March 7, 2007 4:00 AM PST
Flat-panel TV makers sing the discount blues
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The discount LCD maker is one of a handful of smaller manufacturers many believe are driving down prices and profits for virtually all sellers and makers of flat-panel TVs.
The astonishing success of Vizio seemed to catch the industry by surprise last year, and was a boon for consumers who were in the market for flat-panel TVs but couldn't afford to spend a few thousand dollars on a premium LCD from Sony or plasma from Panasonic. But that discounting had a downside: frustration among electronics retailers and big-time grumbling from well-known TV makers like Sony.
The rapid drop in flat-panel TV prices was the topic du jour here at the U.S. Flat Panel Display Conference on Tuesday. Call it sour grapes or a plea from savvy executives who want their industry to show some restraint and avoid self-destructive discounting, but most executives at the three-day conference agreed with Steven Colky, vice president of merchandising for retailer Ken Crane's, when he said, "There are absolutely too many brands on the shelf."
VP, Ken Crane's
Of course, complaints from manufacturers and retailers about low prices aren't exactly going to gain sympathy from consumers, particularly when it comes to high-end items like flat-panel televisions, something many "never would have imagined (affording) in their wildest dreams," said Noah Herschmann, director of audio and video for Amazon.com.
Indeed, the prices of flat-panel TVs dropped dramatically last year, between 38 percent and 75 percent in a range of screen sizes, according to DisplaySearch. The rapid drop in prices alarmed many in the high-end TV business. Last fall, the price war among brands was like a "gunfight at the O.K. Corral," said Dave Workman of the marketing and merchandising firm PRO Group.
"What happened last fall was someone sent the sheriff on vacation, passed out pistols to everyone and said, 'Go have a blast,'" he said. "Retailers are often undisciplined when left to their own devices," he added, and major manufacturers such as Samsung, Sony, Panasonic, LG and Sharp were not strict enough with their minimum price requirements as they joined in on the discount binge.
Though unit sales of television are actually up due largely to the great deals, some brick-and-mortar retailers are hurting. Many of them are operating on, as Ross Young of DisplaySearch put it, "margins thinner than Nicole Ritchie."
Those low margins are wearing on national consumer electronics sellers such as Circuit City, CompUSA and Best Buy. Circuit City announced last month it would be closing 70 of its North American stores and would restructure the company due to price-margin pressure in the flat-panel television market in the third quarter. CompUSA is taking even more dramatic steps, announcing last week it would shutter half of its stores in the next two or three months.
Best Buy has weathered the storm better than most, said Matthew Fassler, managing director of Goldman Sachs. The nation's largest electronics retailer actually raised its operating margins to 5.6 percent in 2006 from 5.3 percent the previous year by pushing hard with a high-end specialty home theater section called Magnolia, Fassler said. (Circuit City's operating margin, by comparison, dropped from 1.9 percent to 1.2 percent.)
But other specialty home theater retailers aren't having quite as easy a time of it. At Ken Crane's, the January average selling prices were "the lowest in years," Colky said. Unit sales are way up, but executives at the retailer worry they're carrying too many brands, he said. "I'd rather have two Samsungs and two Sonys" than a variety of no-names because of the promise of a better return on shelf-space, he said.
That's not to say the Sonys and Panasonics of the world are getting shoved aside. Amazon reports that the top sellers are still the premium brands, and not, in fact, Vizio. Of the more than 1,000 television sets it offers for sale, Amazon's top sellers Tuesday were, in descending order, Samsung, Panasonic, Sony and Mitsubishi.
That could bolster what many analysts believe: that the logjam of brands will eventually shake itself loose. "The market will work itself out," Bill Lucas, president of NPD's retail business group, told the audience.
The bottom line? Many at this conference believe the biggest manufacturers will in time do what they do in any industry, be it televisions, PCs or cars--reel in the discount competition. Eventually, they hope, the discounters like Vizio that are digging into their bottom lines will lose steam. It could take time, but they believe it will happen.
"As major manufacturers move into more parts of the market...second-tier (manufacturers) have less room" to grow, Crane said. "Sony is Sony, Samsung is Samsung."
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We've been this way before.
With PCs in the 80's and 90's.
HDTVs are effectively computers and manufacturers of the displays, especially the LCD manufacturers, have been adopting PC-style component supply chains and processes. In the process, they've created a marchant market for components and, whether they like it or not (mostly, not) they have adopted PC-market market economies and dynamics. That's where the price war is coming from...
We've been this way before.
With PCs in the 80's and 90's.
HDTVs are effectively computers and manufacturers of the displays, especially the LCD manufacturers, have been adopting PC-style component supply chains and processes. In the process, they've created a marchant market for components and, whether they like it or not (mostly, not) they have adopted PC-market market economies and dynamics. That's where the price war is coming from...
Funny how BJ's has a Sony 56' HDTV next to a Visio 56' HDTV with both hooked up to the same Blu-Ray player and demo reel. The Visio BLOWS away the Sony on picture quality.
Visio = $1600.
Sony = $2600.
Which would you buy?
The price is sustainable because Visio and Westinghouse have special arrangements with Manufacturers. I have a feeling Sony is going to have to pull in that belt.
Funny how BJ's has a Sony 56' HDTV next to a Visio 56' HDTV with both hooked up to the same Blu-Ray player and demo reel. The Visio BLOWS away the Sony on picture quality.
Visio = $1600.
Sony = $2600.
Which would you buy?
The price is sustainable because Visio and Westinghouse have special arrangements with Manufacturers. I have a feeling Sony is going to have to pull in that belt.
Flat panel TV's have enjoyed one of the longest periods of "early adopter price premiums" in history.... It was only a couple years befor CD players prices came down, while flat panel TV's have been outrageously expensive for several years.
When a good 50 inch model is $800 or less, I'll buy one, and no sooner. And when I do buy one, just out of spite, I'll buy the Vizio.
Flat panel TV's have enjoyed one of the longest periods of "early adopter price premiums" in history.... It was only a couple years befor CD players prices came down, while flat panel TV's have been outrageously expensive for several years.
When a good 50 inch model is $800 or less, I'll buy one, and no sooner. And when I do buy one, just out of spite, I'll buy the Vizio.
I am a consumer, I want the best I can buy as cheap as I can buy it. That is the way it works, all technology, all products go through this. This is the way it works. There is only one industry that has been able to not go down this road, and that is the automobile industry.
Where is my $500 50" SED TV you guys promised two years ago. Yes, I know the answer to this question, but this is how we consumers think. I want a 42" flat panel TV for my house, that does 1080i or p, (it's HD what dumba$$ brought interlacing back into the picture anyways?) for under $1000.
I am a consumer, I want the best I can buy as cheap as I can buy it. That is the way it works, all technology, all products go through this. This is the way it works. There is only one industry that has been able to not go down this road, and that is the automobile industry.
Where is my $500 50" SED TV you guys promised two years ago. Yes, I know the answer to this question, but this is how we consumers think. I want a 42" flat panel TV for my house, that does 1080i or p, (it's HD what dumba$$ brought interlacing back into the picture anyways?) for under $1000.
Maybe then Sony, Sharp etc. should sit down and let someone else have a turn. Seriously, why should the new, low price makers be the ones to go?
"The rapid drop in prices alarmed many in the high-end TV business."
Note to elitists: This happens every time as your premium luxury products become commoditized and adopted by the mass market. You had a few years of sky high prices. Sorry you got used to them, but you're the idiots for thinking they would stay forever.
"Retailers are often undisciplined when left to their own devices," he added, and major manufacturers such as Samsung, Sony, Panasonic, LG and Sharp were not strict enough with their minimum price requirements as they joined in on the discount binge.
Umm, so they created the problem themselves and were happy to join in... now they want to cry about it? Have these guys been haning out in the RIAA lounge too long?
"Though unit sales of television are actually up due largely to the great deals, some brick-and-mortar retailers are hurting. Many of them are operating on, as Ross Young of DisplaySearch put it, "margins thinner than Nicole Ritchie."
Yeah... perhaps you only made a point on the TV, but how much did that $100 HDMI cable actually cost you? Wasn't your profit on that somewhere around $99? So your profit on the sale that day is much higher than you're letting on.
"CompUSA is taking even more dramatic steps, announcing last week it would shutter half of its stores in the next two or three months."
Well it was a dumb idea for CompUSA to get into the TV business anyway. They should have focused on improving their computer business and maybe they wouldn't be closing so many stores. Best Buy sells crap for PC parts, but tons of TVs. CompUSA tried to muscle in on new ground and got stomped. Boohoo. Here in Michigan, with all but one CompUSA store closing, I hope well finally see the introduction of Fry's and the expansion of Microcenter - both far better than CompUSA.
"At Ken Crane's, the January average selling prices were "the lowest in years," Colky said. Unit sales are way up, but executives at the retailer worry they're carrying too many brands, he said. "I'd rather have two Samsungs and two Sonys" than a variety of no-names because of the promise of a better return on shelf-space, he said."
News flash: Prices on tech drop after the first couple of introductory years. Sorry you didn't realize that.
I'm sure you'd love to limit stock and options and sell only a couple of high profit models. What retailer wouldn't? But the internet has liberated consumers and we're not stuck with your decisions about what to carry any longer. Compete or close.
I can't believe these executives would allow quotes like this to be released to the public. Do they have any idea how bad this makes them look?
"We're having trouble fleecing the public and we're pissed about it."
rotflmao!
Maybe then Sony, Sharp etc. should sit down and let someone else have a turn. Seriously, why should the new, low price makers be the ones to go?
"The rapid drop in prices alarmed many in the high-end TV business."
Note to elitists: This happens every time as your premium luxury products become commoditized and adopted by the mass market. You had a few years of sky high prices. Sorry you got used to them, but you're the idiots for thinking they would stay forever.
"Retailers are often undisciplined when left to their own devices," he added, and major manufacturers such as Samsung, Sony, Panasonic, LG and Sharp were not strict enough with their minimum price requirements as they joined in on the discount binge.
Umm, so they created the problem themselves and were happy to join in... now they want to cry about it? Have these guys been haning out in the RIAA lounge too long?
"Though unit sales of television are actually up due largely to the great deals, some brick-and-mortar retailers are hurting. Many of them are operating on, as Ross Young of DisplaySearch put it, "margins thinner than Nicole Ritchie."
Yeah... perhaps you only made a point on the TV, but how much did that $100 HDMI cable actually cost you? Wasn't your profit on that somewhere around $99? So your profit on the sale that day is much higher than you're letting on.
"CompUSA is taking even more dramatic steps, announcing last week it would shutter half of its stores in the next two or three months."
Well it was a dumb idea for CompUSA to get into the TV business anyway. They should have focused on improving their computer business and maybe they wouldn't be closing so many stores. Best Buy sells crap for PC parts, but tons of TVs. CompUSA tried to muscle in on new ground and got stomped. Boohoo. Here in Michigan, with all but one CompUSA store closing, I hope well finally see the introduction of Fry's and the expansion of Microcenter - both far better than CompUSA.
"At Ken Crane's, the January average selling prices were "the lowest in years," Colky said. Unit sales are way up, but executives at the retailer worry they're carrying too many brands, he said. "I'd rather have two Samsungs and two Sonys" than a variety of no-names because of the promise of a better return on shelf-space, he said."
News flash: Prices on tech drop after the first couple of introductory years. Sorry you didn't realize that.
I'm sure you'd love to limit stock and options and sell only a couple of high profit models. What retailer wouldn't? But the internet has liberated consumers and we're not stuck with your decisions about what to carry any longer. Compete or close.
I can't believe these executives would allow quotes like this to be released to the public. Do they have any idea how bad this makes them look?
"We're having trouble fleecing the public and we're pissed about it."
rotflmao!
I'm done with Sony forever. Six years ago when I and 5 of my friends were building home theaters, I was the go to guy for advice. I recommended Sony for their balance of features and price.
4 of those 6 Sony receivers either came out of the box broken or died within 2 years.
Do these people really think I want to spend $3600 on a TV only to find that my one year warranty doesn't help me when the TV dies in 3 years? If they view their product and not worth supporting, to be tossed when it dies a quick death, why shouldn't I go buy at the price level I can view as more disposable? The reason for paying higher prices is better quality - much of which is measured by longer life. I expect a $5 piece of junk from China to last 2 months. I expect a name brand electonic to last a good long time. Seems I'm alone in that expectation.
Sony engineers suck... plain and simple.
I wish you better luck next time!
They created an artificial demand for over-priced, under-performing TV's and, guess what?
The consumer woke up to it and wanted a better deal.
I'm done with Sony forever. Six years ago when I and 5 of my friends were building home theaters, I was the go to guy for advice. I recommended Sony for their balance of features and price.
4 of those 6 Sony receivers either came out of the box broken or died within 2 years.
Do these people really think I want to spend $3600 on a TV only to find that my one year warranty doesn't help me when the TV dies in 3 years? If they view their product and not worth supporting, to be tossed when it dies a quick death, why shouldn't I go buy at the price level I can view as more disposable? The reason for paying higher prices is better quality - much of which is measured by longer life. I expect a $5 piece of junk from China to last 2 months. I expect a name brand electonic to last a good long time. Seems I'm alone in that expectation.
Sony engineers suck... plain and simple.
I wish you better luck next time!
They created an artificial demand for over-priced, under-performing TV's and, guess what?
The consumer woke up to it and wanted a better deal.
Yeah, right! It's amusing to see how naive these guys are about their own market. In the global economy all electronics are manufactured by no-name factories in the Far East that must engage in cut-throat competition to get the business. Those low prices the middlemen pay must eventually pass on to the consumers because of cut-throat competition at retail. And once the low prices have reached the consumer there's no turning back--you're commoditized. It's happened to cars, cd/dvd players, stereo equipment, computers, printers, you name it. This is how a free market is supposed to work, and they can't control it (at least legally) or wish it away. No force on the planet will ever increase those flat-screen prices, the best they can do now is improve margin or take kickbacks from the manufacturers...
Yeah, right! It's amusing to see how naive these guys are about their own market. In the global economy all electronics are manufactured by no-name factories in the Far East that must engage in cut-throat competition to get the business. Those low prices the middlemen pay must eventually pass on to the consumers because of cut-throat competition at retail. And once the low prices have reached the consumer there's no turning back--you're commoditized. It's happened to cars, cd/dvd players, stereo equipment, computers, printers, you name it. This is how a free market is supposed to work, and they can't control it (at least legally) or wish it away. No force on the planet will ever increase those flat-screen prices, the best they can do now is improve margin or take kickbacks from the manufacturers...
Guess what? I will buy another Vizio plasma or LCD this year....not other brand.....
Sure Sony make good products but the price is tooooooo....expensive........
- Vizio is great.....Sony is expensive...
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by laptopseller
March 7, 2007 8:39 AM PST
- I bought Vizio 42" plasma in 2005 for $2,000 (now $999) and it works great....
-
Reply to this comment
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See all 106 Comments >>Guess what? I will buy another Vizio plasma or LCD this year....not other brand.....
Sure Sony make good products but the price is tooooooo....expensive........