HDTV Competition Could Bring Deals

LOS ANGELES -- A few short years ago, high-definition TVs were widely available only at specialty audio-video stores; in the past year, most have been sold at consumer electronics chains. Today's array of choices is even broader--and potentially more confusing.

HDTV buyers face a diverse selection of places to shop: Internet retailers, discount warehouse chains such as Costco and Wal-Mart, and PC vendors such as Dell and Hewlett-Packard are ramping up their HDTV offerings.

Good News for Buyers

Overall, this proliferation of HDTV retail options is good news for consumers, says Andrew Shulklapper, vice president of TV market research for DisplaySearch.

"It means better pricing for customers, and at the same time more options for customer service," says Shulklapper, who spoke about the implications of the changing HDTV landscape at DisplaySearch's HDTV Forum 2004 here this week.

Shulklapper says the increased availability of attractively priced HDTVs at nontraditional outlets such as Internet merchants, warehouse chains, and computer superstores is certain to bring prices down. He notes that warehouse chains have historically competed on price, and PC vendors can undercut traditional consumer electronics manufacturers because they're accustomed to lower profit margins. The margins on traditional consumer electronics can run as high as 40 percent, whereas a direct vendor such as Dell typically realizes a 5- to 12-percent margin.

Competing on Service

This doesn't mean that traditional consumer electronics retailers will be left out in the cold, however. Shulklapper says that high-end specialists and even chains such as Best Buy and Circuit City have other ways to compete--most obviously by offering good customer service.

At Sam's Club or Costco or Wal-Mart, "there will be no help at all. This becomes a self-serve business," Shulklapper says. A high-end specialty store, in contrast, can offer advice and installation services to upscale consumers who want customized home theaters or home entertainment centers.

Because consumer electronics chains such as Best Buy and Circuit City will likely have to live with lower margins if they are to compete at all, Shulklapper predicts that they will focus their efforts on what he calls "solution buying."

These outlets will try to sell you as many accessories as you need for an HDTV-based home entertainment center, he says.

"They will make sure you won't go home without a necessary cable, or without a DVD player optimized for HD performance," Shulklapper says. As an example, he points to a Best Buy ad depicting a living room filled with home entertainment electronics that work together, as opposed to a collection of stand-alone products.

Some customers--especially those who don't know much about what's involved in putting together an HDTV setup--will benefit from this approach. Others--for example, people who simply want to replace an existing HDTV--will be fine getting the cheapest possible product, either online or at a discount warehouse, Shulklapper says.

IT Eyes HDTV

The entry of what were traditionally information technology companies such as Dell and HP into the HDTV market will have other consequences besides lower prices. Product life-cycles will get shorter, and each succeeding product will likely be cheaper and have improvements in quality or features--all of which could dramatically change the way people buy TVs, Shulklapper says. New sets may last ten years or longer, but people will perceive them as obsolete in a way they never used to perceive a ten-year-old CRT TV.

"It will be more like buying a PC. It will still work after two years, but you won't show it off anymore," Shulklapper says.

Initially, IT vendors might not produce sets that match top-of-the-line models from traditional consumer electronics firms in style and/or features, he adds. "The quality at a minimum will be good enough. And over time, they will close the gap," he adds.

But IT firms will have to work to make their brand names as prestigious in the HDTV market as the brands of top-tier consumer electronics companies already are, according to Shulklapper.

"A high-end TV tends to be a very emotional purchase. It will be hard for these companies to capture the high end. You may have confidence in HP for your computer, but when you're buying a TV there's a lot of pride and satisfaction going into it as well," he says.