[opendtv] News: Retailers Brace for Flat-Screen TV Price War

http://www.reuters.com/newsArticle.jhtml?type=3DreutersEdge&storyID=3D659013=
7

Retailers Brace for Flat-Screen TV Price War
  Sun Oct 24, 2004 08:31 AM ET

  By Ellis Mnyandu

  NEW YORK (Reuters) - As more and more consumers=20
consider switching to digital television sets=20
this holiday season, retailers are cutting=20
flat-panel TV prices to help them make up their=20
minds.

  In fact, the competition for this promising=20
market could turn into an all-out price war.

  Even though rising interest rates and soaring=20
gas prices have caused concern that Americans=20
will curtail their shopping, electronics=20
retailers expect advanced televisions to be among=20
the fastest-selling home entertainment products=20
this Christmas.

  Digital sets, mainly with flat-panel plasma or=20
liquid-crystal display screens, have won=20
admiration for their superior picture and sound=20
as well as for their ultra-slim size.

  The main sales obstacle has been their price=20
tag. The cost of many new high-end models is 10=20
that of a boxy conventional TV.

  To spur purchases, retailers will probably=20
resort to aggressive markdowns, analysts said. At=20
the same time, manufacturers have been ramping up=20
supply, which could further lead to lower prices=20
at the cash register.

  "A lot of the pieces are in place for some=20
significant price movement on flat-panel TVs this=20
Christmas," said Stephen Baker, director of=20
industry analysis at NPD Group.

  Wal-Mart Stores Inc., the world's top retailer,=20
is already jockeying for a slice of the expected=20
windfall from the shift toward digital television.

  Encouraged by its push deeper into the American=20
living room with cut-price DVD players, Wal-Mart=20
has begun featuring a wide range of cut-priced=20
flat-panel TVs -- including its in-house ILO=20
brand -- among its online pre-Christmas=20
promotions.

  As with the DVD players, Wal-Mart is trying to=20
hasten mass-market adoption of flat-panel TVs, a=20
technology that so far appears more geared to=20
specialty chains that are experts at selling=20
complex products.

  PRICE ROLLBACKS

  In August, the average price for a 42-inch high=20
definition plasma TV was about $4,038, according=20
to NPD Group. By contrast, Wal-Mart's Web site is=20
promoting a similar television at $2,994. As the=20
company puts it, that marks a "price rollback" of=20
26 percent.

  But the number of households with flat-panel TVs=20
is still below 10 percent, so industry observers=20
say most potential buyers are still tech-savvy=20
"early adopters" who base their preferences on=20
brand quality and product features rather than=20
just price.

  As a result, specialty chains like Best Buy Co.=20
Inc. and Circuit City Stores Inc. should do well=20
because of their knowledgeable sales forces and=20
wide assortments, analysts said.

  Best Buy Chief Executive Brad Anderson told=20
Reuters the lure of flat panel TVs was probably=20
the single biggest reason the top U.S.=20
electronics retailer was optimistic about this=20
holiday season.

  The company is touting free shipping and savings=20
of up to 10 percent and 18-month "no-interest"=20
financing on select TVs.

  Sears, Roebuck and Co., the largest U.S.=20
department store chain, will also make a big push=20
for flat-screen TVs, including projection sets,=20
this holiday season, a spokesman said.

  Some prognosticators say prices on some 42-inch=20
plasma HD TVs, for example, could dip below=20
$2,500 before the end of the year.

  TV makers like LG.Philips LCD Co. Ltd. and=20
Samsung Electronics Co. Ltd. are saddled with a=20
panel oversupply -- particularly of LCD TVs -- as=20
they pump billions into production, fueling a=20
decline in their margins as prices fall.

  Computer makers Dell Inc. and Hewlett-Packard=20
have also entered the flat-panel TV fray,=20
promoting an expanded assortment of private-label=20
sets for the holiday season.

  The Consumer Electronics Association expects=20
factory-to-dealer sales of digital televisions to=20
reach 6.97 million sets this year, up 70 percent=20
from 2003. But it sees less of an increase -- 62=20
percent -- for dollar volume at $10.5 billion.

  "The prices are going to be pretty competitive,"=20
said SG Cowen analyst Joseph Feldman.

  But with an ample supply out there, he added,=20
retailers will probably source product at a lower=20
cost, helping them to maintain their margins.

  =A9 Copyright Reuters  2004.  All rights reserved.
 
 
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