Improving Your CE Sales Profitability

Author:
Publish date:

Why are consumer electronics accessories important for the typical retailer? Well, in many cases, despite being less than 15 percent of a retailer's total CE sales, CE accessories can account for over 50 percent of a retailer's CE profitability.

This is the result of the typical retailer being able to generate gross margin percentages between 50 percent and 70 percent on the sales of most consumer electronics accessories. Additionally, a typical retailer can see inventory turns on basic consumer electronics accessories products of between four and six times.

With the onset of dramatically declining margins on televisions, audio components, DVD players and VCRs, the high gross margin contribution of accessories should only become more important. Furthermore, in many cases, required accessories will have higher retail prices than the components they connect. A great example is retail prices of DVD players under $30 requiring RF modulators costing $20 to $24.

Yet, most retailers of consumer electronics products are not focused enough on the sales of consumer electronics accessories. They don't focus on simple steps that can guarantee more profitable sales. Our own research shows that on average,retailers across all retail channels walk 60 percent of potential accessory sales.

What can be done? Here are a number of strategies that can be implemented.

Improve Assortments and Inventory Management: Nothing can be more painful than walking a customer who needs an accessory product and losing a 70 percent gross margin sale. Although most retailers have dramatically improved stock levels and increased their focus on having more relevant assortments, there are still significant opportunities to ensure needed products are on the sales floor. There are a number of key tactics a retailer may use:

  • Cycle counting can help ensure that accessories are in stock and on the right peg hook. Accessory products have a tendency to be the products that will be misplaced on a planogram or lost in a stock room.
  • Assortments can be tailored to ensure that compatible accessory products and brands perform based upon market conditions, demographics and other factors on the selling floor. Achieve compatibility in terms of technology, brand and lifestyle. Data analysis tools are available to help make this happen.

Increasing Accessory Attachment Rates: In other words, ensuring that when a DVD player is sold, and an RF modulator is required, it is sold with the DVD player. With a focus on increasing the rate of attachment, retailers will see increased profits from the total sale of an item and ultimately of the entire CE assortment.

Increasing attachment rates is a simple strategy with a simple associated measure. Retailers can determine for every component product sold whether the required accessory or accessories were also sold. To make improvements, retailers can:

  • Ensure that they merchandise accessories with the associated components. Implement signage that informs customers about the necessity and value of associated accessories and provide incentives for selling associated accessories.
  • Create impulse sale opportunities. In this case, the strategy is to capture a sale by getting a customer to see value in an accessory product he had no predisposition to buy. These sales may be stimulated by reminders that accessories at home need replacement, or may result from displays that focus on new styles and colors that are of interest. To get these sales, retailers can merchandise accessories in places like cash wraps or end-caps where customers can be aggressively reminded. Create lifestyle or other displays that feature the characteristics of accessories.
  • Maximize upgrade sales opportunities. Many accessories exist to help improve the performance of the associated products. A good example of this practice is S-video cable sales. A retailer can use a number of tactics to help convince a customer that the step-up accessory will truly create an improvement in performance.

One approach is to create displays and point-of-purchase materials that illustrate the performance improvement and how it is achieved. Also, train and educate the staff on how the product improves performance so a customer can understand the value of buying an accessory. Providing instruction materials is another way to convey the value of accessory upgrades to shoppers.

With accessories creating so much potential economic value for retailers, it is a shame for so many retailers to walk so many customers who are interested in buying high margin accessories or need them to improve or extend the performance of their CE gear. Improved satisfaction for you and your customer can be the result of greater focus on accessory sales and attachments.

Featured

Related Articles