CastleCops® - Retailers Vie for Electronics Holiday Rush

Retailers Vie for Electronics Holiday Rush
By Ellis Mnyandu

NEW YORK (Reuters) - With stacks of cut-price DVD players, digital cameras and big-screen televisions for sale, U.S. consumer electronics retailers are jockeying for what they expect to be a prosperous holiday shopping season.

The battle for a share of the American living room is turning fierce. While many retailers anticipate doing a brisk business this Christmas, some are tempering their optimism.

We have a cautious outlook regarding expectations for the holiday season, but we do expect it to be better than last year, said Larry Costello, a spokesman for Sears Roebuck & Co. (S.N: Quote, Profile, Research) , one of the largest consumer U.S. electronics sellers.

Retailers, including the world's top discounter, Wal-Mart Stores Inc.(WMT.N: Quote, Profile, Research) , are trumpeting bargains.

At best, analysts anticipate that the lure of lower-priced DVD movies, MP3 players, digital camcorders and VCR/DVD recorders will help boost not only store traffic, but will also entice shoppers to look on the Internet for holiday gifts.

Consumer electronics are a good traffic driver, whether it's in the store or online, said Patti Freeman Evans, a retail analyst at Jupiter Research. But whether the increased customer traffic will translate into real profits is uncertain in the crowded $100 billion industry.

NEW COMPETITORS

Computer maker Dell Inc. (DELL.O: Quote, Profile, Research) recently entered the sector with offers of flat-panel TVs and digital music players, going head-to-head with rival Gateway Inc. (GTW.N: Quote, Profile, Research) , which began selling home electronics much earlier to offset weak corporate demand for personal computers.

Long before the year-end shopping spree, prices of consumer electronics were falling just as quickly as manufacturers could crank out new products. That has raised fears of a squeeze on margins as almost every retailer markets aggressively.

This holiday season we have a pretty significant level of price competition, with just a tremendous level of choice for the consumer, said Sean Wargo, an analyst with the Consumer Electronics Association.

BARGAIN HUNTING?

No product segment is expected to face more intense price competition than the market for flat-panel LCDs or plasma televisions.

Prices on these high-definition sets -- sized from 15 inches to 42 inches -- have declined as much as 25 percent from last year, partly as a result of competition among their mostly Asian-based manufacturers.

A lot of retailers are paying attention to this category as a growth area. What's helping out is also the fact that supply is still tough in some categories, Wargo said.

For shoppers, finding a blockbuster deal could prove to be difficult, since some retail chains appear ready to squeeze out a few extra dollars from each sale.

For example, Wal-Mart is offering a 42-inch Sampo plasma monitor at $2,998 on its Web site. But Best Buy Co. Inc.'s (BBY.N: Quote, Profile, Research) online store offers the same set at $2,658.99.

Retailers are even offering free shipping and 18-month interest-free credit, as well as installation, on such televisions.

Wal-Mart, which last year broke new ground with a DVD player priced less than $40, is being undercut by Sears with a $36 one-disc Apex DVD player via its online store, versus Wal-Mart.com's $39.74 Norcent version.

Jupiter Research's Evans says such price differences will send shoppers to comparison-shopping Web sites. That could boost online sales, which are forecast to climb 21 percent from last year to $16.8 billion in the November-December period, excluding travel,

David Schick, an analyst at Legg Mason, said he expects retailers to be smarter on pricing even if they project the usual image of bargain-basement deals to entice shoppers.

I think there will be better gross profitability in the consumer electronics business than it will appear from the circular advertising, he said. No retailer is going to come out to say 'We've have raised prices.' But the pieces of the business they are working on are better-margin pieces.

Source: Reuters


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