In retail showrooms across the country, television sets this holiday season have never been cheaper, but not everyone is happy about it.
“We are making less money because the company is forcing us to slash prices,” Ram Lall, a television set salesman at J&R, a major electronics store in Lower Manhattan, told the “New York Times.”
Indeed, profit margins are down, even as set sales are up. This is due to a huge increase in manufacturing capacity that has led to an oversupply and continued downward pressure on prices from low-cost manufacturers and online retailers.
“Everybody is fighting for a limited amount of consumer dollars,” Gregg Richard, president of PC Richard and Son, told the newspaper. The company operates 66 electronics and appliance stores. “We are selling more TVs, more units, at lower retail prices.”
In December, Best Buy reported a 29 percent drop in net income for the third quarter, largely because of falling prices of television sets.
Television sets can now be purchased for a fraction of what one cost just a few years ago. This has become a nightmare for manufacturers of TVs and the retailers that sell them. Manufacturers like Sony, Panasonic, Toshiba, Samsung and LG are being hammered.
In attempt to stop the losses, Sony last week said it would end its flat-panel joint venture with Samsung, which was set up in 2004, to capture the boom in televisions with liquid-crystal displays. Samsung, the Times reported, will pay about $940 million for Tokyo-based Sony’s 50 percent stake.
The Times reported that for the long term, the future of television sales appears to be more about what content they can provide—such as Netflix and iTunes—rather than new hardware features like flat screens or 3D technology.
“People used to pay additional to get a Sony Trinitron,” Riddhi Patel, director of television systems at IHS iSuppli, a market research firm, told the “Times.” “But the industry has trained the consumer that any time there is a new technology, if they wait six months the price will come down.”
Paul Gagnon, director of North America TV research for DisplaySearch, which tracks the market, noted that a 60-inch LCD television by Sharp was now selling for as little as $799—about half of what it was selling just a year ago. “Absolutely amazing,” he told the newspaper.
In 2004, Gagnon said there were roughly 32 million television sets sold in North America for an average cost of $400. The average size of a television was 27 inches. Today, 44 million sets are sold a year in North America, with an average cost of $460 and an average size of 38 inches.