For retailers, bottom line on television sets a little fuzzy
Television prices are down and sales are up.
While that’s good news for consumers in the market for a fancy new television set, it’s driving retailers a bit batty.
According to several national market-research firms, television prices have been on a steady decline since 2008, with some of the larger, 50- to 60-inch liquid-crystal-display models dipping below $1,000 for the first time ever.
Even the more basic 42-inch flat screen, high-definition TVs that once sold for nearly $1,500 just a few years ago are now going for less than $500.
That’s a boon for consumers, to be sure. But for retailers, prices are going so low they’re nearly to the point it’s not worth selling TVs because stores can’t make up the difference in volume.
“Off the top of my head, I’d say prices have fallen 25 to 30 percent over the past few years,” said Earl Cogdill, owner of US Tech, 2465 Patterson Road. “Sales are up a little bit, maybe 5 or 6 percent. We belong to a buying group, so our buying power is pretty strong. But even with that, it’s still a category that’s not a profit-maker for us.”
Cogdill said the store that specializes in selling electronics has been making up some of its declining TV profits by selling accessories to television sets, such as sound systems and Blu-ray disc players.
Still, even those lowering prices are starting to outstrip profits from sales, he said.
“We’re an audio-video store, so we still want to support that category, and some of the stepped-up models with added features still have some profit in them,” Cogdill said. “But I don’t think that any retailer can sustain these kinds of margins in that category, so something’s got to change. I think the manufacturers are losing money on every set they produce.”
Grand Junction resident Mitch Hamilton said he was surprised at the prices he found when he went shopping for a new TV earlier this month.
True to the R-5 High School math teacher he is, Hamilton devised a computerized spread sheet so he could better compare prices.
“It was an analysis of cost versus screen size to get an idea of where the value was at,” he said. “It’s pretty much an exponential pattern that forms as (screens) get bigger. I never looked at prices seriously before, but I noticed that they were becoming affordable, dramatically.”
Hamilton ended up buying a 40-inch Toshiba with an LED (light-emitting diode) display for about $340.
According to a recent report by the Englewood-based market researcher, IHS iSuppli, the average price for an LCD, or plasma, television dipped to about $1,100 this month. That’s down about 3.3 percent from the previous month and about 27 percent from a year ago.
The firm’s researchers found a 42-inch Sharp LCD at Best Buy selling for $200, and an LG 47-inch 3-D LCD television with Blu-ray selling at Walmart for less than $800.
“The prevailing economic uncertainty, along with frantic efforts among TV manufacturers to boost year-end sales, combined to drive down the price of U.S. flat-panel televisions in November to their lowest level in eight months,” IHS said in a Dec. 22 news release. “TV demand in the United States continues to be weak because of the country’s staggering unemployment, and consumer confidence has been low in the face of a slow economy. Competition among manufacturers is extremely cutthroat at this point, exemplified by Black Friday prices that show how low manufacturers are willing to go to court the consumer.”
Manufacturers also are trying to clear their inventories of the LCD screens in favor of the back-lit LED sets, which offer greater profit margins, according to the report.
Another market researcher, the Santa Clara, Calif.-based NPD Group, predicts those low prices for LCD models will last through the first quarter of 2012, then stabilize and even gradually rise by the second quarter, but only slightly.
That’s about the time the highly anticipated Internet televisions, particularly the Apple TV, are expected to hit the market. What happens to prices then is unknown, Cogdill said.
“What it boils right down to is: Customers want a quality product at a fair price,” he said. “Sitting back, watching a good quality product and listening to a good quality sound, I think, is what’s going to sustain us.”