Door-Busters Serve As Magnets That Sometimes Show Staying Power

Date : 11/27/2009 @ 3:28PM
Source : Dow Jones News
Stock : Hhgregg, Inc. (PN) (HGGGQ)
Quote : 0.0048  -0.0002 (-4.00%) @ 3:50PM

Door-Busters Serve As Magnets That Sometimes Show Staying Power

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With retailers touting door-busters ranging from from 50-inch televisions to three-quarter karat diamond earnings, the array acted this year as magnets to draw crowds and, retailers say, keep them in stores after the items sold out.

This is a switch from last year, said Tom Aiello, spokesman for Sears Holdings Inc. (SHLD), when there was more focus on buying the deals and departing.

Sears was among merchants that had towering displays of items at sharply reduced prices in limited quantities for a few hours on Friday.

Customers kept shopping as the towers came down, heading into aisles offering sporting goods, home decor and even socks.

The business came on slightly longer lines of customers who "know what their budgets are and seem to feel today was the time to buy more broadly," Aiello said.

Retailers are very canny when it comes to crafting door-busters--merchandise that is heavily advertised and marked down to bring in a bigger share of customers on hallmark buying days like Black Friday.

Door-busters are "loss leaders to get you into the store, and typically provide the retailer with very low or no margin," said Laura Gurski, partner in the retail practice A.T. Kearney, a management consultant.

The retailer has likely negotiated something specific with the manufacturer, with most of these products in electronics category.

Door-busters lead to other buying with browsing shoppers but not shoppers who have come in with a specific purpose, Gurski said.

Retailers this year have been especially focused on buying the right amount of each item offered in door-buster specials, said Paul Leinwand, a partner in the retail practice of consulting firm Booz & Co.

He's noticed that in the past two or three years, retailers have begun offering a wider selection of door-buster items, but they stock fewer of each item in order to avoid being stuck with these low-margin items later in the season.

"The challenge for retailers right now is predicting demand," he said. "There's never been a lot of profit on these door-busters anyway. The real downside isn't what you sold; it's what you're stuck with."

That's why stores like to stock only a limited number of door-busters. Sears, for instance, had a 42-inch Panasonic plasma HDTV for $649.99, but had as few as two in stores. Sears said shoppers were saving $350 on the item.

Electronics retailers like Best Buy Co. (BBY) and Hhgregg Inc. (HGG) had numerous items steeply discounted, but most of the ad inserts describing deals noted that stores would only guarantee having a minimum number in stock, and they weren't offering rain checks. For example, Hhgregg said it would have at least 10 AMD laptops at $299.97, and Best Buy promised at least 21 PlayStation 3 packages for $299.99. They normally sell for $419.97.

Best Buy issued a limited number of coupons entitling people in line to buy the product, such as a $197 HP laptop. If all the coupons weren't redeemed within a few hours after the store opened at 5 a.m., Best Buy planned to let some of the dozen people already waiting in another line at 5:30 a.m. have a shot at purchasing them, a worker said.

Several people shopping at Best Buy's north Charlotte, N.C., store said that when they missed out on the HP laptop, they bought 10.1-inch Compaq netbook for $179.99 or, in some cases, went for a $399.99 Sony laptop.

A Best Buy representative didn't immediately have a comment regarding door-buster strategies.

-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145; maryellen.lloyd@dowjones.com; and Karen Talley, 212-416-2196; karentalley@dowjones.com

 
 

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