Fuzzy Signals for Television Retailers

Television retailers are reporting declining profits due to drops in manufacturers’ suggested retail price.

You know how you bought that enormous, dazzlingly bright, paper-thin Hi-Def television last holiday season for twenty-five hundred dollars?  Well, this may come as no surprise, but you could’ve saved yourself some serious money if you had only held out a little longer.

The New York Times reported this morning that an increase in manufacturing capacity has led to a huge television surplus.  “But what is good news for consumers has been a nightmare for manufacturers of TVs and retailers that sell them. The earnings of mainstay television manufacturers like Panasonic, Toshiba and Sony have been hammered. Sony, for instance, is overhauling its television operations because of what one executive said recently was a ‘grave sense of crisis that we have continued to post losses in TVs.’ Even newer and more nimble competitors like Samsung and LG have struggled to make much money on TVs, if any.”

A couple of years ago, the demand for High-Definition technology caused manufacturers to invest in newer, more advanced factories capable of assembling televisions at lower costs.  However, these factories became operational at just about the same time the recession hit, causing consumers to be more frugal with their money.  The lack of demand and oversupply caused a drop in television prices.

It’s a no-brainer that consumer reluctance to spend money bodes bad news for retailers.  “This month, Best Buy reported a 29 percent drop in net income for the third quarter, in part because the retail chain had slashed prices on televisions and other electronics.”  Additionally, Best Buy is one of many major retail stores that face strong competition from digital retailers, who are able to hawk the same televisions for less money due to the fact that they don’t have to worry about leasing expensive floor space in high traffic areas.

Some companies, such as Apple, insist consumers aren’t willing to pay a ton of money for new televisions because the products currently on the shelves aren’t innovative enough.  “Steve Jobs vowed before his death to create a television with ‘the simplest user interface you can image’.”  But is user interface really that hard?  Anyone with an HDMI cord and even the feeblest understanding of technology can figure out how to rock a Google search on their flat screen.

And are slacking television sales really a bad thing?  Aside from upending the incomes of retail salesman, who make their money based on commission, it’s hard to say.  It might be argued that television manufacturers have benefited from, and possibly even encouraged, the shortening of attention spans and the decline of general intelligence for several decades.  And they made a ton of money in doing so.
“Consumers buy a new television set every seven years or so, and an average household owns 2.8 TVs… with an average cost of $460”.  Although it’s painful to ignore the cries of a struggling industry in the hostile economy, I don’t recall Best Buy coming to the rescue of other retail stores, say for example, Border’s Books.