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Holiday Promos Disappointing Many Retailers


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

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