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Random Thoughts (Blog)

Not So Black Friday: Aftermath Action Report

Posted on December 17, 2010 at 8:00 AM

I was reading through the latest issue of TWICE -- This Week In Consumer Electronics -- magazine earlier today. I make it a habit of leaving all of the latest issues of TWICE and Custom Retailer and CE Pro and countless other industry pubs that literally seem to procreate in our mailbox on the floor in a rapidly pile around my desk. This pile starts neat and stacked and arranged by arrival date, but it inevitably gets knocked askew at some point, causing a disarray of books that swirl and slide around my feet until I’m ultimately forced to accept, embrace and then read them. Rather than a compulsion to stay informed and up to date on the industry, it is actually more out of the desire to be able to continue to freely wheel about the office in my rolly chair. When the pile gets to the point that I lose mobility in a given direction, I’m forced to read; keeping abreast of the industry is really a side benefit to my slovenly ways. It’s my system though, and it seems to work. Much like placing your secret “fat stash” of candies and junk foods on top of a mountain, forcing you to exercise your way to the sweet, greasy goodness.


Also, I must say, they take the TW in the title right bloody seriously. And when they say “This Week” they abso-frickin’-lutely well mean THIS week. Because this blasted thing seems to arrive like every 5 days. As punishing as the editorial calendar must be, it is even harder on me, the reader, to try and keep up with their Gatling gun publication cycle!

 

So, I’m reading TWICE Volume 25, No. 24 which seems to be almost entirely devoted to analyzing the minutiae of Black Friday post-sale follow-ups. What were the big deals, how was the traffic, the annual old-lady trample meter, how many money fights were there in the middle of Best Buy, you know, stuff like that. And the opening Viewpoint column titled “Black Friday Aftermath” by the every-man-named, Steve Smith had a concluding quote that I thought was quite profound. (He was actually quoting someone else, who was in turn probably also quoting someone else, which hopefully won’t water down the profoundness now that you are reading this quote like fifth hand. Let’s just close our eyes and pretend that Steve was interviewing me and I came up with the quote all on my ownsome. Yes. Let’s do that, shall we?!) So, I says to Steve, I says, “Steve, you can’t make a meal on a bowl of volume.”

 

We then we clink our glasses of Woodford Reserve, have a hearty laugh and contemplate my stunning brilliance and laser-beam insight into our industry.

What that quote means is that stores selling millions of units of TVs and Blu-ray players and $1.96 DVDs and whatever else at or below cost is not going to help them one iota to get into the Black, on Friday or any other day. Traditionally Black Friday deals were a few carefully chosen lost-leader items that brought shoppers into the stores. They would come rushing in, all in a wild, blind, spending fever frenzy for that TV advertised at hundreds of dollars below cost, but when that was gone, they would buy a regularly priced set. And some cables. And a warranty. Oh, and through in some movies and games and some iPod accessories and...

 

But TWICE repeatedly pointed out that isn’t the way that shoppers are playing the game anymore. Like Sky Net, shoppers have wizened up and are in danger of becoming fully self-aware. In no time, these robo-shoppers will be coming back from the future, trying to kill John Conner and all of his consumer electronics retailing ways. Here are some quotes from stories throughout the magazine:

 

“Customers knew what they wanted and did their research. They were well-informed.”


"Customers had cued up oversnight, some camping out in tents..."


“Consumers did their research, kept a list...and focused on specific deals.”


“Rock bottom prices kept TVs moving fast.”


“Customers in general went after the basic featured, advertised SKUs and didn’t do much trade-up.”


“They knew what they wanted, they had maps of the store, and they shopped in teams.”

 

This all sounds eerily like a Navy SEAL sniper team. They are doing recon, mapping out the combat area, preparing days in advance. Then as they get closer to actionable intel, they lay out in wait for hours, setting up a well-concealed hide; calming their nerves, slowing the rhythm of their breathing, building a nice, stable bone bridge and centering the target reticle on that one super deal. And like a sniper with his spotter – on scope...firing...good hit – they are even working in teams now. They come in, they look for the specific super-mega markdown item, they buy that, and they leave. No upsales, no add-ons, no impulse buys. And each sale potentially costing the store hundreds of dollars.

 

This is a giant reason why our store doesn’t participate in any of the madness of these sales schemes and shenanigans. In a race to the bottom, there are mostly losers, and I’m not at all interested in being one of them. (You can read about my store's Black Friday day here, where I sold a grand total of two items worth less than $180.)

 

That quote about not making a meal on volume reminds me of something one of our reps said to me awhile back. I was complaining about the profit margin on a brand of cabling he sold versus another brand we were carrying, and he said, “You don’t take percentages to the bank.” And this is another stunner of wise fiscal observation.


To put it plainly, a cable that costs $1 and sells for $2 has a whopping 100% markup. And if we only sold that cable, we could end the year with the most amazing margins in the industry. Sure, we’d be out of business, but we’d go out with some great numbers behind us! Conversely a TV that costs $2000 and sells for $2100 has a meager, totally unimpressive 5% markup. But the 100% cable leaves you a single buck in your pocket while the 5% TV bring in $100.

 

When you’re playing a numbers game – which is what Black Friday seems to have been reduced to – the only number that matters at the end of the day is the gross profit. And I’d rather have one TV sale for $100 profit than a million of them at $1 loss per.

Categories: December 2010, Electronics, CTA

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1 Comment

Reply Kirsten
10:15 AM on December 18, 2010 
I might have to quote the Sciacca quoting that rep's insight about margins. It will only be third-hand information, but if my readers quote me, that makes it four...