By Lisa Johnston
New products on display at the American International Toy Fair, held in N
NEW YORK — America's love affair with flat-panel TV displays is predicted to intensify significantly this holiday season as retailers look to promote new aggressive price points starting on Black Friday, while setting the tone for next year's everyday pricing models, vendors, analysts and retailers told TWICE.
Mike Vitelli, Best Buy's senior VP for CE and product management, predicted in a recent conference call that average selling prices for flat-panel TVs will be down 25 percent to 30 percent year-over-year this holiday season. The declines, he said, bode well for Best Buy.
“The price drops will drive tremendous unit volume,” he noted. “More consumers will be entering the flat-panel space, and others will be trading up to the larger sizes that are now available. They can now buy a larger-size, 1,080p TV for the same price they would have paid for a smaller model last year.”
Best Buy hopes that mass market adoption of flat panels will also lead to increased labor attachment rates, and has beefed up its Magnolia home installation service offering accordingly.
This year's Black Friday promotions are expected to focus on LCD and plasma TVs, with emphasis on the former (see box.)
“These are lowest advertised prices for no-name brands,” explained Steve Kovsky, Current Analysis digital TV and displays principal analyst.
“We're expecting digital TVs to play a very important role in Black Friday promotions this year, not just for traditional CE players, but for retailers in other categories hoping to cash in on DTV's cachet,” Kovksy said. “For example, in the recent past, we've seen flat-panel TVs promoted by retailers such as Home Depot, Kohl's department stores, and even Pep Boys Auto Parts stores.”
Tamaryn Pratt, principal analyst for Quixel Market Research, predicted that, as in the past, national electronics retailers and warehouse clubs will continue to dominate the distribution of opening price point flat-panel sets during the holidays.
“However, the mass merchants and alternative channels, like grocery/mass merchant and even large gas stations will get into the action in strong way this holiday season,” she said, echoing Kovsky's predictions. “The mass merchants have been testing products successfully all year long and many of their customers are now finding flat TVs that are affordable. The grocery and discounters will push tier two and three branded flat TV in screen sizes from 15- to 42W-inches in some cases. Lately we've seen LCD TVs at TJ Maxx, Tuesday Morning and Big Lots.”
Pratt offered some additional opening price points slated to appear on shelves the day after Thanksgiving.
“We are expecting a few of the opening price point brands to offer 42W-inch HD at $999, while 50W-inch PDP could get close to $1,599,” she said. “Top tier 42W-inch HD PDP will probably average around $1,699-$1,799 and 50W-inch HD PDP could average about $2,499 or less,” she said.
“There are great values at 60W-inch PDP from top tier brands (one and two), which will range from $4,499 to $4,999. Thirty-two-inch LCD TV, which will be one of the long-term key sizes for the category, will be $699 from the opening price point players but stay as high as $1,299. There will be a big swing,” Pratt predicts.
In electronics-focused retail stores, Ross Young, president of DisplaySearch, forecast key holiday pricing to hit $799 for 32W-inch LCD TV, $999 for 37W-inch LCD TV and $1,499 for 42W-inch LCD TV.
“Those prices are already available in the warehouse clubs” and will migrate over the other channels for the Holiday crunch, Young pointed out.
Young said other rumored Black Friday price points include “a 50W-inch PDP from a major brand which may be priced at $1,999 at national retailers.”
The market forecaster also called for a 42W-inch ED plasma price of $999 and 42W-inch HD plasma as low as $1,199. Meanwhile, “37W-inch LCD TV can get to as low as $799 with 32W-inch as low as $625,” at national retailers, DisplaySearch said.
To remain competitive, top-tier brands this year have worked to offer “similar products (but not the same) to national electronics retailers, warehouse clubs and mass merchants. This way they can be a bit more nimble in the price competition with the opening price point products,” Pratt said.
At the same time, retail chains offering their own private label flat-panel models have continued to do well, Pratt said, but second and third tier brands continue to be the price point leaders, and market share leaders among entry product.
“Most large retailers are able to sell their private-label products but we have found [new opening price point brands] to be a skyrocketing segment. In some quarters, the second- and third- tier players have outsold all their competition at specific screen sizes,” she said. “It appears that many of the third-tier players just cycle through. A new one always pops up and sometimes with the same managers.”
Meanwhile, the story for step-up products this fall has centered on “Full HD” 1,080p resolution.
“The top manufacturers are really pushing the 1,080p issue on several fronts, like LCD TV, micro display rear-projection TV, HD DVD/Blu-ray and the new Xbox 360,” said Pratt. “Many video experts have demonstrated that under 50W-inch, consumers can see very little difference between the two resolutions but the marketplace has decided that 1,080p is the future and we will probably see even smaller sized LCD TVs promoted in 1,080p next year.
“It is a great story for the manufacturers that can offer affordable big screen micro-display rear-projection at 1,080p, as well as LCD TV 1,080p that is more expensive at the same screen sizes.”
She said the retailers and manufacturers should enjoy healthy profit margins from 1,080p this year, but price compression will follow quickly.
“By mid next year enough 1,080p opening price point LCD TVs will be available that we'll see the delta shrink dramatically, which is similar to what we are seeing this year with the MD manufacturers.”
In the battle between the flat-panel formats leading into the holidays, LCD TV has made significant inroads into plasma's core 42W-inch screen size segment this year.
“Pricing on 42W-inch HD LCD TV has been killing 42W-inch plasma,” noted Daniel Sparrow, a marketing consultant to the Chinese Hisense brand, and chief technology officer for Titan Global Commerce, which markets the high-end Epoq TV brand. “LCD pricing keeps getting lower but the production costs on plasma won't allow it to keep step.”
As for EDTV-level plasma models, Quixel's Pratt said “this holiday season will be the last hurrah” for the category. “Most manufacturers have stopped producing the product and are just selling off what they have. I think we'll see the same situation happening in the future with 720 PDP,” she added.
Alan Wolf contributed to this story.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.