The Tough Get Tougher
n Dave Lavin: The environment based on the economy will dictate where retail pricing falls. There will be pricing pressure on flat-panel TVs; there are not a lot of innovative products coming out that will allow retailers to make good margin. The problem: flat panel is in every distribution channel in the world, from CVS to Home Depot to Best Buy. That puts a lot of pressure on margins. I’d say 42-inch will be in short supply through the holidays—32s to 42s, because all the manufacturers are ramping up their factories to build big stuff, where they can make money.
The problem is the same as it was in the old days of glass picture tubes, when manufacturers ramped up so much and had all this product to move, to build market share. That’s what they’re doing now: trying to build market share. But what will happen at some point is that there may be consolidation within the vendor industry, or the manufacturing industry because everybody can’t keep selling flat-panel product down to a zero cost. I have to believe that the second- and third-tier brands, or even the first-tier brands, may be forced to consolidate. They can’t keep driving the cost out, especially when there are only truly a few panel manufacturers. A company that makes the panels can drive the cost down. But if they are selling some of those parts to somebody else, as an OEM, they’re surely not going to give them the price that they’re giving themselves. When we start selling a $499 flat panel under cost, the only one who truly wins is the customer. The manufacturer may be selling it to the retailer for $550, so he may be making some money, but the retailer doesn’t.
DEALERSCOPE: What products or services were most profitable for you in 2007? What new services did you recently add or plan to add?