Healbe launches GoBe on Indiegogo

Posted by: on Apr 15, 2013 in Levin Consulting Blog | No Comments

Our client, Healbe, has launched their exciting product, GoBe, on Indiegogo. The Healbe GoBe is the only wearable device that automatically measures caloric intake as well as tracking calories burned and other important body metrics. http://igg.me/at/GoBe

Black Friday 2013

Posted by: on Apr 15, 2013 in Levin Consulting Blog | No Comments

Thanksgiving weekend is finally over – and by the way, the weekend is now five days long, going from Thanksgiving Day through Cyber Monday. Here are my thoughts, which includes input from our team in the field covering more than 75 stores in more than half a dozen markets in the Northeastern and Midwestern US. Further updates will be sent out over the next few weeks, including more detailed info on the warehouse clubs and office superstores. Please feel free to contact me with any questions.
Adam Levin
adaml@levicnonsulting.com

Big Takeaways

#1 – More and more shopping is being done earlier in the week, through online offers. These offers first were sent to preferred customers, and then to the general public. Everyone did i – the big winners were Best Buy and Target, both of whom leveraged their customer databases to take share. All of the early shopping impacted the sales for the weekend – we think roughly three to five points of store sales moved ahead through this effort. This created a share shift, as those retailers that were aggressive in their efforts clearly took share from the rest of the field. Amazon’s Cyber pre-week was a big winner, as the this year saw a true “tipping point in shopping patterns, with online being a part of the everyday shopping for most middle and upper income customers, not simply early adopters. Big winners on this trend – Amazon, Best Buy and Target. Holding its own – Walmart. Losers – Traditional CE/Appliance Chains without large databases and strong offers, such as HH Gregg.

#2 – The top brands and the best values did exceptionally well – secondary brands and decent values did not do well. Brand winners were Apple (primarily tablets), Beats (headphones and speakers), Samsung (TVs and cellphones) and SanDisk (memory deals at every major retailer), along with new gaming platforms from Sony and Microsoft. Exceptional deals in cellphones, TVs, low end tablets and notebook PCs did well; sales were quiet in home and portable audio, as well as in appliances. This shows that the American consumer continues to get smarter and more sophisticated in their shopping – they recognize a real bargain when they see one! This holds true for all categories, as we saw similar results in apparel and tools.

#3 – Ridiculous deals (pricing well below street, often at negative margin) sold in ridiculous high quantities. Think of Walmart’s sales of TWO MILLION TVs on Thursday alone, along with 1.4 Million tablets – Mind Blowing Numbers!!! Offer TVs at a great price and you will sell hundreds of thousands of them (see Walmart at $98 for a 32 inch set, Best Buy at $169 for a 39 inch set, Target at $229 for a 50 inch set) – expect to see more offers like this over the next three weeks.

#4 – The weekend is for gifts. The next few weeks are for gifts, and for self-gifting – this creates a massive change in the mix. As customers buy gifts for friends and family, they are more likely to buy the price leader in the category. As they buy for themselves, they are more likely to buy step-up products at good values. The step-ups did not sell well this weekend; in our estimation, the percentage of OPP (Opening Price Point) merchandise sold was the highest in the last decade.

#5 – Apple regained significant market share this weekend in the tablet space. There were plenty of low priced and mid priced tablets sold, but in terms of dollars, the iPad dominated. The Walmart offer was incredible, especially in that they allowed an unlimited number of customers to buy one. Target sold an incredible amount of tablets, showing that mass merchants can sell higher priced tablets … when sold at or below cost! And Best Buy, with their matching offers, also sold a large amount – more than they projected.

#6 – Margins were the lowest we have ever seen on Black Friday. This is a combination of retailers’ eagerness to drive top line revenue without worrying about margins (yes, that means Walmart), the type of products purchased (see #4 above), the product mix (tablets are low margins to begin with) and the overall competitive environment. Best Buy warned on their earnings call about the margin for the quarter – we believe it will be lower than projected for every major retailer, be they CE, Mass or apparel.

#7 – The weekend was all about amazon. Retailers were pricing below cost to show a pricing advantage over amazon. Retailers were featuring their websites for purchases – all to compete with amazon. Retailers were starting their specials earlier – all to compete with amazon. And despite all their efforts, amazon was clearly the big winner for the weekend. The amazon site sales were phenomenal, gaining significant share in CE. The amazon marketplace sales were also through the roof – combined with amazon’s direct sales, there was a seismic share shift this weekend, one that we expect to continue through the end of the year and into 2014.

#8 – Store traffic for CE was down considerably, we believe 10 – 15% from last year. It looked even worse, as the hours were extended, for a smaller base of customers – this created many situations where there were store personnel standing around without anyone to help. This is also a result of the move to online shopping for CE, causing a further reduction in store traffic.

#9 – It is all about mobile, mobile products and mobile shopping. The lines for cellphones (congrats to Best Buy on the Samsung free smartphone promotion – the strongest cell promo of the weekend. now they have to figure out how to speed up activations so that the lines are not three hours long to get new phones). Tablets sales were scary good. And people were checking prices and shopping on their phones and tablets – this is a major changes from last year and makes the US consumer more like those in Japan and other markets, where mobile shopping is ubiquitous.

#10 – Opening earlier on Thursday was not profitable as it simply spread the customer count over more hours, while increasing labor costs in a major way … and it will definitely happen again next year!!! Yes, opening earlier does not make sense for everyone. At the same time, it makes sense for those that are looking for an edge. I personally believe that if the deals are good enough, opening at anytime will work – but it does not matter what I think. Retailers will look at the lines at Walmart, Target, Kohl’s, Toys’r’Us and others, and will open early on Thanksgiving Day.

#11 – Retailers are nervous, and will be more nervous over the next three weeks. Everyone is concerned about the shortened holiday selling season. Everyone is concerned about amazon and other online threats. Everyone is nervous about the economy, and the impact on consumers’ spending. This will make for some incredible deals over the next few weeks, and continued margin pressure for all.

Retailer Recaps

Best Buy was well prepared for the weekend, with strong logistics (checkout and such, except for the cellphone activation process). They did a good job of moving sales ahead with offers to their loyalty card base. They did a good job on price matching, and being competitive. They had strong specials in notebook PCs, cellphones, tablets and select TVs. And yet, we believe that their store comps were negative five to ten points for the weekend – while their online sales were up 20 to 30 points, maybe even more. Their lines to get in at opening were down, anywhere from 10% to 75% in the stores we tracked. Their tickets were down, as the average price for their key categories (tablets, cellphones, TVs, notebooks) were all way down from last year. They did a great job on the new gaming platforms – but they did not get enough allocations and sold just a fraction of what they could have sold with more inventory. And Best Buy’s margins were crushed, as the average ticket on their attachments was way down (look at the huge drop in the average sale price of HDMI cables for example, their door busters were at terrible margin, their mix of products sold (see #4 and #6 above) suffered and their willingness to match Amazon, Walmart and Target gained them revenue while killing their gross margins. We give them an “A” for effort and execution – and a “B/C” for results and specials. The world is excited about Best Buy’s stock with good reason, as they have done a great job of re-engineering the company – not sure how well everyone understand how difficult this season will be.

Amazon was a winner by every count. Their sales were strong, up ≥30% in CE (our projection for the weekend). They caused price pressure on their competitors, another plus for them. did they make any money? Doubtful … but that does not seem to be an objective of theirs, nor do their shareholders seem to care. Grade them an “A+”

Walmart was a winner in terms of top line revenue, customer count, and taking care of customers (their process on their 21 guaranteed specials was amazing to see). Their traffic counts the first day (Thursday) was stronger than everyone else, both in raw numbers and increases from last year. Their use of walmart.com was a huge improvement from last year, and the site had strong sales. the rest of the weekend was quiet – it did not seem like Thanksgiving weekend. We believe customers shopped Walmart first, and then spent the rest of the weekend getting their other shopping done. Margins? Who needs margin when you have top line growth, that seems to be the new motto at Walmart for the holiday weekend. We expect them to report that they will miss their margin number for the quarter, and will beat their revenue number – though they will probably not say it in that order. We give them an “A” for the weekend.

Target also had a good weekend, with strong traffic on Thursday and a great promo on Friday that will drive sales the balance of this week. Overall, Target’s numbers were not quite as strong as Walmart, as their TV offers were much more limited in terms of the value of the offer and the quantity available for sale. The Apple offers were very strong, and helped to re-establish Target as a destination for Apple products. We expect Target to be at or slightly below their revenue number for the season, and below their projected margin number. Grade them a “B”.

HH Gregg had a tough weekend, as traffic and revenue was down noticeably. The lines to gt in the stores were half of last year, or worse, in the stores we monitored. As HH Gregg has done a nice job in changing their mix to feature larger screen size TVs, furniture and more appliances, that does not bode well for sales for this weekend. We expect that they were down ≥20% for the weekend, as their addition of Apple and a stronger web presence was not enough to carry them to positive comps. HH Gregg was not as strong on their TV offers as their competitors, and it shod in terms of revenue and traffic. And the industry’s move to mobile products as the lead in CE is not good for them. Their grade? A gentleman’s “C”.

Sears had a very difficult weekend. Their specials were not strong (they did not sell through) and their traffic was weak. They continue to bleed market share in CE, and are less and less of a factor. Grade? a “D”, as traffic and sales were both down considerably.

Overall CE

#1 – We believe that the CE sales for the weekend were down around 10%. Hot products sold better than last year, as the top selling SKUs take a greater share of the revenue than ever before.

#2 – Inventories are tight on the hot items (iPads, Beats headphones, etc.) and overstocked on everything else. Should make for an interesting end of the month in terms of promotions, both by retailers and by vendors.

Random Thoughts

#1 – Is there anyone out there NOT selling Beats Headphones? This was a door buster at the major players – Best Buy, Walmart and Target – as well as at Kohl’s, Office Superstores and pretty much everyone else. Beats proved they are THE player in this space – and sold numbers like we have never seen before from this category.

#2 – Midsize TVs – 32 inch to 50 inch – were the hot size for the weekend. Larger sets, even at great prices, did not do as well. The hot 60 and 65 inch deals at Best Buy did not sell out the first day – or even by Sunday.

#3 – The tablet has replaced the TV as the “must-have” holiday item. This is important, as retailers have a more difficult time selling high priced and high margin profits with tablets (cases, warranties, styli, etc.) than they do with TVs (warranties, power protection, installation, HDMI cables, mounts, etc.). This will lead to margin drops, both short term and long term, for CE retailing.

#4 – Deals need to be great to motivate consumers, just good ones are not good enough anymore. If this continues through the end of teh year, expect a fundamental long terms shift in CE margins (downward). Retailers need to adapt – and those do not, will not make it going forward.