'Brutal' Promos, Shortages Hit Retail
Less-than-stellar sales performances prompt fears of escalated price wars
By Alan Wolf -- TWICE, 12/19/2005
NEW YORK — The end of the holiday selling period may bring an even sharper round of CE promotions than the deep discounts that marked the season's start over Thanksgiving, retailers warn.
At the same time, dealers are also struggling to secure adequate supplies of plasma display panels, which remain constrained amid keen demand. Shortages are especially pronounced for larger 50W-inch and 60W-inch screen sizes in general, and for Panasonic models in particular, retailers say.
Prompting fears of an escalated price war was the less-than-stellar sales performance of retail chains in November — and their projections for only modest increases this month. Wal-Mart, for one, said December same-store sales will likely rise just 2 percent to 4 percent this year, compared with last year's 3 percent gain. The world's largest retailer, which took an early and aggressive lead in holiday promotions and generally sets the tone for much of the marketplace, has indicated that it may meet or exceed the discounting depths it plumbed on Black Friday as Christmas approaches.
Stuart Rose, chairman/CEO of Rex Stores, said Wal-Mart won't be alone. “It was brutal over Thanksgiving. I mean, brutal,” he told investors during a conference call. “But whoever gives away or loses the most money on any given product seems to drive the customer in. I think people in December realize that they have to get the business, and I expect that to continue.”
Rex, he said, is no exception. “We're not going to sit back and get beat by anyone,” he promised. “We will not back down. We will not be the leader in the price drop, but if prices get down to whatever they have to be, we'll be right in there with them. We will do everything we can to prevent people from taking our market share.”
Rose is projecting comp-store sales gains in the mid-single digits for the balance of the season, fueled by sales of flat-panel TVs and, in hurricane-affected markets, replacement purchases of major appliances.
Conn's, another major regional player, takes a different approach to holiday sales. “The competition is ferocious out there, as it always is this time of year,” said chairman/CEO Tom Frank in a conference call. “But our strategy has always been profitable growth. There were ridiculous deals out there, and it puts pressure on us, but we don't play the games, and we were still able to grow our volume profitably.”
Case in point: computers. Unlike the $200-and-under desktops offered by national chains on Black Friday, the average selling price of PCs at Conn's was around $1,000 over Thanksgiving weekend. “We had a legitimate offer at a realistic price with good promotional [credit] activity surrounding it, and we made money doing it,” Frank said.
All told, Conn's comps grew 12.9 percent over Black Friday weekend, and the company is projecting a 12 percent to 15 percent increase for the current quarter — propelled, like Rex, by sales of flat-panel TVs and replacement appliances.
Ironically, both Conn's and Rex believe they benefited from competitors' limited-supply promotions, which left many shoppers empty handed and angry after braving long lines. “Wal-Mart has upset tremendous numbers of customers and is driving people into our stores,” Rose said.
Holiday selling also remains solid for Tweeter Home Entertainment Group. “So far business has been good,” CEO Joe McGuire told investors. “Comps are still up, our marketing continues to bring more traffic, and our gross margins, at least quarter-to-date, are stable.”
More problematic is the availability of plasma TVs. “Demand for 50-inch panels is very, very strong,” observed Philo Pappas, Tweeter's senior VP/merchandising. “We're also starting to see greater demand for 60-inch panels.” The result, said Tweeter's interim chief financial officer Paul Burmeister, is that “there are some shortages in the larger panel sizes out there, like the 50- and 60-inch.” Tweeter's own plasma inventories are good “right now,” he said, and the company is “pretty satisfied” with its plasma stockpiles overall.
Similarly, Conn's “could experience some spot shortages” in plasma, although the company will likely have “sufficient quantities on hand to meet the increased demand,” Frank said.
But Rex's Rose said short supplies of plasmas cost him sales last month. “Our comp-store numbers would have been a lot better if had gotten the plasma supplies we could have sold,” he said.
Most vexing was Panasonic (whose former president, David Bearden, was named president of Rex in October). “They did not ship what we ordered,” Rose recounted. “It's a very, very hot line in plasma right now, and everyone was short on Panasonic. We scrambled around to replace it and did the best we could.”
Top 10 Product Searches On Yahoo! Shopping(Nov. 20-26)
| 1. Xbox 360 |
| 2. iPod |
| 3. Sony PSP |
| 4. portable DVD player |
| 5. GPS |
| 6. iPod nano |
| 7. Xbox |
| 8. iPod mini |
| 9. digital cameras |
| 10. Nintendo DS |
| Source: Yahoo! © TWICE 2005 |
No related content found.
Featured Company
-
Brightpoint
BrightPoint is a global leader in mobile device lifecycle services. We provide a full suite of end-to-end supply chain and customization solutions to manufacturers, retailers and carriers in the mobile device industry. In a world that is increasingly connected with ever-evolving ..more
VIEW ALL GALLERIES