Sunday, October 19, 2008
By Erik Gruenwedel | Posted: 14 Oct 2008
Target Corp. has begun selling Blu-ray Disc players from $229, establishing the big-box retailer among the most aggressive to push the high-definition packaged media format entering the fourth quarter.
The Minneapolis-based retailer, which reportedly sells 25% of all packaged media, is exclusively offering the Olevia BD-110 Profile 1.1 (Bonus View) player for $229 — a price that rivals the proprietary Insignia brand Profile 1.1 player from Best Buy.
Target also is selling the Philips BD-P7200 Profile 1.1 player for $249.99 — $100 below the suggested retail price. It also sells the Sony BD-PS350 and Samsung BD-P1500 players for $299.99 each.
Target spokesperson Sonia Paulson said the company earmarked Blu-ray players at separate prices to attract a wide spectrum of consumers entering the holidays.
“Our vision is to provide our guests with the ultimate high-definition experience,” Paulson said.
She said it was not company policy to disclose sales data for individual products.
The price reductions could be a reflection of the lack of available credit due to the global economic crisis that has many consumer credit cards companies scaling back credit limits and increasing interest rates to consumers.
Indeed, lower monthly limits and higher interest rates discourage consumption, which is not a good thing for CE retail entering the holiday season, analysts say.
Target, which generated $460 million in Target credit card finance charges and late fees in the most recent quarter, also reported $260 million in card write-offs — up from $95 million during the previous-year period.
Target reported a 3% decline in same-store sales in September.
“Challenges in the current environment, including weak top-line growth in our retail segment and higher net write-off rates in our credit card segment, have increased the likelihood that our third-quarter [earnings] may be slightly lower,” Target CEO Gregg Steinhafel said in a statement.
Stacey Widlitz, with Pali Research in New York, said she estimates 80% of all TVs and related CE purchases are on credit, and any pullback in monthly credit limits by card companies could spell trouble for CE retailers.
“If things do not change quickly, we are concerned all credit card companies will put lower monthly dollar limits in place,” Widlitz said in a research note.
Consulting firm Innovest StrategicValue Advisors reported that banks are projected to write off nearly $96 billion in credit card debt in 2009, double the 2008 losses.
Bill Hardekopf with LowCards.com said with card companies unable to legally suspend accounts and demand full payment, they instead increase interest rates and lower credit limits without notice.
“That's effectively the same thing as closing the account,” Hardekopf told MSNBC.com.
Widlitz said in meetings with Best Buy, the No. 1 CE retailer told her increasing numbers of more affluent consumers were charging purchases than previously. She said the trend highlighted the need by consumers who in the past ignored the availability of incremental credit now clamoring for it.
“Maybe consumers still have an appetite for goods they cannot afford right now but are hoping by the time they have to pay off the free financing purchases, the environment [will] change,” Widlitz said.
Independent analyst Rob Enderle said bleak economic headlines underscore consumers’ cautious approach to big-ticket purchases, including Blu-ray, and retail’s desire to cut prices.
“We are likely to see several vendors purge inventory before the quarter is done,” Enderle said.