Batten down the hatches, we may be in for some rough seas, and not just from Hurricane Ike.
An oversupply of LCD panels due to slower consumer spending could lead to some scary post-Halloween promotions by manufacturers and retailers alike.
Despite sworn oaths to never repeat the discount follies of Holiday 2006 — which short-circuited Circuit City and left Tweeter tottering — mounting vendor inventories and dwindling market share for ailing chains could lead to deja-vu all over again.
Bill Trawick, president and executive director of the NATM buying group, told TWICE he is most concerned about the potential for irrational Q4 pricing at Circuit City and Sears — and the inevitable response from Best Buy. “When will they learn that cutting prices doesn’t grow market share?” he asked.
Manufacturers may also fan the promotional flames. According to retail analyst David Strasser at Banc of America Securities, tier-2 and -3 vendors are sitting on excess TV inventory and giving retailers greater price protection, while name-brand players are stockpiling “significant marketing dollars” for the holidays. The result, he wrote in a research note: “We’re looking at 32-inch LCDs for $399 on Black Friday.”
Regardless of who starts it, another price war will put additional pressure on retail margins, which are already stretched thin by high energy costs.
So what of that sworn oath? PRO Group executive director Dave Workman put it best last month in TWICE: “We tend to act like a bunch of self-confessed alcoholics who say all the right things at the AA meeting but can’t stay out of the bars on the weekends.”