TV Price War Hurts Circuit City

A vicious price war for large, flat screen televisions has bit into Circuit City’s bottom line. The electronics retailer posted a loss for the past 3 months, sending shares skidding. As usual, the price war for fancy TV’s has removed profit from the industry and put the money back in consumers’ pockets. The message for retailers or other businesses who use loss leaders: promote cheap loss leaders to encourage larger purchases. Avoid loss leaders or price wars on the core part of your business. It’s one thing to offer cheap DVDs to build traffic and encourage people to buy a new TV with surround sound to enjoy the DVD. That can be a profitable strategy. But if you can’t make money on the TV, there’s no amount of DVD’s or stocking stuffers that can make up for the loss of that profit.