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The fourth annual TWICE Retail Roundtable was held here last month during CES. An edited transcript of the discussion follows.
TWICE: What lessons can we glean from the retail rout last Christmas?
Rick Souder (Circuit City): We saw strong business in entry-level and high-end product, but a vacuum in between. There was strength in whatever unbranded products and in those branded products that each of us uses. For us, premium brands and higher-end products within those brands did well in categories like flat panel TVs. But it was the mainstream stuff that was more of a challenge.
It is an acceleration of a trend we have seen before, where the middle gets smaller and smaller, and it seemed to accelerate much faster as we went through the holiday season.
Ray Brown (Sears): Customers voted that it was not a high ticket Christmas. Unfortunately, or fortunately depending on your perspective, they offset with a lot of 19-inch and 27-inch. There was a balance of sales shift within our business that was certainly unanticipated.
I think all of us agree that we will go broke trying to sell 19-inch and 27-inch TVs, and that plasma and flat panel LCD is a huge opportunity for retailers this year. We need to put in the minds of the consumer that this is a technology that they can afford, is future-proof and is no longer… out of reach of most retailers. We need to bring it down so the mass retailers like me can get into it. I think it is good for the industry. It shows people that maybe it is time for them to go look at a flat panel, whether in my store or one of yours.
Jeff Stone (Tweeter): I visited about 85 of my own stores and a bunch of other stores between November 2 and Christmas. It absolutely floored me. Five or six days before Christmas I was able to park in the 12th space from the front door at what should have been an incredibly busy mall.
On a macro level, I think the customer retreated a bit. Much of it is due to the general uncertainty of the world. People who typically come into our stores and spend a lot of money are not sure what the world is going to be like in the future, so they either bought down or saved their money. I am on the board of a public bank and in the refinancing market we have seen that people are refinancing their home, taking some equity out and putting the money into their savings account. Usually people refinance, take the money and go do something with it.
We all know that the consumer is what has kept the economy afloat for years now. They have been out shopping, going to restaurants, spending money, keeping the world going as we know it, and at some point I think people say, "I'm going to take a step back." Hopefully it will not be for a long time.
Frank Sadowski (Amazon.com): We recognized that there was a lot of commodity action in the marketplace. The only way to push toward profitability in this area was to be operationally intense and make sure that our inventory productivity and turns remained at historic highs for electronics, which Amazon.com has been able to achieve. In addition, we have had very careful management on the supply chain side. That is the boring part of the business but it became more important than ever before with the stresses to the marketplace this season.
Mike Linton (Best Buy): Many things worked well for us, but there were three big drivers. First, the big brand was strong, which is Best Buy. We put operating improvements into the stores, and we think we were pretty realistic about how the market would play out.
Second, clicks and mortar worked well. We saw a significant increase in our dot-com traffic. It basically tripled. The combination of clicks and mortar worked in favor of both channels, so that the store benefited from the site and vice versa. We're not seamless clicks-and-mortar, but we believe it worked very well for us.
And third, a lot of our marketing worked well.
As we look forward, I am cautiously optimistic but there is limited visibility right now. There is a shaky consumer out there in what is still a shaky economy.
Jerry Throgmartin (H.H. Gregg): Although it was a tough December, it was still the second best we ever had on both the top and bottom line. I am hoping that it gets better. January looks better compared to last January so far and certainly better than December.
Last year we went into Thanksgiving with the economy, the threat of war, Wall Street scandals and a short calendar. I have never seen a December with as many things stacked against us. I have also never seen a December where it did not happen. I have seen tough starts, but they have always pulled out at the end. This time, I don't think the consumer took Aunt Millie off the shopping list. She just got a $50 item instead of a $100 item. I shopped for the same number of people, they just did not get as much, so some of the tickets we wrote were smaller.
We are hoping for a better year this year.
Tom Edwards (NPD Group): People were buying [promotional] product but they were stepping up as well. For example, they would go into Wal-Mart to buy a DVD player. One of the best sellers was not the low advertised price, however, but the step-up with all the displays and bells and whistles on it that was $10 higher. That is where the potential for the manufacturers and retailers exists today.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.