updated 12/17/2006 6:39:42 PM ET 2006-12-17T23:39:42

What’s a big electronics retailer to do when companies like Home Depot start stocking high-definition TVs near the garden hoses?

Fight back — by selling service and expertise.

The days when high-end TVs were found only at electronics retailers are over. Home Depot Inc. is selling flat-panel televisions during the holidays this year. Wal-Mart Stores Inc. has been selling them for some time now.

“We can have pretty much anything we want now from the suppliers,” Costco Chief Financial Officer Richard Galanti told analysts last week.

That’s pressuring Best Buy Co. Inc., Circuit City Stores Inc. and other traditional electronics sellers to offer something besides a TV on their shelves. The stakes are higher than ever, with customers willing to spend more on TVs even as prices fall. Retail-tracking company NPD Techworld estimated that U.S. sales of plasma-screen and LCD TVs jumped to 5 million sets during the first 11 months of 2006, versus 941,000 during the same period in 2004.

Best Buy has boosted training for its staff, and has expanded the number of its Magnolia home theater stores-within-a-store to 300 of its roughly 800 stores. Last year it had about 100 Magnolia stores inside Best Buy stores. Every HD-capable TV at Best Buy now has a high-definition signal, and each store now has a side-by-side comparison of standard-definition and high-definition TVs, said Mike Vitelli, Best Buy’s senior vice president for consumer electronics.

It’s also working with customers to make sure they’re getting a high-definition signal from their cable or satellite company. He said many customers don’t realize they need that.

“I would bet 75 to 90 percent of the people don’t even know that. They think, I bought a high-definition TV, I’m watching high-definition TV,” he said.

Circuit City has rolled out its own installation service and expanded its price guarantee to refund 125 percent of the difference if a competitor sells a TV for less within 30 days of a purchase.

TV maker Panasonic has rolled out a “Plasma Concierge” service that gives customers free tech support for their new TVs.

Steve Kovsky of the research company Current Analysis said there’s more money in selling services than in the product alone. Efforts like those at Best Buy and Circuit City are “aimed at getting in deeper with the consumer, not just selling them a box and waving bye-bye out the door, but following that consumer home and helping them set up not just their TVs, but their PCs and their wireless,” he said.

Kovsky’s own father-in-law ran out and bought a 42-inch plasma screen TV to watch a big UCLA game, his alma mater. But he had to call his son-in-law for help when he turned the TV off and couldn’t figure out how to turn it on again because the remote hadn’t been programmed right.

“These things, they’re not as simple as your old TV. A lot of people end up taking them back,” he said.

Indeed, returns — which are expensive for retailers — have been a problem for some. Costco’s Galanti acknowledged that they have hurt margins there, though he said they’re working on the problem. Vitelli said Best Buy has nearly halved its TV returns, in part by doing more to make sure customers buy the right TV in the first place.

“The concept is that you really don’t want somebody just to buy a television and take it home,” said NPD Techworld analyst Steve Baker. “A, you make a lot of money selling other things, and B, you don’t want them to be unhappy with their purchase and take it back.”

“Customers aren’t just buying on price,” he said. And selling accessories and installations tends to favor Best Buy and Circuit City, he said.

Home Depot merchandising Vice President Bill Hamilton said the lack of services isn’t a disadvantage for his company, because its customers are do-it-yourselfers anyway, and because TVs are an opportunistic way to grab some Christmas electronics spending.

But the promise of extra help lured Barb Penn into Best Buy when it came time to replace her 20-year-old Mitsubishi TV. Penn, a 57-year-old letter carrier who grew up with a black-and-white set, was baffled by the choices. “I felt like I had lived on the range my whole life,” she said during one of several trips to the Best Buy in suburban Richfield.

She needs to make one more measurement to ensure the 46-inch television she’s eyeing for her husband’s birthday on Dec. 24 will fit. After that, she expects to spend about $8,000 for the TV, a new sound system, mounting, and all the stuff to hook up the components.

Best Buy promised she could get it all installed in time for her husband’s birthday, she said.
Duane Gullickson, another TV shopper at Best Buy, said he had noticed an improvement in the company’s sales force: “They’ve gone from a bunch of high school kids that didn’t know anything to actually providing some intelligent information.”

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