What it means
The name comes from the image of shoppers queuing before opening time, ready to burst through the doors when the doors open. Retailers use the tactic around major sales days, with a small number of items offered at a very steep discount.
Examples include a television, a coat or a kitchen appliance priced far below its usual level. A doorbuster is a type of loss leader, a product sold at or below cost to bring in traffic.
The economics depend on what else customers buy. A shopper who came for a cheap television may also pick up cables, accessories and gifts at normal margins, and the extra profit pays for the discount.
Retailers keep the cost under control by limiting supply and time. Only a small quantity may be available, or the offer may last just a few hours.
This creates urgency and makes sure the loss on the discounted item has a ceiling. Finance and marketing teams track results carefully.
They compare the loss on the promotional items with the extra sales and margin from other products, along with factors such as new customers and repeat visits. A doorbuster that attracts bargain hunters who buy nothing else may lose money overall.
There are risks and rules. Customers may feel misled if stock runs out immediately, and some jurisdictions have advertising rules that require stores to hold reasonable quantities or state clearly how many are available.
Heavy discounting can also train shoppers to wait for sales, which hurts regular-price demand. Online retailers use the same idea with flash sales and countdown timers.
The principle is the same: use a limited, very attractive offer to bring people in, and make money on what they add to the basket. Done well, it can build a customer base, while done badly it simply gives away margin.
In practice
Real-world examples.
Example
An electronics chain advertises a laptop at $199 for the first 50 customers on a holiday morning. Queues form before opening, and shoppers buy cases, software and printers while they are in the store.
Example
A home goods retailer offers a set of towels at half price online for two hours. The email promotion drives a spike in visits, and many buyers add pillows and bedding at regular prices.
Example
A supermarket sells eggs below cost for one weekend. It is happy to lose a few cents per box because customers also buy meat, bread and drinks with higher margins.
Formula
Calculation
Loss per doorbuster unit = cost per unit - promotional price
Total promotional loss = loss per unit x units sold
Break-even extra profit needed = total promotional loss
Worked example: A store buys a television for $130 and normally sells it for $200. As a doorbuster, it sells 500 units at $120.
Loss per unit = $130 - $120 = $10.
Total promotional loss = $10 x 500 = $5,000.
If the 500 customers each spend an extra $60 on other items at an average profit margin of 25%, the extra profit is 500 x $60 x 0.25 = $7,500. Net result = $7,500 - $5,000 = $2,500 profit. If they spend only $30 each, extra profit would be $3,750, and the net would be a $1,250 loss.Case study
Seen in the real world.
Brightside Home Stores is a fictional retailer that planned a big sale. The marketing team proposed a doorbuster on a popular blender, priced $15 below cost, with 800 units available.
In this illustrative case, the finance manager asked for a forecast of the loss and the expected extra spending. The team calculated a promotional loss of $12,000 and estimated extra margin from other products of about $18,000.
On the day, the blenders sold out in an hour, but the shoppers bought fewer extras than expected, and the extra margin was just $9,000. The store lost $3,000 on the promotion but gained several thousand new email subscribers. The illustrative lesson is that a doorbuster should be judged against clear targets for basket size and repeat custom.
Watch out
Common mistakes.
- Setting the discount too deep with unlimited stock. Without a limit on quantity or time, the loss can grow far beyond what extra sales can repay.
- Measuring success by units sold alone. A doorbuster that attracts only bargain hunters may not earn back its cost.
- Ignoring customer experience. Running out of stock in minutes or having a poor website experience can damage trust.
Questions
People also ask.
What is the difference between a doorbuster and a loss leader?
A doorbuster is a type of loss leader that is time-limited and heavily promoted, while loss leaders can be ongoing.
Do doorbusters always lose money?
Not always, since some are sold above cost, but they are priced to attract attention rather than to earn a normal margin.
How do retailers choose the items?
They pick well-known products that customers can easily compare, so the discount is obvious and credible.
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