Best Buy and Circuit City are reeling this week from the loss of their edge over discounters in the minds of high-definition television buyers -- just as total industry sales are beginning to slow. Yesterday's retail numbers showed that more consumers are trading down to price-focused shops for entertainment products, eschewing the better service and selection offered at specialty stores. Wal-Mart, the king of discounters, yesterday reported "extremely strong sales" of flat-panel TVs and home entertainment furniture.
This is a remarkable turn of events for specialty retailers that once had the high end of the business locked up. Vendors like Sony and Panasonic used to sell exclusively through the leading specialty stores to protect their brand image and leverage the service levels these outlets offer. But now, as the big electronics makers are fighting for their own lives, squeezed by low-cost competitors and a slowing consumer, they’ve become a lot less picky about where to sell their wares. At the end of the day, it's about the sales targets.
This backs up the findings of a recent survey by AlixPartners, a consultancy, which showed that U.S. consumers at all levels now rank "low prices as the most important determinant of what and where they buy, eclipsing product quality, customer service, the shopping experience and ease of shopping." In the words of AlixPartners managing director Fred Crawford: "It's a whole new ballgame."
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