New York — The stock market and banking industry may be on a roller coaster headed for a crash of 1929 proportions, but the flat-panel television market appears to be entering the holiday season in relatively good shape, vendors and analysts told TWICE.
Vendors noted that TV sales have softened somewhat since Labor Day, but not enough to warrant many unplanned price cuts. Yet, display market analysts told TWICE they are still calling for very aggressive holiday price promotions, whether planned in advance or forced by the recent turn of events, starting as soon as early November.
Vendors, retailers and analysts said that the flat-panel market may be weathering the storm for a variety of reasons including February’s end-of-analog TV broadcasting, which is driving more sales than normal into stores, while top-tier brands made new product introductions at greatly reduced prices this year, in an effort to counter past gains by second- and third-tier upstarts.
Overall, TV manufacturers contacted by TWICE are “cautiously optimistic” that the strong sales performances most saw over the first half of the year, will continue into the fourth quarter without having to change their plans too dramatically.
A number of flat-panel TV brands made price cuts across their lines entering in September and October as they traditionally do. Most of the moves were in line with earlier plans, vendors said. Where slowdowns have occurred, some vendors have been offering instant rebates for limited periods, or are planning attractive financing programs, albeit through banks with more stringent terms for qualification.
Jonas Tanenbaum, Samsung visual display products group LCD products marketing VP, said he was cautiously optimistic about flat-panel sales this year.
“In general LCD sales have been very good through the year. Although there have been negative macro-economic forces since Q1, the flat-panel sector has withstood the pressure very well. Within the last four to six weeks, however (after the Labor Day holiday), there has been a noticeable deceleration in demand.”
“As far as predicting what will happen between now and the holidays, nobody knows,” he continued. “I am still hopeful that given the historically very strong consumer attitude toward flat-panel TV, there will be resumption in demand through the holidays and it will favor the Samsung brand as it has throughout 2008.”
Bob Scaglione, Sharp product and marketing group manager and senior VP, said his company adjusted prices across the Aquos LCD TV line on Oct 5, but those were moves planned well in advance.
“One contributor to the price moves was the aggressive nature of the competition,” Scaglione told TWICE. “There are always price moves during the holiday season but we haven't modified those plans as of yet. Our sales are still at a position where we feel comfortable moving into the holidays.”
Riddhi Patel, iSuppli television systems principal analyst, said she expects more aggressive price steps this holiday season coming from “the premium brands,” where in past years third-tier flat-panel upstarts directed most of the price slashing activity.
“Pricing activity happens during the holiday season for each and every year,” she said. “Some of the aggressive price points that we are anticipating are more reactions to the panel oversupply and to fuel growth or encourage consumer spending. These deals will be initially for limited quantities on Black Friday but if the inventories continue to be high towards the end of December going into 2009, then these could become sale prices to attract the last bit of demand.”
Entering October, Patel said retail inventory levels were running heavier than normal.
“We are hearing of [more than] eight weeks of inventory currently at the channels, where six to eight weeks is normal for Q4 time frame,” she said. “Given the current economic conditions and slowdown in consumer spending, the over eight weeks of inventory could be considered a tad higher than what retailers want for this time of the year.”
Where the economy is having an impact, however, seems to be in accelerating the shift in TV buying patterns, to favor discount retailers to some degree over A/V specialists.
As a result, analysts said they expect to see more aggressive advertising and pricing promotions from the CE big-box chains, such as Best Buy, and harder-pressed regional and local A/V specialists to counter the traditionally strong offers from Wal-Mart.
“For the industry, we definitely see a shift towards the mass merchant retailers and clubs, such as Wal-Mart and Costco,” said Sharp’s Scaglione. “Recent NPD data shows more sales at mass merchants at a higher rate than any other segment. Activity inthe electronics superstores has been declining due to Circuit City's performance.
“For Sharp, we do offer a wide assortment of products across our distribution portfolio so we are ready to sell to consumers regardless of where they plan to shop,” he continued.
Despite this trend, manufacturers said that consumers continue to look for flat-panel sets in larger screen sizes with better feature sets.
“We sell LCD TVs in the 40-, 46- and 52-inch screen sizes and from our philosophy the screen size that is the most critical to us is 46-inches,” said Frank DeMartin, Mitsubishi marketing VP. “Interestingly enough, we’ve found that our 52-inch LCD TV sets are doing very, very well, because people come in and see that the price difference between 46 and 52 inches is not that much.”
To keep the momentum going, DeMartin said Mitsubishi will be looking to leverage its Three Diamond Card zero percent financing programs, rather than price reductions, for the holiday season.
“Given how tight credit is these days, that is really resonating with consumers,” DeMartin said of the financing option. “We are locked in with [HSBC] for multiyear financing and we can offer very attractive rates to our retailers so they can offer long-term consumer financing to their customers.”
Mitsubishi is currently offering a no-interest, no-payments offer for 1,000 days in a deal that runs into November. Further financing offers are expected to follow that.
DeMartin said the current credit climate has made approvals a little more difficult than in past years, but “they have been pretty good at keeping approvals at a pretty high rate given the current climate.”
Similarly, Hitachi’s marketing VP Daniel Lee said his company is using incentives beyond price cuts to entice fourth-quarter business.
“Our approach has been more to focus on enticing consumers and offering them some incentives. So, for example, right now, we are doing Gift Card promotions with some of our partners,” Lee explained. “We think focusing on the end-game — generating increased consumer demand — is the best way to help our retail and distribution partners.”
Some observers said the pre-holiday results are likely to make retailers even more aggressive in their approach to the holiday selling season, with some blowout bargains likely to start surfacing in advance of Black Friday this year.
“We are expecting Best Buy, Costco and Wal-mart to get aggressive. This has been a very quiet period so far for TV promotion and many of the manufacturers will turn in up or on in early November,” said Tamaryn Pratt, Quixel Research principal.
As in recent years, flat-panel TV will be a key category for Black Friday blowout promotions.
Patel of iSuppli said some of the key prices she is hearing about this year include the following:
32-inch LCD TV — $399 to $449
42-inch HD plasma — $499
42-inch HD LCD TV - $799
Pratt of Quixel’s day-after-Thanksgiving bargains include:
32-inch LCD TV — $499 for top brands
40-inch 1080p LCD TV — $799, top brands
46-inch 1080p LCD TV — $1,099, top brands
42-inch 720p plasma — $599, top brand
50-inch 720p plasma — $799, tier-two brands
52-inch LCD TV — $999, opening price point brands
768p front projectors — $699, mainstream brand
Pratt also predicts that “many manufacturers will have a drop in models.”
As for third-tier brands that helped to stir the price-cutting pot in recent years, some have left the market due to financial difficulties, and, observed Pratt, a few have stopped shipping but have not closed U.S. operations outright.
“Shake out has to happen in the next three to four quarters,” iSuppli’s Patel predicted. “Due to increased price pressure from premium brands, the value brands are finding it hard to sustain themselves and continue the momentum. Sony and Samsung’s aggressive marketing and promotion strategy is impacting the sales of the value brands. Gaining and maintaining profitability is a big issue.”