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Stores Curtailing One-Year Promos

Consumer electronics retailers appear to be backing away from costly 12-month credit promotions in favor of more targeted six-month consumer offers.

“We have noticed an increase in the use of six-month promotions as retailers attempt to shift consumer expectations,” observed Bill Johnson, a senior VP at Associates Commerce Solutions in Deerfield, Ill. “These efforts are driven by an increased awareness that long-term promotions are not driving as much incremental business as they once were.”

“In effect,” he said, “longer promotions shift sales forward at greater expense for businesses.”

Jim Crary, a senior VP at Household Retail Services USA, headquartered in Prospect Heights, Ill., concurred.

“Terms are becoming more rational, more sane,” he said. “The extended terms were so expensive that margins were offset by the longer promotions. Now, you see them targeted at specific products – either those with higher margins or items they want to move. They’re also being done over limited periods, over a weekend, perhaps, rather than day in, day out. It’s selective financing.”

But isn’t the decline in 12-month promotions bad for finance companies? Yes and no, said ACS’s Johnson. “The impact on private-label finance companies could culminate in a decline of promotional volume. However, this decline should not affect overall performance.

“Moreover, greater emphasis will be place on the core values of private-label programs, including communication, relationship building and targeted marketing,” he said.

Still, others believe that the CE retailscape hasn’t seen the last of the year-long promotions.

While Dick Klesse, executive VP of sales and marketing for HRSUSA, agrees that the 12-month plans are on the wane, he noted that the industry “is starting to see some of them come back a little, and we’ll probably see more of that for the fourth quarter.”