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Cautious Dealers Are Bullish As Ultra HD Gains Early Traction

Superstitious dealers still smarting from the 3DTV misfire are reluctant to make premature pronouncements, but initial results suggest that the TV category’s new best bet, Ultra High Definition, is connecting in a big way with consumers.

ABC Warehouse, for one, is enjoying early success with the category, reported Dan Schuh, TV and A/V products executive director for ABC and its sister chains. Encouraged by what he described as “growing interest” among consumers and recently reduced price points, the big-box retailer is doubling its Ultra HD rollout from 25 percent to nearly half of its 43 locations.

The Michigan-based business was first in its market to launch LG Electronics’ 84-inch 84LM9600, with what Schuh described as “great fanfare.” The specialty CE and appliance chain followed that up with the launch of Sony’s 65-inch and 55-inch XBR-X900A-series models, which also proved to be big successes, he said.

All three models are currently on ABC sales floors utilizing manufacturer-supplied displays, which “best call attention to this truly incredible new product in our stores,” Schuh told TWICE.

Looking ahead, the NATM buying group dealer plans to add Sony’s new and slightly lower-priced 65-inch and 55-inch XBR-X850A-series TVs next month during a special launch event planned in conjunction with Sony, and will also highlight the vendor’s FMP-X1 Ultra HD media player “and all that it has to offer in both 4K rentals and 4K films for purchase,” Schuh said.

“Our feeling is that Sony has the best overall 4K UHD solutions with both series of UHD TVs and their 4K Media player.”

And while the jury is still out on whether the category will gain critical mass by the fourth quarter, Schuh believes Ultra HD could ultimately “drive some badly needed dollars back into the category at higher and more profitable price points.”

Another regional launch pad, and one of the industry’s greatest proponents of Ultra HD, is Santa Monica, Calif.- based Video & Audio Center, whose proximity to Hollywood has helped raise the technology’s profile within the film industry.

The three-store chain was the first retailer to publicly display and sell Ultra HD panels (LG’s 84LM9600, in October 2012), and has since gone on to stage more launches and carry more models than most U.S. dealers. Currently, one-third of the showrooms’ TV floor space is comprised of dedicated departments for new display technology, including Ultra HD models from LG, Samsung, Sharp and Sony, and Samsung’s new OLED panel.

Corporate director Tom Campbell, who has long extolled the virtues of 4K displays as a powerful antidote for a moribund CE business, told TWICE that Ultra HD TV, along with OLED and premium audio, have helped fuel one of the company’s best third quarters in its 31- year history.

Jim Ristow, executive VP of Home Entertainment Source (HES), a specialty A/V and custom integration division of the BrandSource buying group, also views Ultra HD as a needed shot in the arm.

“We’re excited because it gives us something to talk about,” he observed. “It’s not just a TV. It’s a better picture technology and you could start telling a story. We believe it’s going to raise [average selling price] overall” – as it will margins.

Indeed, despite some recent MAP drops, “the Ultra HD manufacturers that we support heavily are UMAPped [unilateral minimum advertised priced],” he said, “so as far as cutting margins, that’s self-regulating.”

Ristow said the new 4K displays, at least initially, will probably be more impactful for the group’s integrators and installers. “In our integration community where they’re selling best-of-class product, it could actually be a large percentage of those members’ Q4 sales,” he noted. “If it’s a TV/appliance dealer it might be part of [their holiday business], and obviously it’s not ready for the rent-to-own channel.

“It really depends which channel you’re talking about, but I think we’re at the infancy of Ultra HD, and I think the fourth quarter will tell a lot.”

One holiday development that won’t surprise Ristow is tightness in the supply chain. “If history repeats itself, anytime you launch new technology, launch dates in quantities are typically small and delayed, and I think there’ll be shortages in Q4,” he said.

Tom Hickman, electronics senior VP for the $14 billion Nationwide Marketing Group, believes that Ultra HD and OLED represent “a monster step forward” in picture quality, and that the allure of the new technology is helping to bring consumers back to the marketplace following a long, recessionary hiatus.

“We think demonstrably better pictures will result in incremental increases in sales and profits,” he recently told TWICE. “UPP is helping stabilize profits for our guys and they are embracing it.”

Hickman is encouraging all CE members to be first in their markets with the advanced displays, in order to position themselves as new technology leaders. Dealers must “pound the technology [message] and communicate that we are the first to bring more new technology to the market,” he said. “Our goal is not only to close a sale but to get younger and more affluent customers in the stores.”

For Jeff Davis, sales senior VP at D&H Distributing, high-profile events like Sony’s 4K broadcast trial at Wimbledon this past June are “a good way to create awareness of Ultra HD,” although he believes it will take more mundane market forces to establish a beachhead for the new displays.

“When pricing becomes more accessible and screen sizes more practical for the average consumer, adoption will begin to accelerate,” he recently told TWICE.

Davis is also confident that native 4K content will become plentiful sooner rather than later, and that availability will not be a roadblock to adoption as it initially was with 3D. “4K content will likely grow with the same speed as high-def availability when the first HDTVs were introduced,” he noted. “4K will experience a more robust and longer-lasting adoption than 3D since 3D had issues with glasses and gear in addition to a scarcity of content.”

Another likely adoption driver was the decisions by manufacturers to extend advanced TV distribution to Best Buy via its premium Magnolia in-store shops. Both LG and Samsung included select Magnolia Design Center locations in their OLED roll outs, and the first in-store wave of Ultra HD recently arrived from Samsung and Sony, with additional models and brands available online via special order.

Best Buy home president Mike Mohan told TWICE this summer that having a “compelling new technology that consumers can see” should help lift TV category sales – something CEO Hubert Joly also alluded to during a second-quarter earnings call last month.

“We are, of course … intrigued by the innovation in the space with 4K TV, OLED TVs, and so forth,” he told analysts. “We love the fact that in our stores now there’s TVs with a price point of $15,000, $8,000, and that’s helpful from the top-down selling standpoint.” – Additional reporting by Steve Smith and Greg Tarr