When major retail chains continued to lower prices on HD flatscreen products in a fierce price war during the recent holiday season in order to compete and to move merchandise off the shelves, they also took a beating when it came to profit margins. Circuit City, for one, is now feeling the ripple effects of the price war in very tangible ways.
The Richmond, Va.-based CE chain announced it will have no choice but to shut down at least a few dozen stores and, therefore, lay off several hundred workers. Also, some top Circuit City execs (including its chief merchandising officer) will be fired, according to The Washington Post.
The all-out price war, which continued in some respects well beyond the holidays until the Super Bowl earlier this month, positioned Circuit City in a pitched battle with other major retailers, notably Wal-Mart and Best Buy. Circuit City wound up offering more than 170 HD/DTV models and brands, with price cuts of up to 18 percent across the board.
The Panasonic brand 42-inch plasma set, for example, fell from nearly $1,800 in the early fall to about $1,200 by November. For fiscal 2007, Circuit City is estimating its operating margin may be as low as 1.2 percent. "What you're seeing today is us trying to change to become more competitive within our industry," a company spokesman said.
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