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360pi: Most Black Friday deals a myth

BY Dan Berthiaume

Ottawa, Ontario — Black Friday deep discounts could be a myth, with only a few retailers dropping prices on only a few categories. Some key findings from pricing intelligence technology provider 360pi based on Amazon’s own assortment in eight categories, including TVs, video games, tablets and digital cameras, show that:

  • Amazon was the only retailer who adjusted prices on over 20% of its assortment, changing prices on almost a third of its merchandise on Black Friday.
  • On Cyber Monday, all the multichannel retailers were trending closer to Amazon’s pricing than the pureplay online stores. You would think the exact opposite given the cost differential in physical stores.
  • Walmart actually raised its prices almost 5% on average on Black Friday, and had been increasing prices steadily in the days leading up to it.
  • Sam’s Club and Amazon dropped their prices most aggressively on Black Friday.
  • Target was the mass merchant with the most significant decrease in its own prices for this assortment from two weeks prior to Black Friday to Black Friday.
  • A majority of retailers either did not lower prices, or even raised prices slightly, on Black Friday.

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Dollar General Q3 rises 14%; ups 2014 expansion to 700 new stores

BY Dan Berthiaume

Goodlettsville, Tenn. – Dollar General delivered some impressive financial results for the third quarter of fiscal 2013 as traffic improved and shoppers spent more per transaction on average. The retailer said it plans to open approximately 700 stores in fiscal 2014 and remodel or relocate approximately 525 locations, expanding store selling square footage by 6% to 7%.

Dollar General’s net income increased by a better-than-expected 14% to $237 million in the 2013 third quarter compared to $208 million in year-ago period.

Net sales increased 10.5% to $4.38 billion in the 2013 third quarter compared to $3.96 billion in the 2012 third quarter. Same-store sales increased 4.4%, with increases in both customer traffic and average transaction value. Consumables sales continued to increase at a higher rate than non-consumables in the 2013 third quarter, with the most significant growth due to strong sales of tobacco products, perishables and candy and snacks.

Dollar General once again delivered strong results in the third quarter, even in the face of an ongoing challenging consumer environment,” said Rick Dreiling, Dollar General’s chairman and CEO. “Our merchandising initiatives have continued to be successful in driving traffic and sales. We had solid financial performance across key metrics.”

During the first nine months of this year, the company opened 577 new stores and remodeled or relocated 534 units as part of a full-year plan to open approximately 650 new stores and remodel or relocate another 550 locations. The company said it operated 11,061 stores as of Nov. 1.

Dollar General now expects total net sales for the 2013 fiscal year to increase by 10% to 10.5% from the 2012 fiscal year, including an expected increase in same-store sales of 4% to 4.5%. Previous guidance reflected an increase in total net sales of 10% to 11% and an increase in same-store sales of 4% to 5%.

"Looking ahead, while we are cautious on the current macroeconomic trends, we remain excited about the long-term growth prospects for our business,” Dreiling said. “Dollar General is committed to delivering everyday low prices and convenience for our customers, which has proven to be a winning formula given our long track record of success.”

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Hidden Costs of Holiday Returns can Wreak Havoc on Bottom Line

BY CSA STAFF

By Tom Rittman, VP of marketing, The Retail Equation

Retailers around the world are gearing up for the hustle and bustle of the busiest time of year. Experts are projecting consumers will spend $602 billion this holiday season. And with billions in sales, there’s bound to be billions in merchandise returns, which can cause retailers to lose a significant profit margin.

However, the monetary drain of these lost sales does not end there. Additional “hidden” losses accrue when you factor in the time employees spend processing returns, evaluating the item’s resale potential, and restocking the returns. When an item must be discounted or, even worse, discarded after a return, it further compounds the company’s losses. There are also the administrative expenses of accounting for returns and managing the entire return system. For major chains, the costs can reach into the millions of dollars annually.

Below are the top seven hidden costs of returns:

1. Labor time and cost. Besides the staffing of the customer service role at the return counter, there are other aspects of labor including the time spent assessing the item’s condition, making it ready for re-sale (cleaning, tagging, folding, packaging), and placing it back on the selling floor or dispositioning it for other processes.

2. Credit/debit or other transaction fees. A retailer may typically see credit card interchange refunded, but not necessarily their transaction fees for authorization and settlement. So while the retailer may get back the majority of what they paid in fees, it is not every penny nor is a return a free transaction to them.

3. Restocking with markdowns. Even if an item is returned in re-sellable condition, it may be past its prime selling time. This might relate to the seasonality of the fashion or the status of the current model of the item. In many cases, items in this semi-out-of-date situation are subject to markdown discounts to clear the inventory from the selling floor, lowering the margin on that returned item.

4. Disposition of a non-sellable item. In many cases, the merchandise returned must have some extra action performed to determine whether it can be resold. Often this falls into a retailer’s reverse logistics process. The item may need to be sent to an interim location for inspection and testing. It may need to be re-packaged. It may need some or all of its accessories and manuals replaced. It may need to be returned to vendor for credit. It may need to be disposed. In all cases, it is removed from the selling floor, eliminating the possibility for the revenue and margin from the purchase.

5. Administrative costs. Depending on the destination of the returned item – back to the selling floor or out the back door – there are inventory and logging requirements to account for the item’s status and location. While modern supply chain systems help, tracking returned merchandise still requires attention to detail.

6. Shrink. Return rates and shrink are strongly correlated. The higher the store’s return rate, the higher its shrink. Studies show if a retailer takes actions to better control returns, shrink can be reduced by a significant amount.

7. The customer experience. While not a measurable cost like those above, the retailer’s relationship with their customer in this potentially negative encounter is paramount and, in fact, trumps all other costs. A fast, friendly, and flexible return experience is worth the retailer’s investment to ensure best customers keep their trust, and their spending, in the store’s brand.

Tom Rittman is VP of marketing for The Retail Equation, a leader in optimizing retailers’ revenue and margin by shaping behavior in every customer transaction.


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