At CES last week, LGE took a leadership position in rolling out OLED TV. The company announced five 2014 OLED TV models, expanding into new sizes and variants. Its rival Samsung barely mentioned OLED TV, instead focusing on curved and 4K LCD TVs. In Las Vegas, and indeed in the global TV market, LGE has the OLED TV field largely to itself.
It is therefore quite surprising to find that John Lewis (an upscale UK department store), Richer Sounds (a price-fighting retailer which typically is the channel of choice to sell remaindered stock, although known for their strong customer service and knowledgeable staff), and Currys (largest UK electronics retailer) are all listing LGE’s 55EA980W curved OLED TV on “sale” at a discount of £3,000 ($4,910).
It is clear that the “list” price of £7,999 ($13,092) puts the set far from consideration for the vast majority of TV buyers. Our Global TV Shipment and Forecast Report reported just 94 units from LGE across Western Europe in Q3’13; we have yet to collect Q4 data. Yet LGE sees fit to discount the product massively. Note also that Samsung is retailing its OLED only through John Lewis and not a discounter.
One might suspect inventory clearance, but it is not likely that LGE has a warehouse full of OLED sets, bearing in mind the difficulties in manufacturing them. We do understand that yield has improved in OLED panel manufacture – perhaps especially in repair processes to increase the overall material yield far beyond the direct yield (first time good).
What is hard to understand about this strategy is that LGE is using OLED as a key part of its future. OLED is meant to be a premium product to revitalize profitability. Discounting like this is no way to preserve value. Consumers have been trained to wait for discounting and cutting by 37.5% in one big jump merely reinforces a view that prices will fall rapidly. This is a premium business is meant to sell products that (to borrow a phrase) are refreshingly expensive. Porsche knew that to retain exclusivity they should not sell too many cars.