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Promos Mark Early Holiday Sales

Bolstered by tax cuts, lower energy prices and unseasonably warm weather, consumers left their Thanksgiving cocoons in droves last month to tackle their holiday shopping chores.

And while consumer electronics once again figured among the top post-turkey picks for December gift giving, the category was marked by steep Black Friday discounts and other holiday sales promotions — perhaps setting the tone for the entire 32-day shopping season.

As Brad Anderson, vice chairman, president and chief operating officer of Best Buy, observed, “Pricing is very aggressive, although cutting-edge technology is less price sensitive.”

Indeed, while retailers quickly ran through their allotments of the hot, new and fully priced Microsoft Xbox and Nintendo GameCube gaming consoles, existing technologies took it on the chin as promotional loss leaders. DVD players in particular were vigorously footballed, with Kmart offering Apex’s opening price point AD1500 for $69.98 as a Thanksgiving Day special, and Blockbuster literally giving away Philips’ DVD619AT with the purchase of a 52-week DVD rental card for $199.

Underscoring the promotional nature of Black Friday’s sales surge was data from TeleCheck Services. According to the check authorization company, same-store sales rose 2.4 percent on the day after Thanksgiving, compared to Black Friday 2000. But the average check amount written on Nov. 23 — $73.64 — was 4.6 percent less than the $77.18 written the year prior.

Observed TeleCheck senior economic adviser Dr. William Ford, “While the day after Thanksgiving is traditionally not the biggest shopping day of the year, the one-day sales data provide us with just a glimpse of what we might expect for the rest of the shopping season.”

Similarly, discount leviathan Wal-Mart said Nov. 23 represented its single biggest day ever in sales volume, with registers ringing up over $1.25 billion in purchases. According to executive VP/chief financial officer Tom Schoewe, electronics products, along with toys and small appliances, were key drivers that day — as was Wal-Mart’s annual five-hour “Holiday Blitz” sales event.

Special day-after-Thanksgiving offers also drew crowds at Best Buy. According to company spokeswoman Laurie Bauer, shoppers began lining up as early as 3:30 a.m. in some areas for a five-hour sale on CDs ($9.99), DVD movies ($14.99), a $399 eMachine PC (after rebates) and a $69 DVD player. Other Best Buy locations reported up to a thousand customers in line by the time the doors opened at 7 a.m., she said.

And despite an ultimate dip in weekend sales, Sears lured Black Friday bargain hunters with one-year, zero-finance offers on camcorders, majaps and TVs priced over $299, $399 and $499, respectively.

The news comes as no surprise to Michael Niemira, VP/senior economist for the Bank of Tokyo-Mitsubishi. “The holiday season won’t be easy for any retailer, but discounters will have the edge,” he said. “Consumers have shifted to more value-oriented retailers, and are downscaling their purchases to opening price point products versus higher-end goods.”

Niemira said the slowdown in retail sales started about a year ago, and became “more severe” following Sept. 11.

Retailers won’t be getting any relief from Washington either. A proposed 10-day nationwide sales tax moratorium got lost in the last minute congressional shuffle of appropriations bills and airport security measures amid anthrax lockdowns on Capital Hill. A spokesman for the National Retail Federation, a chief proponent of the legislation, said it is resetting its sights on passage of the tax reprieve measure in time for Presidents’ Day in February.

On the plus side, consumers — or at least those who are still employed — are better positioned to splurge this holiday season than last. According to Niemira, the combination of tax cuts and rebates, lower interest rates and energy prices, and the decrease in travel has put more discretionary dollars in their pockets.

And that extra scratch, says the International Mass Retail Association (IMRA), is being spent in large measure on CE. According to the group’s annual Holiday Shopping Survey, approximately 22 percent of Americans are planning to purchase an electronics product this season, trailing only toys (27 percent) and apparel (56 percent). What’s more, consumers said they are planning to spend an average of $863 on presents, or 4.4 percent over last year’s planned spending.

CE was also the big winner at the nation’s shopping malls. Despite a 1.5 percent decline in total mall sales over the Thanksgiving weekend, the “music, video and home entertainment” category led all other product sectors with a 9.8 percent hike in sales, according to the International Council of Shopping Centers (ICSC).

Despite the promotional frenzy, some upmarket retailers are reaping the benefits of consumers’ deeper pockets. At Tweeter Home Entertainment Group, Thanksgiving weekend sales “exceeded expectations,” said merchandising VP Bernie Sapienza. “The climate felt surprisingly good.”

So good, in fact, that the specialty A/V chain is scrambling to secure additional TV and DVD inventory. Top sellers at Tweeter included DVD players priced between $149 and $249, and TVs within the $5,000 to $15,000 range. “They showed amazing strength,” Sapienza said, “and there’s nowhere near enough supply. The 40-inch XBR is selling to beat the band.”

Similarly, “better appliances continue to sell unabated, and digital projection TVs are doing well” for member dealers of the MARTA Cooperative buying group, reported executive director Warren Mann. Many of his dealers enjoyed weekend sales spurts of between 10 percent to as much as 50 percent year-over-year, he said, without the aid of “midnight madness sales and $39.99 DVD players.”

Online sales also surged over the post-Thanksgiving Day period, with Yahoo, for one, reporting a 75 percent hike in order activity on its Yahoo shopping portal over the same three days last year. The site’s three most popular categories: video game consoles, digital cameras and computers (see chart, p. 20).

Nevertheless, most retailers will have to work harder for the money this holiday season. “It’s going to be one of those Christmases that retailers dread,” said Doug McMillon, senior VP/general merchandise manager for Wal-Mart. “It will be a little late with the extra day, and you won’t know what you’ve got until Dec. 26. It will probably be a good season, but not great.”

Joe Ettore, chairman/CEO of Ames Department Stores, agreed. “No doubt it’s going to be a tough season,” he said, “although ultimately I think Christmas will be better than everyone expected. Consumers may shop less, and they may look for more bargains, but they will shop.”

So far, Ettore reported, DVD players are “selling very well” and phone cards, promoted as stocking stuffers, have become a “huge, huge business” at the regional discount chain.

As for Best Buy, vice chairman Anderson is “cautiously optimistic for the holidays and substantially optimistic about the long term” thanks to the cycle of digital innovation. “Products increasingly are more interesting and do more for consumers,” he said, noting that digital devices will have grown as a percentage of Best Buy’s holiday sales from 10 percent in 1999 to a projected 18 or 19 percent this year.