Falling 4K TV prices benefit consumers, possibly harm retailers like Best Buy

by on August 15, 2016

Stephan Jukic – August 15, 2016

The faceoff between the purely online retailers and Brick & Mortar stores which also sell online but carry the cost weight of their physical locations too is not something new at all but what’s interesting is also how this competition plays out in all the smaller aspects of these two business types’ sales rivalries.

The latest example of just this is Best Buy (NYSE:BBY) which has been fighting fiercely with the digital retailing giant for a share of the U.S consumer electronics market. However, despite strenuous efforts to beat the huge digital Amazon market with its vast network of retail locations, Best Buy is struggling in a number of ways and its stores are looking more than ever like pricey showroom ornamentations than places where people come for a new 4K TV or other electronic toy.

This manifests itself particularly with regards to 4K TVs and while customers who are looking for the latest or even older model 4K TVs of all types have plenty to choose from if they go with Best Buy. In contrast to Amazon’s selection of roughly 60 4K TV models which are all sold only online by the retailer, Best Buy offers a massive selection of over 159 4K TV types in both its stores and website. This makes it an above average seller of 4K TVs on this highly competitive market and the physical locations of the store also allow millions of potential TV buyers to actually compare models live before deciding on a purchase, but even with these benefits in best Buy’s favor, the overall market is treating the company roughly.

For starters, 4K TV prices have plunged in the last year and a half and in the last 12 months alone many models (especially older TV editions) sell for 30% less than they used to. Furthermore, the total stock of TVs kept by the major retailers from Walmart to Target to Best Buy as well has increased heavily with soaring growth in the popularity of 4K home entertainment display.

Cutting edge 4K TVs like Vizio's 2016 M-Series HDR models are sold at most Best Buy locations

Cutting edge 4K TVs like Vizio’s 2016 M-Series HDR models are sold at most Best Buy locations

Given the Amazon doesn’t need to deal with the maintenance costs of numerous giant brick & mortar stores and that Best Buy derives about a third of all its revenues from consumer electronics sales with big-screen TVs and 4K TVs being the leading cash generators of all such electronics, the above combination of steeply falling prices and stiff retailer competition is not helping the company. There is even a possibility of cuts into Best Buy’s earnings for the holidays that are only a few months away.

As a result of all these trends, Best Buy share prices might start taking a bit of a tumble from the currently flat levels they’re trading at for now.

Consumers who aren’t also investors in Best Buy stock will of course continue to reap the benefits of these trends. Competition and price decreases are only going to continue as trends, just as they do for virtually all consumer electronics and the result will only be the continued releases of newer, better and at the same time cheaper 4K ultra HD televisions which are rich in a growing selection of display enhancements like high dynamic range, superior color performance and wider connectivity options.

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