Retailers were forced to switch gears this past holiday season: rather than chase scarce supply in flat-panel television, dealers were coping with an abundance, and the price pressure that has occasioned.
According to retailers assembled for TWICE’s Annual Retail Roundtable, hosted here by senior editor Alan Wolf during International CES, the holiday selling season was an extended exercise in flat-panel limbo, with retailers seeing how low they could go.
“Once you set a low benchmark, you’ve degraded the price points thereafter,” said Dave Workman, PRO Group executive director. “It’s scary. We’ve robbed ourselves of two years worth of sales.”
“We had limited availability for two years and now we have a lot of capacity, and that’s an animal we have to learn to manage,” said Dan Schwab, D&H Distributing marketing VP.
The depth of discounting even scorched brands formally averse to price wars. While third-tier brands have traditionally dominated Black Friday discounting, this holiday saw the unique emergence of premium brands racing to the bottom, said Jonathan Magasanik, Sears Holdings, VP/general merchandise manager.
The unprecedented discounting will subside as cooler heads prevail, predicted Joe McGuire, president/CEO, Tweeter. “But memories are short and the desire for share is great and whether this will hold [until] the next holiday is anyone’s guess.”
Amazon.com’s A/V director Noah Herschman countered that while retailers may have watched aghast, consumers won. “You have people getting flat-panel televisions that never could have afforded them in the past.”
There are silver linings in the flat-panel price drop, said Mike Vitelli, Best Buy consumer electronics and product management senior VP. “The price compression opens the door to more attachments and services, and that is helping to move more televisions,” he said.
The contours of the holiday selling season have also shifted. “There are always peaks and valleys, but this year the peaks were very high and the valleys very low,” said Randy Wick, Circuit City senior VP and general merchandise manager for CE.
Retailers also reiterated complaints aired at last year’s roundtable about the HD format war. “This is the grand frustration,” McGuire said. “The industry needs to get out of its own way, because there is a very small window to sell high-definition video in a physical format and it will close as people start to download or stream content from other sources.”
“We’re in a precarious situation,” admitted Schwab.
“Customers don’t want to place the wrong bet,” Magasanik said. The HD format war has also caused casualties among standard-definition DVD players, depressing sales as consumers wait to see how the battle shakes out, he added.
Retailers took no comfort in the emergence of dual-format decks. “It feels like a Band-Aid,” and still requires retailers to stock both format discs, Magasanik said.
“There is still an opportunity” in the format war, said Rick Souder, Crutchfield merchandising executive VP. “We have an opportunity to walk consumers through their choices.”
Despite the HD frustration, retailers were optimistic about the rebound in audio — driven by both the iPod and HDMI switching. “We’ll be forcing the HDMI issue more this year so we can recommend products with confidence,” Vitelli said.
“In general, it was a good holiday season,” said Ross Rubin, NPD industry analysis director. The top four categories gained more share of overall holiday volume — 42 percent — than the previous year and the segment overall was up 6.5 percent from Black Friday to Christmas vs. the same period last year. The season was led by LCD TVs, digital still cameras, notebook computers and MP3 players.
A full report on the Roundtable will appear in the Feb. 26 issue.
