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NPD Cites Low Close Rates For Discount Channel

10/10/2007 12:22:00 PM Eastern

Port Washington, N.Y. — While consumers are increasingly shopping warehouse clubs and discount chains for consumer electronics, their tendency to make a purchase within those channels remains relatively low.

What’s more, those who do buy CE products there tend to limit their purchases to low-ticket items.

This came from The NPD Group, which queried 1,300 consumers nationwide last June about their CE shopping habits over the past 12 months. According to the resulting report, Clubs and Mass: Tech Consumers Change Channels, of the 34 percent of consumers who said they shopped at a discount store over the past 12 months, only 23 percent actually bought something. And of the 14 percent who shopped at a warehouse club, only 10 percent made a purchase.

The survey also indicated that most consumers are purchasing lower-ticket CE products at warehouse clubs and discount stores. According to the report, the highest instances of CE purchases at discount stores were for CE items selling for less than $200 (17 percent) and digital cameras selling for less than $400 (14 percent), while bigger-ticket products such as TVs and computers were purchased by less than 10 percent of respondents.

Consumers indicated their low-ticket limit was not reflective of brand assortment. According to the report, 58 percent of consumers surveyed agreed warehouse clubs offered trusted brands at a good price, and the number rose to 65 percent for discount stores. Only 25 percent of respondents were concerned the branded products being sold through these channels were inferior models or of lesser quality.

Why the low close rates? Stephen Baker, NPD’s industry analysis VP, believed the two biggest reasons are lack of service and a dearth of knowledgeable sales people. “Consumers have confidence in the products being sold, just not in the people selling them,” Baker said. “But buying through these channels is a trade-off between low prices and low levels of service.

“As products get more complicated and interconnected, getting good, reliable customer service is going to outweigh getting lower prices for some consumers,” he continued. “But for others, having the recognized and trusted brands found at clubs and discount stores are appealing as replacement products, second devices for the homes, and lower-priced alternatives to some of the products found at electronic specialty stores.”

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