Discounts on plasma and LCD TVs may be great for consumers, but they're causing a world of hurt for TV retailers and manufacturers that face dwindling profit margins. Two global TV industry giants, Samsung and Sony, hope to boost profits by requiring retailers to drop the cutthroat pricing and focus more on making money.
The Wall Street Journal reports that a new Samsung and Sony pricing plan is designed not only help bolster the sagging prospects of big box electronics chains like Best Buy, but also to help brick-and-mortar stores compete with online retailers, which often charge less for TVs.
The pricing policy, which went into effect last month, prevents stores from advertising or selling Samsung and Sony TVs for less than prices set by the manufacturers. The plan is rife with risk, however. As the WSJ points out, consumers may balk at paying suggested retail for TVs. And since other leading TV makers, including LG, Panasonic, Sharp, and Vizio, aren't implemented the policy, Samsung and Sony risk losing sales to discounted TVs from their competitors.
Slowing TV sales and declining profit margins have plagued television manufacturers and retailers for some time. This year may bring some improvement, however, at least for some vendors.
According to The NPD Group, the TV businesses for LG and Samsung had profit margins of just over 2 percent in 2011. And while that's not very impressive, it's better than just breaking even, which was the case for both companies' TV operations in 2010.
Retailers have been struggling as well. Best Buy announced in March that it would close 50 of its big-box stores and replace them with 100 smaller outlets that focus on phones, tablets, and e-readers--but not TVs.