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The Cost of Black Friday

December 13, 2006 | Author: Ibex Marketing

A Sony executive has already gone on the record that flat panel TV prices have fallen too fast this year, and while it has been great for consumers, the low prices will make it difficult for manufacturers to fund expanded production and technological innovation. Now we hear from a retailer on the subject. In a report by TWICE, Best Buy indicates that the Black Friday promotions contributed to weaker earnings than were expected for the company’s third quarter. According to the company CEO, the decision to trade profits for market share was the right choice by meeting or beating competitor prices.

Revenues rose 16%, but the gross profit rate dropped nearly one percentage point. Black Friday was the busiest day of the company’s history, serving about 3 million customers on that one day at its flagship Best Buy stores alone. The company says it expects the rate of price decline to be slower in 2007.

Still, it’s got to be a scary time to be in the retail HDTV business. Manufacturers are whistling in the dark about holding the line on panel prices, but as the new plants come online with added capacity, the pressure to move product at any cost will be difficult to resist. The future still looks best for the consumers.