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Perry: LG Retail Distribution Almost Set

LG Electronics has virtually completed its distribution push for the brand among qualified dealers and said it is poised now to take top market-share positions in the categories in which it competes.

Bob Perry, LG Electronics U.S. CE products sales VP, told members of the press attending a 2006 line show here that LG continued to maintain high market-share positions in LCD and flat-panel TV in 2005 — expanding business in some plasma screen sizes by as much as 15 times 2004 volumes, while offering dealers and consumers a “frictionless” relationship.

Perry said more than 850 dealers were to attend the dealer show, while its total dealer base is several times larger than the number of dealers attending. The mix is focused primarily on regional and national A/V dealers, omitting general merchandise mass merchants and warehouse clubs.

LG will continue to build the premium perception of the LG brand in 2005 and 2006 by delivering high-quality A/V products and strong support, service programs and dealer policies, he said.

In exchange for “investing a substantial amount of their time, employee training, personal resources and space on their floor to our line,” LG is working to eliminate “friction points” common with other vendors.

As examples, Perry said LG is ensuring that it gives all of its dealers “equal-cost pricing” without the need for heavy negotiation on such issues as merchandise returns.

He said that LG will maintain responsible pricing practices in the volatile flat-panel TV markets, where the company is one of the world’s three largest panel manufacturers in both the LCD and plasma categories.

Perry told TWICE that recent industry flat-panel price moves by both lower-tier and premium-brand manufacturers were “inappropriate.”

“Those moves didn’t do anything for their dealers,” Perry said. “Essentially, companies that dumped pricing that way created huge demand. They ran out of stock, and they left a vast majority of their dealers without inventory. So, now they’ve got their dealers going into the holiday selling season without inventory.”

Perry said LG has consciously gauged its flat-panel price moves this year to compete with first-tier brands while carefully balancing supply.

“We’ve done a pretty good job delivering to our dealers,” he said. “In general, when you know your supply is limited and when you know you are going to do something with pricing that is going to accelerate demand beyond your capacity, you are damaging your distribution channel.”

Perry said LG sales representatives are trained to “find out how we can win together. How do we improve the customer experience? How do we do better displays and provide better education? How do we invest money with the dealer to advertise, to improve not only the awareness of the LG brand but the brand perception?”

LG dealers are “either totally committed to their LG relationship, or they are not our dealers,” said Perry.

Regarding Zenith, Perry said LG will continue to operate under a two-brand strategy, investing to raise the LG brand-perception to first-tier status, while “making sure that Zenith is fully seated and anchored as a second-tier brand.”

The year 2006 represents year three in a $300 million dollar investment in building the LG brand in the U.S. market, Perry said.

“In terms of overall business, we are growing very, very rapidly. We went as the LG brand essentially at zero in late 2003 to the first five months of this year being No. 2 in plasma,” he said. “Today we have dropped a little bit to No. 3. But we are achieving our goals.”

As for over all advanced television displays sales, Tim Alessi, LG product planning and brand advertising director, said the industry will about double the amount of plasma displays sold in 2004 by the end of 2005. By the end of 2006, the industry should surpass the 3 million unit mark, he said.

The 42W-inch and 50W-inch screen size segments are driving a majority of plasma sales, he added.

Plasma sales continue to shift from EDTV models, particularly in the 42W-inch screen size, to HDTV level models. Sales rates grew from an 80-20 percent ratio at the beginning of 2005 to a 50-50 ratio in September, he said.

In 50W-inch plasma, more than 18,000 units were sold by the industry in September alone.

“That’s more than the entire fourth quarter of 2004,” Alessi said. “In LCD, the industry will see more than 110 percent growth in 2005. The industry will exceed more than 4 million units, probably doubling again in 2006.”

The market driver in LCD TV is large screen sizes, 26W inches and above, which will represent about 50 percent of the industry in 2006, he added. The 26W-inch and 32W-inch LCD screen size sales combined in September represented about 40 percent of the industry, with the 30W-inch and 32W-inch screen sizes together equaling sales of 20 inches and 24W inches, which have traditionally been one of the strongest screen size segments in the LCD TV category, he said.

Meanwhile, microdisplay rear-projection TV sales continue to exhibit strong growth in 2005, Alessi said, with sales of around 2 million a year expected for the industry.