-K have such warranties.
Will Stanley Craftsman improve on existing C3 Power Tools?
I doubt it and here is why. Stanley bought the brand Craftsman. I did not see where they also acquired the R&D or the contracts/relationships with existing vendors. Stanley already has a few other brands such as Black and Decker and Dewalt that makes power tools. If they do anything, they may make a new line like C4 or something, but they will be different and most likely use yet another new battery format that is exclusive to that new model line.
Will Stanley Craftsman Sell lawn tractors, mowers and snow throwers?
I would hope so, but Stanley’s current portfolio of products does not include these large items so they cannot simply have a couple board meetings and make things happen. It will take time for Stanley to work out contract deals with either the same or new vendors who currently make these products for Sears Craftsman. Plus one can assume that most vendors will not be eager to supply Stanley with products that will then compete with their own in non Sears stores. I predict it will take up to 5 years before Stanley can fill most of the product line that Sears currently provides. Time will prove me wrong or right. But, read my thoughts on this above, this is an opportunity for Stanley to build up something then spin off that division to make their shareholders happy. Also more important to note the more they rely on other vendors to provide Craftsman products the higher the risk is that they could damage the brand in the process.
What is your opinion?
I am a strong believer of buying American made tools when possible. There are still some Craftsman hand tools sold at Sears that are made in the USA such as some of the mechanic’s crow bars, pliers and classic handled screwdrivers. Otherwise I have been filling the missing wrenches and sockets with other brands such as Wright, Proto, S-K, Pratt-Read, Klein, and MasterForce (Menards house brand). Since I purchased a Wright 3/8″ drive double paw ratchet I have been a big fan of Wright Tool’s line of sockets, ratchets and wrenches. I’ve also been buying new old stock (NOS) made in USA tools such as Craftsman, Kobalt, KD, Allen and NAPA on eBay over the past few years.
I am not concerned about the Craftsman guaranteed forever warranty. I’ve only used the warranty a couple times on screw drivers from my younger years. I now know better not to use a screw driver as a prybar, or a ratchet to break loose a torqued down bolt. pry and breaker bars exist for a reason.
I am sad to have watched the change of Craftsman hand tools going from a good middle of the road quality tool brand to a brand with some good tools and others comparable to Harbor Freight tools. Many folks who don’t really dig deep into the importance of quality do not think there is a real difference but there is. My best example is the time I used a 3/8″ to 1/4″ drive adapter from Harbor Freight. I was tightening a small fastener to a trailer I was assembling and the tip snapped right off while tightening the 2nd fastener. Trust me when I say this, but it should not have happened, the bolts should have sheared first if I was truly over torquing. I went to Sears and got a Craftsman 3/8 to 1/4 adapter, went back home and finished installing the remaining 30+ fasteners without any issues. What initially cost $1 at one store ended up costing me an hour running back to the store to spend $5 to finish the job. Lesson learned, if you value your time do not buy crap.
It is true you can produce quality tools anywhere in the World, and I am sure there are quality tools coming from Taiwan and China. If you look though the vendors who sell these quality imported tools charge the same amount as the Made in USA competitors, and they are not innovating the space like the USA made companies are. So why support a company that doesn’t have plans to improve their products? If you are not aware, Snap-on, Wright and S-K now produce combination wrenches with extra gripping ability on the open ends. S-K also includes a new ratcheting end to their combination wrenches that has an extremely small amount of ratcheting movement (arch to each click). Watch the videos on Flank Drive plus, WrightGrip and X-frame wrenches, these wrenches will blow your mind that they can shear off the head of a grade 8 bolt without slipping.
Hand tools are ever changing to meet the needs of our world. As newer cars require less repair, the next big innovations coming like the Tesla 3 electric car will require even less mechanical maintenance, while recreational and hobby use will put new demands on the tool industry to provide quality tools. Even though it is sad to watch the industry change, I believe it will also evolve which is a good thing. If the new line of Stanley Craftsman hand tools are made in the USA then awesome, they may just eventually end up in my tool boxes. Either way, I still have other tool brands such as Wright Tools that will be making their way into my tool box in the near future.
UPDATE on February 2, 2017:
According to B2BeCommerceWorld, Stanley has a plan to sell Craftsman products online, more than likely they are referring to Amazon.com. This makes a lot of sense. It also sounds like Stanley will continue to honor existing lifetime warranty on the tools, which is also great news and a smart move on their part! Hopefully they will bring hand tool production for Craftsman tools back in the USA, but there lies the challenge, there will be owners of newly purchased Craftsman tools that are made in China that now Stanley will have to replace with USA made versions. Perhaps they can create a policy that if you bring in a traditional Craftsman tool made in USA you get a made in USA craftsman replacement, but if you bring a recent Chinese made Craftsman tool they exchange it with a Chinese made Stanley tool. I think that would be fair. What I hope not to see is Stanley release Craftsman sockets that are also not made in the USA, that will continue to tarnish the Craftsman brand instead of inject new life into it.