New Models Spur Price Hikes in LCD TVs

LCD-TV pricing in the United States surged upward in July as brands and retailers introduced new models with enhanced features and slowed promotional activities designed to move older sets, according to according to electronic display market research firm iSuppli Corp.

The average retail price in July for an LCD-TV in the United States amounted to $1,136, up 7.2 percent from $1,060 in June, the highest rate of increase in at least a year. The price also was up 2.8 percent from $1,104 in July 2009.

“While pricing often oscillates on a month-to-month basis, a year-over-year increase is unusual in the LCD-TV market, where annual price erosion rules due to falling panel costs and escalating competition,” said Riddhi Patel, director of television systems at iSuppli.

“After small sequential declines in May and June, average prices for LCD-TVs increased in July with the arrival of a flood of new sets. More than 20 new models were added to each of the size ranges, with the majority of these models boasting improved features and functionalities—as well as higher pricing. With these new models available, sellers cut back on deals designed to stimulate the sales of older LCD-TVs and reverted back to the regular prices.”

New LCD-TV features include LED backlighting, 3-D display, higher frequencies such as 120Hz and 240Hz, and built-in Internet capability. Many of the new models also feature larger display sizes.

Price trends vary by retailer
LCD-TV price trends in July varied among different retailer types. Prices at mass merchandisers and club stores, for instance, declined on average on a sequential basis, while those at consumer electronics and online retailers saw increases. The price changes could be attributed to the brand and product mix at each retailer.

Some of the higher average price increases were seen at outlets, including Amazon, Best Buy, Costco and Crutchfield—stores where an increased number of higher-priced premium models were available or added to the mix. In comparison, stores like Vanns, HHGregg and other regional chains saw a slight price decline given their mix of new and older models, as well as the availability of older models on sale.

Existing economic uncertainty and caution among consumers are factors that explain the reduced consumer interest in TV purchases among mass merchandisers and club stores. Furthermore, promotions at such stores have been slower than the prior months, adding to their woes. Nonetheless, iSuppli expects retailers to become aggressive once again with their promotions in the upcoming months in order to fuel demand.

TV sales go soft
Overall the U.S. LCD-TV market is experiencing a softening in sales due to factors including seasonality, increasing prices for some key sizes and a slowdown in consumer uptake given the economic uncertainty. In July, retail inventories rose and stood at six weeks to nine weeks on average—considered somewhat, high for this time of the year. Brands and retailers, in order to fuel demand and the replacement cycle, will have to come up with aggressive promotions for the rest of the third quarter to generate excitement for the upcoming holiday season.

iSuppli