Sharp Decline in LCD TV Prices Forecast for Holidays

by Doug Desjardins

Black Friday is still nearly two months away, but some analysts have already pegged at least one item retailers will be featuring in their door-buster sales: LCD TVs.

Two leading research firms say that an over-supply of LCD TVs coupled with pent-up demand among recession-weary consumers should combine to lower prices and make TVs a must-have for holiday shoppers. Paul Gagnon, director of TV research at Display Search, said that LCD manufacturers have been waiting all year for demand to return and have held off on lowering prices.

“Manufacturers were playing a game of chicken, hoping demand would be there and reluctant to be the first one to let prices fall,” said Gagnon. “Only recently did they come to the shocking realization that prices needed to fall. That will have a good impact on holiday sales.”

That reluctance to lower prices has created a glut of high definition TVs panels that need to move. According to research firm iSuppli, shipments of LCD panels increased to 52 million in the second quarter of 2010 but only 38.7 million were actually shipped to retailers, leaving 36% sitting idle.

Meanwhile, continued high unemployment and a slow economic recovery have kept TV sales sluggish for most of the year, leaving manufacturers no choice but to drastically lower prices.

The same dynamic is playing out in China, where many of the panels used to make LCDs are manufactured. Prices there are expected to drop as much as 40 percent in October as retailers and suppliers work to rid themselves of a similar glut of TVs. Sales are expected to hit 5.5 million in just one month as consumers take advantage of the sharp decline in prices.

Though it’s still unclear how low prices will go here in the U.S., Display Search predicts they’ll fall at least 12% during the last three months of the year, dropping the average price of a 32-inch LCD TV down to the $249 to $299 range with some off-brand models falling below $200. Even brand names are expected to be priced below $200 for some Black Friday sales to get consumers in the buying mood.

And even as Halloween sales are just getting into full swing, a few analysts are already making preliminary projections about holiday sales. Research firm Deloitte is predicting 2010 holiday sales will increase 2%, while Nielsen is forecasting flat holiday sales.

Online holiday sales are expected to continue their run of double-digit increases this year with 15% of consumers saying they plan to make more online purchases, a 16% increase over 2009. Research firms typically issue revised holiday sales forecast in early November when results are in for Halloween sales, which are usually a good barometer for the holiday season.