Don't get me wrong, as a retail business analyst, I understand the importance of add-on selling and value-added merchandising to growing both top-line sales and bottom-line profits for CE retailers. But it is possible to take things too far.
Exhibit A: This week, national retailer The Brick is offering a FREE $89.97 Samsung DVD player when you buy a $149 Monster HDMI Cable. This is exactly why I read the weekly flyers as the come out, to stay on top of what the major players are up to.
this week's ROP from The Brick
There are lots of ancilliary reasons to run a promotion beyond the obvious one of getting people to buy stuff: focusing on overstock, special push ("spif") incentives from the vendor, or just plain tactical offerings designed to piss off competing retailers. Regardless, offering the hardware "free" if you buy an accessory that's half-again the retail price of the original device wanders dangerously close to the Theatre of the Absurd. For starters, it confirms in savy customer's minds that you're more interested in the value-add than the sale. How about a FREE TV when you buy the extended warranty?
Also, what about the fact that the point of add-on sales is to build your margin, above and beyond what your hardware sales deliver? CE hardware margins are tough, we all know that. That's why retailers have to accessorize. But by scratching off the hardware margins to zero, and replacing them with straight accessory margins isn't growth, it's just shuffling the deck. Ask category managers from HBC and Sears how their margins on electronics are during their periodic "save double the GST" offers, plus the extra 10% off for signing up for their credit card. Hint: they're not good.
As you can imagine, I'm not a big fan of taking the "buying business at the expense of margin" strategy too far.
1 comment:
The Brick's advertising leaves a lot to be desired. They've currently got a "32 inch plasma flat panel TV" with purchase of a Sealy mattress. It's apparently a Prima TV, and as far as I know it's only LG that makes 32" plasmas.
I remember a few months back when they were giving you a "Free Samsung HD-DVD Player" with certain TVs that was actually just a Samsung upscaling DVD player. I would imagine they called it HD-DVD just to simplify the terminology without realizing that there was a unique format with that same name. Or, maybe they were just trying to prey on the confused masses out there who thought they were really getting something.
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