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Is the Potential Demise of Sears an Asset or Albatross for J.C. Penney?

For now, Sears and Kmart will remain operational through the Sears Holdings bankruptcy proceedings thanks to gaining approval to tap $300 million in debtor-in-possession financing, giving the chains an opportunity to remain open for the holidays—less the 142 locations that are already slated to close.

Depending on who you talk to, the Chapter 11 filing by Sears Holdings could be just the lifeline J.C. Penney needs. Others say rather than a gift, Sears’ potential demise could be just the thing to tip an already-teetering Penney’s into the abyss, too.

“Penney’s is on thin ice, and Penney’s of course doesn’t have any forward momentum of their own right now,” said Mark Cohen, former CEO of Sears Canada. And if the rival retailer had been banking on a boost, Cohen says it’s unlikely. “Most of Sears’ apparel and accessories business is gone. Penney’s and Kohl’s have been getting the benefit of that for years.”

There’s so little left on the Sears carcass that Brett Rose, founder and CEO of off-price wholesale distribution firm United National Consumer Suppliers, doubts there will be any real winners if the department store were to disappear altogether.

“I think it’s a non-issue. It’s not an operational demise. It’s really a nostalgic demise. They kind of went away years ago,” he said. Unlike the “seismic” shift that occurred after the Toys R Us implosion, Rose said, Sears will barely register. “[With Sears] whatever was left, they’ve been so rapidly declining since 2004, 2005 that I don’t think you’ll see a big bump in any particular retailer.”

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The one sector that could get a boost, according to Cohen, is appliances, which Sears used to dominate with a 40 percent market share.

While that’s an arena Penney’s rushed into over the last couple of years since former CEO Marvin Ellison left, many, including his former employer, have openly criticized the move.

Throughout, Ellison was very vocal about his intentions, as he explained to Forbes in January. “We’re going after Sears and we’re going after market share that we think is going to be available not only now but as they continue to contract,” he said.

Ellison’s rationale was that Sears was contracting, and 70 percent of Penney’s shoppers were homeowners. While Sears opened a couple of locations dedicated to appliances, Penney’s rolled out 600 appliance showrooms in its stores and introduced HVAC, bathroom remodels and window furnishing installation.

Though he admits the thinking made sense on a surface level, Cohen said there was little-to-no chance for Penney’s to capture that business in any meaningful way—and even if it did, the upside was too small. “People buy appliances very infrequently with about 8.25 years between purchases. So Penney’s was banking on footsteps that aren’t as robust as they would have thought,” he said.

Moreover, one major benefit of selling big ticket items is the service charges that come with the financing most shoppers use to make those purchases, Cohen added. Unfortunately, since Penney’s sold its credit card business, it couldn’t collect on those either.

With no savior in sight for Penney’s, William Wilson questions whether that retailer could be at the beginning of a larger slide. “Attention among distressed retail investors will doubtless focus on J.C. Penney amid its many reboots,” he said. “But more fundamentally, does the department store channel have the merchandising moxy to avoid going the same way as mid-tier retailers?”

No matter the tier, a vocal chorus has risen declaring the downfall of Sears was based on its failure to transition into an omnichannel retailer.

“In our view there are a multitude of factors that have contributed to Sears’ demise, but foremost among them is management’s failure to understand retail and evolve Sears in a way that would have given the chain a fair chance of survival,” Neil Saunders, managing director of Globaldata Retail said in a statement, adding that the “missteps” began in the 80s.

In fact, the prevailing thought pegs the turning point for the retail group to the rise of Walmart. The once mighty Sears was never able to pivot enough to compete.

It missed another crucial turning point with the emergence of the e-commerce era, never managing to get online in any substantial way.

“The bankruptcy of Sears only reinforces the importance of adapting fast to the change in consumer buying habits,” Gavin Bisdee, vice president of global marketing for retail software firm Zynstra, said in a statement. “Those that are adapting fast to omnichannel integration, including the use of stores as distribution and fulfillment centers as well as sales outlets, will be the clear winners.”

Wilson agrees, saying the latest retail collapses prove this to be true.

“Toys R Us and now Sears provide compelling evidence that the omnichannel retail model is not just a category killer, but a business slayer,” he said.