Flat panel TVs are the hot item this holiday season, with lots of consumer demand, but fierce competition among store chains is hurting profits, according to a story in the Wall Street Journal.
Despite heavy demand for flat panel TV sets, and steep discounting by retailers, stocks of the sets have piled up at major store chains, according to a story in the Wall Street Journal. Competition and price wars are taking a heavy toll on retailer profits, as chains like Best Buy and Circuit City try to fend off Wal-Mart’s efforts to use consumer electronics sales to recharge its growth.
Flat panel TVs have turned up for sale in such unaccustomed venues as home-improvement stores, office supply outlets and discount chains. The category is expected to account for nearly a quarter of the nation’s holiday gift spending this year, according to the story, written by Gary McWilliams.
Circuit City has emerged as the first casualty of the battle, having reported a third-quarter loss triggered by rapid price declines on big-screen TVs.
Best Buy appears to have successfully fended off Wal-Mart’s initial assault, as it has continued to gain market share, according to the story. When Wal-Mart announced it would offer Panasonic plasma HDTV sets for $1,294, Best Buy triggered an “unadvertised special” offering the sets for $1,000, a below-cost price. The company considered it essential to price below Wal-Mart because the latter has more stores and attracts more customers each week.
Best Buy accounts for 35% of flat panel TV set sales 37 inches and larger sold in the United States. That’s a larger share than any other retailer and exceeds Best Buy’s past dominance in sales of conventional TV sets.
Costco has competed with Wal-Mart by piloting a program to deliver and install the big sets, a step Wal-Mart has not taken.
Consumer electronics is a key advertising category for network TV, but in spot, home electronics and video stores ranked 25th among top spenders, with outlays down 9% in third quarter. Discount department stores ranked 18th among spot TV ad categories in third quarter, with spending down 13%.
Wall Street Journal Online subscribers can read the full story by clicking here.