Retailers Expanding Their Assortments of Private-Label LCD TVs

In acquiring the private label sets, retailers have relied on their existing base of suppliers (Target) or taken a semidirect approach (Best Buy) by hiring a firm to help in buying from factories in the Far East. Best Buy set up an office in China several years ago to source products and is said to buy Insignia sets from Quanta and Amtran. For its part, Circuit in 2004 bought Intertan, a company that operated RadioShack stores in Canada and had extensive experience sourcing private label products sold under the NextTech and other brands.

“I think it’s something I need to do, but it’s a question if I have the financial wherewithal and buying power to pull it off,” Mark Shaw, a video buyer at Nebraska Furniture Mart, said of private label. “If I'm buying from a Coby or Jwin and the market moves prices, I can force them to move. If I'm buying semidirect from a factory, I'm probably stuck.”

A sampling of the private label products shows them to be fairly uniform in price and performance. On Fri., Micro Center, Best Buy and Wal-Mart were carrying 32W LCD TVs on the Internet at $999, $1,234 and $986, respectively. Each set featured 1,366x768 resolution, 800:1 contrast ratio and 500 candelas. CompUSA had 23W and 30W Norwood LCD TVs with $617 and $1,234 retails, the latter containing 1,024x768 resolution, 500 candelas and 500:1 contrast ratio. Target fielded a 15” TruTech LCD TV ($249) with a 400:1 contrast ratio and 250 candelas. Private label TVs are expected to account for less than 2% of the 4.5 million LCD TVs forecast to be sold this year, NPD analyst Steve Baker said.

“I've always wondered why the industry has held out so long in doing this,” said David Workman, former Ultimate Electronics CEO who takes over as Marta Cooperative of America pres.-CEO in mid-Jan. “I think Best Buy is doing the most complete job of building a brand, because in many cases a company will build it only to make it the lowest priced lead item. I see where Best Buy is building Insignia to be a great value. There is a big difference between sourcing the cheapest product just so you can put a stake in it, and sell to other products, and trying to get attractive, approachable price points with a very good value product.”

But some industry officials believe interest in private labels will wane once they are faced with competing tier 1 and 2 product. Some private labels may start to fade in 2006 as consumers opt for better-known brands with similar prices and features, said Syntax- Brillian COO James Li, whose company sells LCD TVs under the Olevia brand. While the quality of some private label sets may be good, retailers will walk a fine line to avoid fracturing vendor relationships, industry officials said.

“Private labels will be gone as soon as the unit prices from tier one and 2 suppliers are accepted by consumers,” Li said. “There is no reason for a private label to exist. The only reason for a private label is that it creates a sales boost and store traffic at a discounted price compared to tier one brands.”

In creating a private label program, retailers face hurdles ensuring adequate supply and dealing with issues that are “not really their core competencies”, Westinghouse Mktg. Vp Rey Roque said. An OEM model for retailers “hasn’t been that good” at dealing with a rapidly changing market, he said.

Despite the risks, a private label strategy is worth considering, retailers said. Even with a semidirect program, price quotes can be 10-30% cheaper, said Shaw, who is meeting with 3 companies in deciding whether to launch a private label brand. “The closer I can get to the factory, the cheaper it will be,” he said.

Retail buying groups also are giving some consideration to private label product. They include NATM, which has rights to the Capehart banner. “We're having random, on-going discussions and every time we've kicked around the idea it hasn’t panned out,” ABC Warehouse Video Buyer Daniel Schuh said. “Right now it’s working for us with the Syntaxs and Westinghouses of the world, but whether we want to combine in to one brand is open for discussion.” -- Mark Seavy

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Amid the growing number of private label, brands keep emerging with the backing of factories in China. In addition to ED Digital and its Digitrex LCD TVs (see separate report, this issue), Astar Electronics, a division of Shenzhen, China-based KXD Technology has opened an office in Baldwin Park, Cal. It plans to introduce a range of products including 27W, 32W and 37W LCDs this week at CES in Las Vegas. Taiwan’s Proton also is seeking to build its LCD TV business to include 37W, 42W, 47W and 55W models that also will be demonstrated at CES. The Puriti brand sets will support 1080p resolution and ship first and 2nd quarters, company officials said.