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TVs are hot, but price alone might not win sales

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CIOL Bureau
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Nicole Maestri

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NEW YORK: Advanced televisions, like those with high-definition capabilities and plasma screens, are expected to be big draws this holiday season as prices fall and products like Microsoft Corp.'s Xbox 360 become available to take advantage of new technology.

Gamers bought out Xbox 360 supplies at many stores across North America and there was frantic bidding for the new game console on various Web auction sites. The new consoles showcase games with high-definition graphics that need high-definition televisions to really strut their stuff.

"New television technologies appear ready to take center stage this holiday season, as price declines of 20 percent to 30 percent per annum over the past few years have made flat-panel big-screen prices affordable to upper-middle-class and even middle-class households," said Prudential analyst Mark Rowen in a note.

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But worries that the competition between discounters like Wal-Mart Stores Inc. and Target Corp., and consumer electronics retailers like Best Buy Co. Inc. and Circuit City Stores Inc. to attract shoppers would result in drastic price cuts and hurt margins may be premature, analysts said this week.

"We continue to believe that all of the concern over the discounters' push into consumer electronics may be overblown," said CSFB analyst Gary Balter in a note.

STOCKING THEIR SHELVES

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To try to lure higher-spending consumers into their stores, discounters have been stocking a larger selection of pricier consumer electronics, like flat-panel TVs.

Worries that consumer electronics chains would be squeezed by discounters flared in September when Wal-Mart vowed aggressive price cuts for the holidays after drawing criticism last year for keeping prices too high, driving shoppers away.

Concern heated up again last month when Wal-Mart said it would roll out its holiday advertising campaign Nov. 1, the earliest launch in its history.

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But as "Black Friday" approaches this week to kick off the U.S. holiday shopping season and retailers unveil a range of promotions, analysts said discounters may not win sales based on price alone.

"Some of the cheapest prices we found were at Wal-Mart, but product selection and presentation of the televisions at the discount retailer left much to be desired when compared to our experience at Best Buy and Circuit City," Rowen said.

With consumers buying an item that can cost thousands of dollars, Best Buy and Circuit City may draw customers based on their wider selection, their customer service and the accessories they can offer shoppers, analysts said.

"Our discussions with store employees suggest that increased interest in flat-screen TVs has prompted demand for TV accessories (i.e. wall mounts, filters, surround sound equipment)," noted UBS analyst Brian Nagel. He said that employees mentioned that clients who purchase a flat screen TV usually spend an additional $700 to $1,000 on accessories.

Rowen said that at this stage, with advanced televisions so new to consumers, shoppers are less enticed by "rock bottom prices if the catch is less product selection and minimal services offerings."

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