The Consumer Electronics Retailing Loser of Black Friday Weekend
Retailers are spending millions of advertising dollars hoping to entice shoppers into their stores during this year's shortened holiday season. But between Best Buy and Radio Shack , one consumer electronics retailer shorted out on Black Friday weekend. Which one was it?
Dollars not well spent
An analysis recently released by Placed and Kantar Media unveiled which retailers had the best Black Friday weekend based on one key metric, "cost per visitor share." This metric gives insight as to how well television ads helped drive in-store customer traffic. The study focused on three categories, including department stores and mass merchandisers, home improvement stores, and consumer electronic stores. Last week, I examined the results from the department stores and mass merchandisers category and home improvement stores . Today, we'll take a look at consumer electronics stores.
Among the consumer electronics retailers, Best Buy and Radio Shack spent $25 million and $9 million, respectively, on TV ads in the run-up to Black Friday weekend. Yet, Best Buy enjoyed many more visitors to its stores. Among the legions of shoppers who flocked to retailers on Black Friday weekend, 6.2% opened their wallets at Best Buy. By comparison, only 0.8% of shoppers patronized Radio Shack. As a result, Radio Shack had the higher cost per visitor share of the two rivals. Radio Shack shelled out $11.3 million per visitor share, while Best Buy spent $4.0 million per visitor share. So, even though Radio Shack spent fewer dollars luring customers in with TV ads, they weren't effective enough to get shoppers through the door.
The broader picture
One metric an investor can look at to gain insight into how much money a company spends on ads is its selling, general, and administrative (SG&A) costs as a percent of revenue. A company's SG&A costs include much more than advertising, but we can use SG&A as a percent of revenue as a broad metric to see how much of a company's revenue is spent on things like advertising. Check out how the two consumer electronics retailers fare:
Fiscal Y2012 Revenue
SG&A as Percent of Company Revenue
Source: Yahoo! Finance
Taking a look at these figures coupled with the cost-per-visitor-share metric, we can see that while Best Buy spends less of its revenue on things like advertising, each dollar it spent on TV ads translated into more share on Black Friday weekend. By comparison, Radio Shack spends a much greater percentage of its revenue on SG&A expenses. The Shack also received much less share on Black Friday weekend. In broader terms, Best Buy appears to spend money much more efficiently than Radio Shack.
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The article The Consumer Electronics Retailing Loser of Black Friday Weekend originally appeared on Fool.com.Fool contributor Nicole Seghetti has no position in any stocks mentioned. Follow her on Twitter @NicoleSeghetti. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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