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Whether consumers snap up deals may set tone for retail industry
By Matt Richtel
New York Times
Published on Tuesday, Dec 02, 2008
In a volatile year that has turned many Americans into armchair economists, here's an important indicator to watch this holiday shopping season: how many people are lugging home big, flat-screen televisions?
The answer matters to more than just TV makers. Just as high-definition sets have become the hearth of the digital home, they are increasingly central to the fortunes of the consumer electronics industry and plenty of retailers.
And there's reason for serious concern. While retailers are trying to use discounted TVs as a lure for shoppers, many would-be buyers continue to wait for a price low enough to inspire a purchase. Others just have more pressing needs.
Americans are expected to spend $28 billion this year on TVs, making them the largest segment of the $173 billion electronics industry. So far, about half of American households have made the jump to flat-panel screens, which started out as status symbols but are on their way to becoming standard household appliances.
More people might choose to upgrade this year because of the national switchover to digital broadcast signals that is coming Feb. 17. The change, which will mostly affect people who watch over-the-air signals on older sets, has generated a good amount of consumer confusion — which could be good for sales of new sets.
TVs are also a gateway to a host of other products, like Blu-ray discs and their players, surround-sound audio systems, digital video recorders and cables.
Focus is on TVs
All of these factors have led electronics stores like Circuit City and Best Buy, and even less specialized chains like Sears, Wal-Mart and Office Depot, to put TVs front and center in their advertising recently, promoting them on the cover of Sunday circulars and on the home pages of Web sites. They are offering discounts — like 42-inch TVs for less than $700 and 32-inch sets for $450 — that come on top of recent steep price declines for the sets.
For the industry, the feeling is that if retailers cannot get TVs to move, the holiday season could be a bleak one indeed. In that sense, the TV market offers a glimpse of the broader tensions this year between wary consumers on the one hand and retailers and manufacturers desperate to spur sales on the other.
''The television becomes a litmus test of the robustness of the American economy,'' said Richard Doherty, an electronics industry analyst with the research firm Envisioneering. In Doherty's consumer surveys, the early word is mixed; many consumers want a new TV, but they think that if they wait to buy, retailers will drop prices further.
Doherty's firm tracked stores in New York and California and found that for some retailers it was the slowest Black Friday of the decade.
Steep price cuts
A year ago, Sony sold a 40-inch model for $1,600 that now costs $1,000, and a 32-inch model for $1,100 that now goes for $749. And Sony is one of the costlier brands. Several manufacturers are selling 32-inch TVs for $450 to $500. Mammoth TVs, those more than 50 inches, have come down too; Best Buy is offering a 52-inch Sharp for $1,299.
Many major retailers are sweetening the pot by bundling TVs with high-definition DVD players, or offering discount bundles on cables.
Just to be safe, TV makers have been shipping fewer sets — but they may not have pulled back fast enough. In the third quarter of this year, shipments to North American retailers of LCD TVs rose 21 percent from a year ago, and those of plasma TVs rose 20 percent, according to DisplaySearch, a market research firm. That is down from growth rates in the last two years that at times hit triple digits.
In a volatile year that has turned many Americans into armchair economists, here's an important indicator to watch this holiday shopping season: how many people are lugging home big, flat-screen televisions?
The answer matters to more than just TV makers. Just as high-definition sets have become the hearth of the digital home, they are increasingly central to the fortunes of the consumer electronics industry and plenty of retailers.
And there's reason for serious concern. While retailers are trying to use discounted TVs as a lure for shoppers, many would-be buyers continue to wait for a price low enough to inspire a purchase. Others just have more pressing needs.
Americans are expected to spend $28 billion this year on TVs, making them the largest segment of the $173 billion electronics industry. So far, about half of American households have made the jump to flat-panel screens, which started out as status symbols but are on their way to becoming standard household appliances.
More people might choose to upgrade this year because of the national switchover to digital broadcast signals that is coming Feb. 17. The change, which will mostly affect people who watch over-the-air signals on older sets, has generated a good amount of consumer confusion — which could be good for sales of new sets.
TVs are also a gateway to a host of other products, like Blu-ray discs and their players, surround-sound audio systems, digital video recorders and cables.
Focus is on TVs
All of these factors have led electronics stores like Circuit City and Best Buy, and even less specialized chains like Sears, Wal-Mart and Office Depot, to put TVs front and center in their advertising recently, promoting them on the cover of Sunday circulars and on the home pages of Web sites. They are offering discounts — like 42-inch TVs for less than $700 and 32-inch sets for $450 — that come on top of recent steep price declines for the sets.
For the industry, the feeling is that if retailers cannot get TVs to move, the holiday season could be a bleak one indeed. In that sense, the TV market offers a glimpse of the broader tensions this year between wary consumers on the one hand and retailers and manufacturers desperate to spur sales on the other.
''The television becomes a litmus test of the robustness of the American economy,'' said Richard Doherty, an electronics industry analyst with the research firm Envisioneering. In Doherty's consumer surveys, the early word is mixed; many consumers want a new TV, but they think that if they wait to buy, retailers will drop prices further.
Doherty's firm tracked stores in New York and California and found that for some retailers it was the slowest Black Friday of the decade.
Steep price cuts
A year ago, Sony sold a 40-inch model for $1,600 that now costs $1,000, and a 32-inch model for $1,100 that now goes for $749. And Sony is one of the costlier brands. Several manufacturers are selling 32-inch TVs for $450 to $500. Mammoth TVs, those more than 50 inches, have come down too; Best Buy is offering a 52-inch Sharp for $1,299.
Many major retailers are sweetening the pot by bundling TVs with high-definition DVD players, or offering discount bundles on cables.
Just to be safe, TV makers have been shipping fewer sets — but they may not have pulled back fast enough. In the third quarter of this year, shipments to North American retailers of LCD TVs rose 21 percent from a year ago, and those of plasma TVs rose 20 percent, according to DisplaySearch, a market research firm. That is down from growth rates in the last two years that at times hit triple digits.
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Posted 07:31 AM, 12/02/2008
Interesting report, but tvs are like cars: once you buy one, you won't need another for awhile. Why base our consumer economy outlook on a product like that?