Framing a hot item beyond seasonal success
Even before the holidays started, folks knew that digital photo frames were going to be a big deal, but reports since acknowledge that they were among the hottest selling holiday items. The question is, now that the holidays are over, how should retailers merchandise the segment in order to keep it hot?
The picture frame segment must be regarded as the dynamic element in home decor, a category that otherwise hasn’t been particularly lively lately. Indeed, retailers heavily dependent on it, including Kirkland’s and Tuesday Morning, have suffered.
Enthusiasm for digital photo frames has been intense among both retailers and consumers. In November 2007, during a third-quarter conference call, BJ’s chairman Herb Zarkin noted that digital photo frames had major potential and were a central part of the warehouse club retailer’s technology strategy for winning holiday bucks. “We are making a big statement in digital photo frames with a fine assortment of sizes and price ranges,” he said.
Photo frames played a positive role in BJ’s success in December 2007 when sales increased 6.2% to $1.03 billion and comparable-club sales advanced 3%. Digital frames “were a good item for us,” a BJ’s source confirmed in January.
Now retailers are looking to turn seasonal success into ongoing sales. Digital frames play into Meijer’s new photo category strategy. Meijer debuted a new digital photo department in November 2007 co-branded with Hewlett-Packard that became a favorite holiday stop among its customers.
Naturally, Meijer sought holiday-oriented sales. “Our customers…now have the opportunity to create personalized holiday cards, allowing them the flexibility to create cards with their own images right up until the eleventh holiday hour,” Pete Heinz, merchandising manager for Meijer’s photo department, said during the holidays. The new technology also creates T-shirts, posters, photo books and calendars from personal pictures.
Digital frames are a natural extension of the Meijer photo strategy, and are being merchandised with that in mind. Spokesman Frank Guglielmi told Retailing Today that Meijer is setting up digital photo frame displays immediately adjacent to the photo department, which itself is set at the electronics section periphery.
In its latest prototype, the Cascade store in Grand Rapids, Mich., home and photo sections located close to one another, which could provide cross merchandising opportunities, especially seasonally. After all, not all shoppers visit the electronics section, so digital frames provide an opportunity and a challenge. Secondary and seasonal displays may be necessary, despite department boundaries, to take advantage of photo frames’ current popularity and maximize their ongoing potential.
Wal-Mart misses January sales mark
The surprisingly weak January sales results Wal-Mart reported Thursday can be viewed as disturbing on a number of levels. For starters, the performance of Wal-Mart’s U.S. stores division, more so than any other retailer, is closely watched as a national economic indicator because it provides broad-based insight into the health of the consumer. As such, it is unsettling that Wal-Mart’s U.S. stores eked out a 0.2% same-store sales increase when the company was expecting a 2% increase for the reporting period ended Feb. 1.
Equally disturbing is what the missed same-store sales estimate says about the pace at which consumers curtailed spending during January. Wal-Mart provided its January same-store sales guidance on Jan. 10, when it announced December 2007 same-store sales that were surprisingly strong at 2.6%. At the time, Wal-Mart already knew what its sales were for nearly one-third of the month when cfo Tom Schoewe said, “During the first two months of the quarter, our comparable-store sales number for U.S. operations has run at about 2%. We expect to run at a similar rate for the January four-week sales period.”
Apparently, sales decelerated rapidly from Jan. 10 through Feb. 1, when the four-week January reporting period ended. The company cited the familiar culprit of unfavorable weather conditions, especially in the Midwest, as contributing to the weakness, and also indicated that gift card redemptions took place at a slower rate during January. It also noted that consumers turned defensive in their purchasing behavior with more gift cards being used to pay for food and consumables purchases rather than more discretionary big-ticket items.
Another possibility for January sales could relate to a reliance on flawed assumptions, certainly with regard to the U.S. consumer, but also as it relates to the effectiveness of merchandising and marketing initiatives. Customer-facing efforts, whether at Wal-Mart or any other retailer, typically gain traction at a slower pace than anticipated by senior management
Despite coming up short against a monthly same-store sales target, it’s worth mentioning that earnings per share guidance for the fourth quarter were unchanged at 99 cents to $1.03.
“Our inventory position remains very good across the country, which has resulted in fewer sales from clearance items than the same period last year,” said Eduardo Castro-Wright, president and ceo of the retailer’s U.S. stores division.
The company will report results for the fourth quarter and full year ended Jan. 31 on Feb. 19, and when it does, sales are expected to increase more than 8% to roughly $375 billion and profits should hit record levels with full-year net income expected to exceed $12.5 billion.
Wal-Mart U.S. misses comps mark
BENTONVILLE, Ark. Wal-Mart’s U.S. January same-store sales rose by 0.5%, less than the 2% forecasted by the company and analysts.
The retailer said that sales of nonessential items like home goods, apparel and jewelry struggled, although groceries and health care items did well.
Wal-Mart placed the blame for the disappointing numbers on unfavorable weather, particularly in the Midwest, and on gift card redemptions that fell below expectations. The company said that customers were holding on to the cards and often using them for food and consumable goods rather than splurging on nonessential items.
Same-store sales rose 0.2% at namesake stores and 2.1% at Sam’s Club locations, which operate gas stations. Including gas prices, same-store sales rose 4.9%. Net sales for the month ended Feb. 1 rose almost 8% to $27.28 billion.