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 (NYSE: BBY  ) and Radio Shack (NYSE: RSH  ) , 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 (NYSE: BBY  ) and Radio Shack (NYSE: RSH  ) 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.

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  • Report this Comment On December 07, 2013, at 10:09 AM, plange01 wrote:

    comparing best buy to radio shack is like comparing bankrupt and disgraced gm to lexus!!

  • Report this Comment On December 07, 2013, at 3:46 PM, sabebrush6 wrote:

    Radio Shack -- they should refocus on some new product types in addition to cell phones. They are history as far as elecftronics goes. Pobably due to chips instead of diodes and capacitors. Last time I went into Radio Shach, the guy at the counter didn't even know what I was talking about when I ask for a 7 pin adaptor. Hmmm -

  • Report this Comment On December 08, 2013, at 12:58 PM, garyquince wrote:

    @sabebrush6

    You think associates at Bestbuy would know what a 7 pin adapter is? Radioshack employees are much more knowledgeable then bestbuy's.

  • Report this Comment On December 08, 2013, at 4:06 PM, crymsonkyng wrote:

    Radio Shack needs to get back to basics...providing parts and accessories to hobbyists and independent repair techs. They cannot compete on phone sales, but could possibly compete with newegg and others. Imagine...a place for us to gather again and brainstorm/talk shop that doesn't require a chat client....

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