NEW YORK –
Despite a record surge in Black Friday transactions, many CE retailers are reporting relatively flat comp sales for the holiday season due to price compression and steep promotions.
Moreover, the flat comps came at the cost of ravaged bottom lines, as price-sensitive customers, armed with the latest online and mobile shopping tools, force dealers to walk a tightrope between sales and profits.
“It takes an extraordinary value proposition to get customers to respond,” observed Doug Schatz, CE merchandising VP for the 3,000-dealer Nationwide Marketing Group. The organization provided the tools to slug it out on Black Friday and many members were effectively aggressive, he said. “But whether the traffic and sales gains are worth the gross margin issues is a decision that rests with the individual dealers.”
The mix of go-to-market strategies, compounded by TV price compression, has, like the industry overall, netted out to flat unit sales and declining dollar volume for Nationwide’s seasonal CE business, Schatz said.
Like some of Nationwide’s dealers, Conn’s, the regional CE, appliance and furniture chain, took a pass on the Black Friday promotional blitz, which admittedly cost it business. Newly named president/ CEO Theodore Wright said November comps would have risen 22 percent, instead of 10.5 percent, had the company got down and dirty in TV.
“We decided not to sell many thousands of TVs at negative margins,” he told analysts earlier this month. As a result, “Black Friday was a much more profitable day for Conn’s this year than last,” and TV volume resumed for the remainder of the holiday weekend.
Home Entertainment Source (HES), the A/V specialty wing of the BrandSource buying group, pursued a three-point holiday plan that included limited pre-Black Friday promotions to rev up sales, vendorsponsored deals to drive traffic during Thanksgiving weekend, and buying and holding select Black Friday promotional pieces to sell at a profit in December.
The strategy, said executive VP Jim Ristow, has led to nearly flat top-line revenue for the holidays and the biggest unit-volume Black Friday ever for the group’s Expert Warehouse distribution program, which managed to fulfill nearly 90 percent of members’ doorbuster needs despite industrywide spot shortages.
Both Ristow and Schatz said audio sales, including headphones, better HTiB, components, and attached accessories and services, helped offset the less profitable business.
Best Buy, which was criticized last year for choosing margin over market share, reversed course and aggressively price promoted throughout Black November – and is promising to turn up the heat still higher for the balance of the season.
“Retail has been very promotional and consumers have been value-conscious,” Dunn told analysts during an earnings call last week. “We purposely plan to take a leadership stance in the marketplace and step up our promotional efforts to do so.”
The strategy, which famously included a 42-inch 1080p Sharp LCD TV for $199 on Black Friday, generated record sales, traffic, transactions and lines out- side stores, Dunn noted. Nonetheless, comp sales for Best Buy’s third quarter, which ran through Cyber Monday, edged up only 0.9 percent.
On the product front, Dunn cited tablets, e-readers and smartphones among the company’s top holiday sellers. “While it’s still early in the holiday season, we’re pleased with our start. We’re excited about momentum we’ve seen in hot products like mobile phones, tablets and e-readers for the rest of the holiday season.”
Tablets in particular “have been very popular so far this holiday with continued triple digit growth,” he said, driven by continued strength in iPad and the increasing popularity of Android-based models.
E-readers, he added, “are seeing similar trends as tablets, and are proving to be very popular gift items this season” as the introductions of Kindle Fire and the latest Nook helped Best Buy drive triple-digit category growth.