Friday, September 21, 2012

Retail As TV Declines

The dismal state of the TV screen business could last for a few years, until the next technology breakthrough.

A CNNMoney report, “LCD TV shipments decline for first time ever,” summarizes the downturn this year in global TV manufacturing. LCD occupies 84 percent of the TV market globally, and is declining for the first time ever as people have finished upgrading. Unit sales in high-end categories are falling faster, and U.S. prices are hardly falling. Prices are still higher than last year’s Black Friday sales. For some models, the same unsold inventory from last year is still on the shelves with the same price tags — hardly a formula for getting consumers excited about buying right now.

Black Friday price reductions in the last two years have been big enough to wipe away retailers’ profit margins. That’s the result of ordering too much inventory, a mistake retailers will try to avoid this year. The big Black Friday price reductions this year will probably be on designs that feature the latest gimmicks that consumers have decided they don’t care about (so if you want one of those, you could hold out for the sale prices).

Retailers are hoping for some new technology to get consumers interested in TV hardware again, but that isn’t on the horizon, as Demitri Kalogeropoulos explains in “TV Sales Won't Save These Stocks” at Motley Fool.

The retailers in the most obvious distress with the decline of TV are Best Buy, which has lost its big back-of-the-store product and the associated foot traffic, and H.H. Gregg, as it bets heavily on a blowout Christmas season that will never arrive. Walmart too is hurting in the TV department, though it (along with Amazon and may see an opportunity in the high-volume low-end LCD segment if other retailers go too far in emphasizing the latest high-end features. Television has become a replacement-cycle product, and retailers are still trying to figure out what to do.