Tweeter has escape plan in flat panel price wars

Friday, February 02, 2007

Tweeter Home Entertainment Group is trying to slip out of the line of fire in a flat-panel television price war that began over the Christmas holidays and is now continuing through Super Bowl Sunday.

The 154 store electronics chain has seen its flat panel television stock plunge as it tried to compete with prices of larger rivals like Circuit City and Best Buy.

But now Tweeter's top brass have developed an escape plan true to their high-end niche: drop out of the low end flat panel market and focus on custom high end installations.

Also included in the plans, are the launch of new "Consumer Electronics Playground" stores where concierges greet arriving customers, and take them on guided tours of interactive showrooms.

This marketing plan is almost history repeating itself, because in the late 1970s, Tweeter was front and center pioneering the sales of videocassette recorders, but as the market matured and prices declined, Tweeter quicky dropped all lower-end VCRs and focused on high-end models.

Over the christmas holidays, larger rivals Circuit City and Best buy slashed prices on 42-inch flat-panel TVs to below $1,000, drawing customers who otherwise would have settled for older projection-style models. Tweeter responded with its own price cuts, but many analysts agree that Tweeter lacks the size and buying power to compete for long at the lower price points.

Last year, Tweeter's shares lost more than half of their value despite a cost-cutting plan begun in 2005 to close 19 stores and shave more than 200 jobs.