LCD TV Price Reckoning Coming
By Paul Gagnon – Director, North American TV Research, DisplaySearch
A recent post on Cnet.com got me thinking about a growing problem. The article was about a 32″ HD LCD TV from Vizio selling for $359 with free shipping at Dell.com. The same “Eco” friendly model sells at Walmart for $429, which is also the normal price at Dell. This example fits into a pattern of using aggressive pricing to drive sales volume in the LCD TV market. Even in the face of economic headwinds, we continue to see strong sell-through activity. But negative revenue growth in LCD TVs remains a disturbing trend and it is closely related to increased price sensitivity by consumers.
Declining revenue is the result of a reversal in the steady growth in screen size in addition to the aggressive pricing. These two trends converge at 32″ LCD TVs. ASPs for 32″ HD LCD TVs are as low as they have ever been according to The NPD Group’s weekly tracking service, hovering just above $400, matching the best deals of Black Friday 2008.
The big problem with this situation is the rise in TV panel prices is leading to a compression of profit margins. Panel prices have been rising $10-15 PER MONTH recently according to the DisplaySearch Monthly Large-Area LCD and PDP Pricing Report, and have been rising in general since the end of Q1′09. The combination of falling set prices and increasing panel prices for 32″ LCD TVs can be seen in the chart below (the delay between panel purchase and sell-through is roughly 8 weeks). As can be seen, panel price as a percentage of final selling price has been rising for the past few months. Either brands or retailers (or both!) are experiencing declining margins to keep prices interesting, and they may soon raise prices to offset the rising costs, which we’ve been starting to hear about. So the continual erosion in prices will soon be ending.
Figure: 32″ LCD TV Set Prices and Panel Prices
Source: DisplaySearch Monthly Large-Area LCD and PDP Pricing Report and The NPD Group/Weekly Tracking Service
This leads to the question of impact on volume growth. What will consumers do if retail prices stabilize or rise into the holiday season? The implications for holiday product and promotion planning are not trivial. It certainly doesn’t seem like there will be many deals during the upcoming holiday season that are dramatically better than those to be found today.
I’ve seen a few more recently, particularly on older models now that newer ones have been released. Has the trend continued through September according to your or NPD data?
Prices have fallen a little more in recent months than I expected given the upward surge in panel prices. Of course, there was some margin recovery to brands and resellers in the first quarter as a result of the falling panel prices during the end of 2008 and Q1′09, so they’re trading it back now to keep prices moving steadily downward and unit volume healthy.
Any feedback on results from Golden Week? Seems CPT sold some CRTs in 3Q…wonder how that affects LCD inventory in China…zero sum game?
So far, it’s too early to tell, although there are reports that sales are strong. CRT demand in China has been very dismal so far this year, so the net effect (given tight supply of LCD) has been a total decline in TV shipments to China. So I don’t think an uptick in CRT shipments will have much of an effect on LCD demand since it’s still likely that CRT shipments are going to be down strongly.
Thanks…hopefully ‘real’ data comes out soon. BTW I saw some surprising stats from Chinese Minstry of Commerce on PC sales under the ‘rural’ program. First 6 month of 2009 110,000 PC were sold under the program. Seemed to be a very small amount given the enthusiastic articles about how well the program was working…