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:

Company

Fiscal Y2012 Revenue

SG&A as Percent of Company Revenue

Best Buy

$51 billion

20.2%

Radio Shack

$4 billion

35.9%

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.

Ring in the New Year with great growth stock ideas
Tired of watching your stocks creep up year after year at a glacial pace? Motley Fool co-founder David Gardner, founder of the No. 1 growth stock newsletter in the world, has developed a unique strategy for uncovering truly wealth-changing stock picks. And he wants to share it, along with a few of his favorite growth stock superstars, WITH YOU! It's a special 100% FREE report called "6 Picks for Ultimate Growth." So stop settling for index-hugging gains... and click HERE for instant access to a whole new game plan of stock picks to help power your portfolio.


 
 

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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

Reading a Stock Quote

Learn to read the ingredients of a stock.

View Course »

What are Penny Stocks

The lucrative and dangerous world of penny stocks.

View Course »

Add a Comment

*0 / 3000 Character Maximum