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"Wait Till After the Holidays" says NY Times

3K views 27 replies 20 participants last post by  mike123abc 
#1 ·
Pretty interesting article.


Quote:
If There’s a High-Definition TV in Your Future, Wait Till After the Holidays



By ERIC A. TAUB

Published: August 25, 2007



LOS ANGELES, Aug. 24 — Consumers walking into an electronics store looking for a big-screen high-definition TV may find that the place looks and feels different from how it was last Christmas.





They will see more name-brand models along the wall and a lot fewer of the second-tier brands that also happen to carry lower price tags. They may also find themselves accosted by sales employees pushing expensive but nonessential services like extended warranties and professional installation. Liberal return policies are getting tougher at some stores.



“We’re abandoning the entry-level price point,” said Joe McGuire, who was the chief executive of the regional electronics chain Tweeter Home Entertainment Group until stepping down this week. “Compared to last year, we’ll be very much focused on models with superior picture quality and large sizes.” To increase profits, the company will also push customers to purchase its $399 professional installation package and its $79 picture calibration service.



Electronics retailers are doing this because, although they are selling more HDTVs than ever, they are making less money on them. Indeed, even as consumers inexorably move toward buying ever-larger screens and retailers’ revenues climb, competition is forcing price cuts. And as the low-price, high-volume mass merchants like Wal-Mart or Costco become major vendors of big-screen HDTVs, all retailers are forced to keep their prices — and their profit margins — as low as possible.



Prices have continued to drop substantially this year. According to the research firm iSuppli, the average retail price of 42-inch HDTVs — one of the most popular sizes this year — has declined to $1,522 from $1,844 last Christmas, an 18 percent drop.



Prices will continue to fall, industry analysts say, because the retailers are powerless to prevent the declines. Not only is retail competition fierce, but flat- panel TV manufacturers, especially the Taiwanese contract manufacturers, continue to build new plants and expand production, which has created a glut in panels.



The price promotions by the minor makers propelled Vizio from the No. 4 L.C.D. television maker in the American market in the first quarter of 2007 to the best-selling maker in the second quarter of 2007. “Half the reason that consumers buy our sets is because of lower prices,” said William Wang, Vizio’s chief executive. “But our goal was never to compete on price only. We have a great product.”



While this is great news for consumers, it is not what retailers want to hear. The impact of the low, sometimes negative, profit margins has been devastating to many of them. For example, Tweeter increased its unit sales of televisions during last year’s Christmas selling season by 15 percent over the previous Christmas. Profit margin in the video category, said Mr. McGuire, was “down substantially on a year-over-year basis due to the intense competition in the category” and in June, the company sought protection from creditors in bankruptcy court. It was sold in July to Schultze Asset Management, an equity buyout firm.



Other chains were affected as well. At Circuit City , video sales dropped from 42 percent of overall sales in 2006, to 39 percent in its first quarter, ended May 31. To cut costs, the company laid off some of its higher-paid veterans in sales. “In some cases those people were not any more productive than lower-paid people,” said Bill Cimino, a Circuit City spokesman.



During Best Buy ’s quarter ended June 2, its gross profit rate declined 6 percent, to 23.9 percent of revenue compared with 25.4 percent in the year-earlier period. The company attributed the decline partly to the “promotional environment in home video.”



Even Costco, which operates on a 9 percent profit markup on television or about half what big-box retailers manage, has been negatively affected by plummeting flat-panel TV prices.



The company said that because of its liberal return policy — almost anything can be returned at any time, no questions asked — its effective profit margin on TVs was more than halved, according to Richard A. Galanti, Costco’s chief financial officer.



Customers would buy a large flat-panel TV, use it for one year, then return it for a larger, less-expensive one. “I spoke to one customer who had bought four TVs and returned three of them for lower prices,” Mr. Galanti said. The company often got stuck with used TVs, or had to sell them to salvage companies for a fraction of their price.


Costco wants to make sure that does not happen again. It has changed its generous return policy to permit televisions to be returned only within 90 days, as it does with computer purchases. The company has doubled the manufacturer’s warranty to two years.



Perhaps as worrisome to retailers are signs that growth is slowing, said Gregory Melich, a retail-sector analyst at Morgan Stanley . “For the past few months, growth in the total TV market has been zero or negative, because demand is not there at these price points,” he said.



Morgan Stanley research indicates that two-thirds of American households will not buy an HDTV until the price of a 37-inch or larger set drops below $600. The price of a 37-inch L.C.D. set averaged about $1,200 in June, according to iSuppli. “When the price goes to $800, 17 million more Americans will consider buying one,” Mr. Melich said.



So retailers are trying to wring as many dollars as possible from the customer’s pocket. Circuit City has increased its Web presence, hoping to appeal to Internet shoppers by offering additional information about what equipment is necessary to view high-definition programming. More information may also reduce HDTV return rates, which run 10 to 20 percent, according to Forrester Research .



The retailer is also promoting its professional installation services, called Firedog.



Best Buy, which has its Geek Squad installation and repair service, is also looking to sell higher-profit premium models through its Magnolia subsidiary, which operates both as separate locations and as stores-within-stores.



The fear is that these methods have had a spotty record of success. Retailers complain about the lack of high-profit accessories for the new flat-panel TV buyer. Consumers might add a video game console. Retailers would also like to see them buy a new high-definition DVD player that makes movies on an HDTV especially vibrant — though the format war between companies making Blu-ray and HD DVD players has stymied sales, said James L. McQuivey, principal analyst at Forrester Research.



“The high-definition DVD format war must end by 2008 if retailers are going to sell movie discs and players,” Mr. McQuivey said.



Sales of surround-sound systems have also been disappointing, Mr. McQuivey said, because TV makers have been promoting their own high-quality sound built into the TV sets. And many consumers do not understand that to get true surround sound requires the addition of external rear speakers.



“The first thing customers want is picture quality, and the next is good sound,” Mr. McQuivey said. “But the average consumer is not that sophisticated. To most people, that means a big, loud TV.”

Extended warranties, another high-profit service, are selling less well. As TV prices drop, consumers are less inclined to buy the insurance, Mr. Melich said.



Whether or not these strategies help to increase profits, analysts say, one thing is certain: HDTV prices will continue to drop. For consumers looking to buy a new HDTV, “wait until January,” Mr. McQuivey said. “You’ll get great deals. The retailers will always take on more product than they need.”

http://www.nytimes.com/2007/08/25/bu...&ex=1188360000
 
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#3 ·
>>>>>Thanks! I always love how these articles so blatantly suggest that consumers are morons.



Well...That's the NY Times for you! They assume most Americans are morons. That's one of the reasons why their circulation is plummeting and their reputation as the source for serious journalism is ancient history.
 
#6 ·

Quote:
Originally Posted by timr21 /forum/post/11483063


>>>>>Thanks! I always love how these articles so blatantly suggest that consumers are morons.



Well...That's the NY Times for you! They assume most Americans are morons. That's one of the reasons why their circulation is plummeting and their reputation as the source for serious journalism is ancient history.

Bingo. The 'old gray lady' has lost out to the Internet where all us 'morons' are gathered to help each other learn how to navigate the tricky world of consumer electronics.


And we can make our own decisions, thank you very much. Some of us prefer DrudgeReport and others prefer the blatantly manipulated Digg "news" site. In either case, its our decision to make and sometimes us 'morons' do actually put a little thought into where we source our knowledge.
 
#7 ·
Look, i'll be the last person to take up for the NYT politics and consistent push to think FOR us. However, when you compare the commenters on NYT to the average internet forum... its obvious where the IQ lead is.
 
#8 ·
I think the writer of the article didn't state that America is full of morons, but many of the people quoted in the article basically said that, and, really, I agree with them, so I don't see why this is such a surprise or such a big deal to those two posters a bit above me.
 
#9 ·

Quote:
Originally Posted by Josh7289 /forum/post/11484828


I think the writer of the article didn't state that America is full of morons, but many of the people quoted in the article basically said that, and, really, I agree with them, so I don't see why this is such a surprise or such a big deal to those two posters a bit above me.

Again, I would ask anyone to point out who "blatantly suggested" (incongruency aside) that the average consumer is a "moron" (substitute any perjoritive here given the fact that "moron" was obviously not used in the article).


If your point is that they were called "unsophisticated", that is a long way from moron. Many of the self proclaimed experts on this forum are equally confused by the back of an A/V receiver, bass management, display setup, audio formats, etc. - as am I.


I'm no lover of the Times but the article seemed to be a pretty fair summation of retail HD issues. The manufacturers would do well to understand these points.
 
#10 ·
If you want the best sales I'd say the day after Thanksgiving is the best time. Big Box stores like CC & BB probably aren't going to have big discounts right after Christmas because those who bought after Thanksgiving can price match plus get 10% of the difference. If you wait long enough prices will always come down. A never ending game.
 
#11 ·
Journalism and News Media brings stories out of the dust hopper file cabinet as sort of a script.


I would guess they said that last year and the year before and the year before . . . what another CES? Then we wait another 9 months for the next gen CES crap and then they pull the same story out and make what appears to be a fresh statement of the same suggestion next year before the next Holliday season. Boilerplate Journalism! As you get older you notice it for what it is - slow news or lazy reporting and cyclical evolution of AV and CE products.
 
#12 ·
Looks like this article was more written for retailers and retail stock investors. They are focusing more no different strategies to increase profit margins around flat panel TVs. Makes it sound like we should take pitty on them because their margins are so low.


The only line that has any consumer use is the last one which says to wait til January. That's pretty much common knowledge that didn't take any thinking on the part of the author.


As far as people being morons, I think this article says the opposite. It indicates that consumers are more savvy and resourceful when it comes to maximizing their dollars when it comes to the purchase of an expensive TV. Things such as high return rates and willingness to buy lower tier products and not going for additional ,good for the retailer, high profit margin accessory items.
 
#14 ·

Quote:
Originally Posted by sammyd /forum/post/11484778


Look, i'll be the last person to take up for the NYT politics and consistent push to think FOR us. However, when you compare the commenters on NYT to the average internet forum... its obvious where the IQ lead is.

I would put the average poster in an electronics enthusiast forum considerably higher than the dolts who draft the "lifestyle interest" columns for the NYT.


Science, business, world politics, yes they get brilliant columnists. But the rest of the paper? Not exactly the Yale Law Review.
 
#16 ·
I think the buying advice was the worst aspect of the article. The rest was interesting and informative.
 
#17 ·
This part makes me sad.

Quote:
Originally Posted by EscapeVelocity /forum/post/11479639


At Circuit City, video sales dropped from 42 percent of overall sales in 2006, to 39 percent in its first quarter, ended May 31. To cut costs, the company laid off some of its higher-paid veterans in sales. In some cases those people were not any more productive than lower-paid people, said Bill Cimino, a Circuit City spokesman.

Nice. Stay loyal and work your butt off to get a few raises, until you're too expensive because of a 3% drop in sales, then you get laid off.
 
#18 ·

Quote:
Originally Posted by EscapeVelocity /forum/post/11489172


I think the buying advice was the worst aspect of the article. The rest was interesting and informative.

Agree with that.


But I am amazed at the speed of price drops on LCDs, I am specifically looking at the W and V series that Sony put out about 6 weeks or so ago. The 40 inches have dropped by a good 600 dollars already. Maybe its more of a size thing....I am not comparing the 46s. And of course there is price premium of the newest products.


The question left is what is the price difference the top of the line will have over the cheapos. In the 40 inch if the lowend 1080P is 1000 what will the brand names be able to go for. I would think a 30% premium will still go or more.


Right now pricing to maximize sales and profits will be very interest. Sony has not stood still here too. They have their M series about to be flushed in the market.


Sony would be wise to not sweat being the top end.....but establish the lowend as quality product.


The price war is fun....but the buyers remorse casualities are high.
 
#19 ·

Quote:
Originally Posted by Zer0beaT /forum/post/11490373


This part makes me sad.




Nice. Stay loyal and work your butt off to get a few raises, until you're too expensive because of a 3% drop in sales, then you get laid off.

Circuit City needs some people laid off.....They always are running a 10% off deal.....I just missed the one by a day for fathers day. I was willing to buy at the price listed and if the gave me the 10%.


The sales guy ask his Sales guy manager....he declined...and the main guy did not even come over to talk to me....it was a weekday and he was too busy sitting on the couch watching some new Blue Ray release.


I ended up better off 2 weeks later, with a better sale and a 10% off.


Did that senior sales guy need to be fired? very very much so.
 
#20 ·

Quote:
Originally Posted by tombaker /forum/post/11490512


Circuit City needs some people laid off.....They always are running a 10% off deal.....I just missed the one by a day for fathers day. I was willing to buy at the price listed and if the gave me the 10%.


The sales guy ask his Sales guy manager....he declined...and the main guy did not even come over to talk to me....it was a weekday and he was too busy sitting on the couch watching some new Blue Ray release.


I ended up better off 2 weeks later, with a better sale and a 10% off.


Did that senior sales guy need to be fired? very very much so.

Your experience may have been negative because these people were fired. Just because they fire someone doesn't mean the job goes away. Less experienced people end up taking the place of the senior people that have left. Most of the time, these folks don't understand the system enough to make adjustment for a customer's request. They don't know what to do to help the customer within the bounds of company policy. It's too bad they don't see the value of these employees. Sounds like they could have had a sale rather than alienating customer.


But then again, this is exactly what the overall consumer market is pushing for, "We want lower prices no matter the consequences". Those consequence being the loss of customer service. As far as I can tell the quality of employees at stores dealing with expensive items has dropped. Idea being that customers don't care about customer service and are sophisticated enough to know exactly what they want thus don't need a helpful sales person. We've effectively trade help for lower cost. Unfortunately this trend may have gone too far.


Mike
 
#21 ·

Quote:
Originally Posted by PanamaMike /forum/post/11491425


Your experience may have been negative because these people were fired. Just because they fire someone doesn't mean the job goes away. Less experienced people end up taking the place of the senior people that have left. Most of the time, these folks don't understand the system enough to make adjustment for a customer's request. They don't know what to do to help the customer within the bounds of company policy. It's too bad they don't see the value of these employees. Sounds like they could have had a sale rather than alienating customer.


But then again, this is exactly what the overall consumer market is pushing for, "We want lower prices no matter the consequences". Those consequence being the loss of customer service. As far as I can tell the quality of employees at stores dealing with expensive items has dropped. Idea being that customers don't care about customer service and are sophisticated enough to know exactly what they want thus don't need a helpful sales person. We've effectively trade help for lower cost. Unfortunately this trend may have gone too far.


Mike

Agreed, somewhat. But there is room for variety in the marketplace. That being said, working for a retailer sucks, and firing more highly trained employees, sucks. Home Depot went this route under Bob Nardelli, and it backfired on them. They are now attempting to hire, experienced plumbers, electricians, painters and the like, in each department, to help train other employees and assist customers with their knowledge and experience(which boosts sales). Nardelli came in a hammered the employees, was fired within a few years and left with $250 million he stole from the employees and stock holders, now hes at Chrysler.
 
#22 ·
I find the quality of service at big box stores horrendous. I pity the consumer that goes in there without doing their research first. A few times, being in CC and just looking at the latest panels to get an idea of what they look like in person, I will overhear mis-information, poor advice and flat out lies being told to unsuspecting consumers. I've had to butt in a few times, as politely as possible to point some things out but I generally avoid doing it as it can either irk the sales people and sometimes even the consumer, or the consumer will glom onto you seeing that you know what you're talking about, unlike the fumbling sales person, even asking me things like do you think I should buy this here, in front of the sales person. How do you answer that?


Not to paint with too wide a brush - there are some sales people who do know what they're talking about, and its sad to see that companies are firing them first.


The fact is there are a lot of people who don't research their high $ electronics purchases - perhaps they feel that they don't have the background, or they don't read the right periodicals or web-sites or simply don't have the interest or don't think it's necessary. While the situation has undeniably improved as more people use the internet, places like this forum are simple not representative of the general public.
 
#23 ·
I'm curious...Since this thread has moved to the discussion about Circuit City's business practices and how they laid off 3400 employees earlier this year, have any of the other "big box" retailers done something like this, at least recently or within the last few years?
 
#24 ·

Quote:
Originally Posted by Josh7289 /forum/post/11492361


I'm curious...Since this thread has moved to the discussion about Circuit City's business practices and how they laid off 3400 employees earlier this year, have any of the other "big box" retailers done something like this, at least recently or within the last few years?

Tweeter laid off about 650 people by closing 49 stores several months ago. In July Tweeter was sold and the new owners cut 80 corporate staff employees.


A month or so after CC laid off 3400 hourly employees they cut a few hundred management positions as well.
 
#25 ·
Zankou - You quoted me, but misunderstood what I said.


I said "commenters on NYT", which you equated with "columnists". Those aren't the same. Look below the NYT stories, and you'll find the "commenters". And on whole, they are quite well-read and insightful.
 
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