Falling HDTV Prices Hurt Independent Retailers.

[Smokey]

The advantages of lower-priced, higher-performance videos such as Flat panel HDTV are many, but they come with their downsides – some of which are truly hurting the most skilled, well-informed AV retailers and installers in the home theater marketplace.

As prices have dropped on HDTVs, so have the profit margins. It is not uncommon to see the margin on a plasma HDTV offer the dealer between two and five percent profit, so a $2,000 sale might yield $100 in profit for the deal.

A commissioned salesman who makes 10 to 15 percent of the sale walks away with barely enough money to pay for lunch and the guy who owns the store is left wondering how he can sell 12 HDTVs per hour so he can pay his overhead.

So to stay afloat, independent retailors exploring other avenues. Noel Lee, the founder of Monster Cable, is best known as the King of the Attachment sale, as attachments to the sale are a key to solving the profit problems on many HDTVs currently in the marketplace. If dealers are smart, they will work hard to sell a Blu-ray or HD DVD player, complete with an HDMI switcher, HDMI cables and perhaps a few other accessory goodies (such as audio) . This could improve the profit of the sale nicely.

http://www.avrev.com/news/0107/25.hdtv.shtml

[Woochifer]

I already see this happening. The home theater store a couple of miles from my house closed up shop a few months ago. They sold Vienna, PSB, Totem, Parasound, and a variety of other audio gear, but their biggest margin items were their flat panel HDTVs. It worked great for them when the Fujitsu plasmas were selling for upwards of $10,000, and they could bundle the TV in with home installation and media room construction services. But, with prices tumbling on the HDTVs, and even Best Buy getting into the custom installation market with their Magnolia Home Theater ministores, they got squeezed big time.

[kexodusc]

In my area I'm seeing more small stores that are rebranding and joining "chains" or associations - think the small guys are seeing the writing on the wall and trying to ally themselves with their peers in order to enjoy the same buying power advantages of the larger retailers.

I'm seeing more of them selling computers, car audio, and personal audio (mp3, Ipods) at the expense of some TV's and stereo equipment. This is resulting in less floor space for the big items.

Not sure how I feel about this. TV's are pretty generic anyway - but if the big stores become the lone choice for buying them, it will force small retailers to find profits from other areas.
On one hand, if these stores close and PSB, Totem, and Parasound aren't available in smaller retailers, they'll fight for floor space in BestBuy and offer their wares wherever they can. I think this can be beneficial to the consumer. On the other, we run the risk of premium products that don't appeal to the mass-market disappearing, or coming at a heavy premium.

Quite honestly, there's too many damn companies saturating the market with too many products right now anyway. Normally that's not a bad thing, but even small companies need to move some volume in order to achieve economies of scale. HT has been a textbook example of a surging market's life cycle. The last 7 years have been incredible - all kinds of new people jumping in. I suspec the next 5 years we'll see just as many get out, leaving the industry at an equilibrium.

Big retailers are going to get squeezed a bit too, I suspect. A lot of new customers in the HT market aren't likely to buy a 7.1 HT system with HD display every 2 or 3 years - probably not even every 5....This raises big questions on the sustainabilty of current sales, especially for smaller retailers. HD and HT in the last 5 years have been the first major, compelling reasons to buy new gear for the average joe since the VCR hit stores. This was somewhat revolutionary...I'm not sure if BluRay and other future formats will have the same effect.

I think we'll see fewer premium gear shops, but the ones that do survive will probably be better off. There's advantages and disadvantages passed to the consumer.

It's sad to see the little guy down the street who lets you demo his gear, and provides excellent service go out of business. But in my experience, the internet and big box retailers are offering comparable or better products now at lower prices. In the past, Big Box didn't always have as good a selection of quality components.

The industry is changing - the money you save buying online or at a Big Box retailer is probably directly proportional to the added cost a small brick and mortar store takes on in providing you the superior service. The question then becomes "does the consumer perceive added value in the B&M's service providing? I'm guessing more and more the answer is no. In an industry where the consumer can become reasonably well educated fast, and products quality is good, and maintenance is almost non-existant, service isn't as important. Someone like me use to depend a lot more on my local hi-fi shop. Today I need them less than ever. Sad but true.

[Smokey]

I really think the electronic local B&M stores start getting hit once Bestbuy and Circuitcity came to town. I remember when in the late 80s, we had three or four local electron stores (such as Rex) that sold TV and audio equipment with their own credit department. Even JCPenny was selling TVs and accessories.

But once BB and CC opened up stores in the suburbs, local stores went out of business one by one. The only couple that are left stay afloat by doing custom installations and sell high end audio and video equipments that one can’t find in BB or CC.

It is like Walmart running all of local home suppliers out of business.

[nightflier]

There's nothing good about this trend. Not only are small specialty shops being edged out by BB & CC, but even Tweeter and Magnolia are starting to comoditize. Last weekend I noticed that their speaker selection was thinning out (looks like they are abandoning Definitive and box speakers in general) and that all the Audioquest stock was being replaced with Monster stuff.

It won't be long until all tangible / non-consumable products will only be available online...

[nightflier]

There's nothing good about this trend. Not only are small specialty shops being edged out by BB & CC, but even Tweeter and Magnolia are starting to comoditize. Last weekend I noticed that their speaker selection was thinning out (looks like they are abandoning Definitive and box speakers in general) and that all the Audioquest stock was being replaced with Monster stuff.

It won't be long until all tangible / non-consumable products will only be available online...