Retail
MarketStar Retail
MarketStar Channel
MarketStar Direct
Industry Insights
News and Notes
MarketStar was recently referenced in a TWICE Magazine article regarding TV sales leading up to the Super Bowl. The article cited our analysis of retailer point-of-sale data, which indicates a significant uplift in sales just before the Super Bowl — approximately 15% over typical run rate sales. But the question is this: Is it the event hype or simply the consumer market responding to retailer marketing programs?
The uplift in television units to close out the “holiday buying season” is not surprising. As my economics professor used to say, “There is no supply demand curve on this planet where units don’t increase when price decreases.” (Note: He also told us that drinking significant quantities of expensive, imported beer was his personal pathway to success, a theory not validated by the author.)
Starting in November, retailers begin ratcheting up their discount rates and promotions on televisions. As you would expect with declining prices, unit sales increase. In early January, prices go back up (with units declining) until about two weeks before the Super Bowl, when prices are once again dropped, leading to the increases cited in the TWICE study.
So while sales do increase leading up to the Super Bowl, our analysis indicates it is simply an efficient market responding to lower prices rather than any special homage to a football game. At other times during the year when discount rates match, similar sales uplift occurs.
In other words – there is no “Super Bowl” effect.
Other takeaways from our analysis:
- The Super Bowl Is Great, But It Ain’t Christmas. In the TWICE article, we were quoted discussing the uplift leading up to the Super Bowl. To clarify, sales are higher leading up to the Super Bowl than a regular week during the year, but do not match the unit sales seen Black Friday through Christmas. The retailers use the Super Bowl as an excuse to promote products and clear out inventory, often using the same pricing strategies they employed during the holidays.
- TVs – Not a Growth Category. If we compare this year’s holiday season to the same period last year we see a startlingly flat year-over-year sales trend. Even without price cutting, margins are low and retailers are not pushing the category as they have in the past. The lack of growth validates the commoditized nature of televisions – tons of brands, little differentiation and declining prices.
- I Love My Team, But Not That Much. Having your team play does not lead to any geographically based sales increase. Neither the New England or tri-state areas saw any significant TV uplift relative to the rest of the country. The same was true last year as well in Wisconsin and Pittsburgh when the Packers played the Steelers.
- Maybe Size Doesn’t Matter. For televisions, the sweet spot remains the mid-range category (defined between 32” and 45” screen sizes). Not coincidentally, this is also retail’s most profitable category. Unless production costs change dramatically, expect to see this trend continue.
In summary, television-loving Americans are proving more and more adept at responding to pricing measures rather than “event buying” as they may have in the past.
I like your conclusions in the article. They are well thought out and precise. However, I do think that your economics professor is only partially correct in his statement “There is no supply demand curve on this planet where units don’t increase when price decreases.”
Lifesaving medications do not react in the same way. Here the demand is solely dependent on the number of people that need the drug. So even if the price of the lifesaving drug were to drop 20%, we would see little if any increase in demand for that drug.
Interesting insights – thanks for sharing, and congrats on contributing to TWICE magazine!
One of the factors contributing to how much price affects sales is the concept of a ‘substitute’, a product that can be switched out for another with a similar benefit to the buyer. While there may be few or no substitutes for prescription drugs, the convergence of internet and broadcast network has led to a myriad of substitutes for TV’s. Up until recently you could only buy a TV or a projector to veg out on the couch. Now, along with the traditional tube, you can watch TV on your desktop, laptop, tablet, or phone. As the number of substitutes increases for a product, so does the downward pressure on price–exactly as we have seen with the market for televisions the last few years.
Having realistic expectations of sales increase during the Superbowl week can help put ad strategies in perspective for a lot of companies. It’s also important to take note of clutter, because an ad will be competing with so many others during Superbowl.