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Retailers Seek End To Flat-Panel ‘Land Grab’

3/07/2007 07:32:00 AM Eastern

San Diego — A panel of mostly specialty consumer electronics retail representatives speaking at the ninth annual DisplaySearch Flat Panel Display Conference here March 6 likened the heavy TV promotions in the last months of 2006 and early 2007 to “a land grab” that turned selling entertainment experience into selling spec sheets.

Dave Workman, executive director of the PRO Group, said what went wrong in the fourth quarter of 2006 was the fault of retailers and manufacturers “acting as if this was the last year they were ever going to sell flat-panel displays.”

He noted, “What happened last fall was the sheriff went out of town and somebody passed the pistols around and said ‘let’s have a blast.’ It was like a gunfight at the OK Corral to see who would be the last man standing.”

Workman explained that retailers were the ones handing out the pistols and the manufacturers who had always served the role as “the sheriff of the land, right or wrong” were lending encouragment.

“CEA numbers and some of the data points have shown that we have robbed ourselves of two years of sales growth,” Workman said. “What shouldn’t have happened until 2010 is now happening this year.”

Workman said the repercussions are that instead of having industry sales rise for everyone, as has happened over the last several years, the industry is going to see a mix of winners and losers in the marketplace.

The new market will be favorable to certain channels, and “some of the harvesters that are efficient at supplying the demand created. At the same time, from the manufacturing side, manufacturers have to be mindful that you can’t just have harvesters. You have to have some people who can sow seeds in the ground. You have to have people growing the business. There is always going to be a lower-cost operation out there. Those people have their place, but it can’t favor so heavily into that end of the marketplace that you forget about growing the market,” Workman said.

Workman expressed his frustration with the way manufacturers catered to the needs of the major national retail chains last fall, at the expense of the entire market.

“I always have to laugh when I see manufacturers wringing their hands and saying ‘Gee, we don’t want to have just two customers to sell to,’ and then turn around to see them doing everything they can to favor those two customers,” said Workman.

Steven Colky, Ken Crane’s merchandising VP, said the rocketing growth in large-screen flat-panel TVs over the last two years has lowered his company’s average selling prices and average screen sizes, forcing the company to rely even more heavily on the sale of ancillary products and services.

“December and January showed the lowest average selling prices we’ve seen in many years and the smallest screen sizes,” said Colky. “We’ve been selling over 50-inch products for 20 to 30 years. We’ve been selling $3,000 to $5,000 centerpiece systems for the same period. So while $998 may be a higher price than it was for a 12-inch or 20-inch TV, for us, is a lower price.”

Colky said Ken Crane’s “mantra” is that “video without audio is nothing but surveillance, and we encourage all of our sales associates to remember that when they are selling the least expensive to the most expensive TV.”

Ken Crane’s is in the business today to sell home theater systems and packages, not just a display, he said.

“The customer coming into our stores is looking for an entertainment environment,” Colky said. “Our job is to provide them with an entire entertainment environment, which is the display, furniture — key to our growth and success, hidden speakers, the installation and the service.”

Colky said his store’s associates are encouraged not to ask customers “‘What would you like to buy?’ but ‘What would they like to do and how would they like to do it?’”

As for online retailing of large-screen TVs, Noah Herschman, Amazon.com, said his company had “a very strong hard lines quarter in the last quarter of 2006, where total Amazon sales were up 24 percent year-over-year, but hard lines grew to more than 34 to 35 percent of the total Amazon business. This is something where we didn’t quite know if the customer was going to want to buy televisions online.”

Herschman said that by addressing some of the trepidations that customers have about buying televisions online, Amazon was able to make customers “very comfortable with the process.” Amazon provides telephone sales assistance for any purchase more than $500, provides unfiltered online customer feedback on models to help potential purchasers gauge their purchase decision and delivers and connects large-screen TVs through a third-party service operation.

About the only area not covered online is the ability to show the customer a demonstration of the set, but Herschman said more and more consumers are comfortable enough in the reputation and quality of key brands that they don’t fear making a purchase sight unseen.

As for flat-panel TV sell through, January sales of 40-inch and larger TV displays were about evenly mixed between flat-panel TV, LCD TV and microdisplay rear-projection TVs for the first time, according to Stephen Baker, The NPD Group’s strategic analysis VP.

“Over the past couple of years, rear projection has gone from about 75 percent of the market to 33 percent,” Baker said. “The LCD market has gone from nothing a few years ago to 33 percent. So LCD is really there, and there is still a lot of competition between the technologies.”

The segment continues to gain a lot in technology share, he added. In January, “LCD TVs and CRTs under 40 inches were about even,” Baker said. In the 40-inch and above segment, sales have reached over 200,000 units in January 2007 vs. virtually nothing a year earlier.

Pricing is not nationally consistent, Baker said, explaining that there can be as much as a $200 difference in the average selling price of a television model sold in Denver compared with the least expensive Seattle market.

“There is the ability for managed pricing,” Baker said. “There are ways around these price declines by managing your pricing.”

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