TV price carnage in South Africa

Electronics suppliers and retailers have slashed the prices of TVs in South Africa in an all-out war for market share, Iser-Expert CEO Jonny Aarons has said.

A well-placed industry source at a major global electronics brand has also told MyBroadband that the price war had decimated prices in the mid-range segment of 40-inch to 46-inch TVs.

This is great for consumers but has placed significant pressure on manufacturers, distributors, and retailers.

Speaking at Iser’s annual supplier awards dinner at the Emperor’s Palace convention centre, Aarons said retail margin pressure was being caused by second-tier brands driving prices down and Amazon’s recent entry into South Africa.

Iser-Expert is a purchasing organisation established in the 1990s to consolidate the buying power of independent resellers and prevent bigger competitors from trampling them.

Originally incorporated as Iser, the organisation’s founding members included Kloppers, Hirsch’s, and Tafelberg.

Hirsch’s eventually broke away from the alliance and now handles its own buying.

In 2015, Iser became affiliated with Expert Group, a retail alliance founded in 1967 that provides support and services to retailers of consumer electronics and appliances.

Addressing Iser’s suppliers, Aarons encouraged them to help ensure independent retailers remain price-competitive across all product segments.

“We have seen and continue to see rampant pricing aggression, particularly in the TV category,” Aarons said.

“Even though the Amazon entry was very tame, we have seen various retailers aggressively trying to protect their share of the market by driving prices down even further.”

Aarons said that in times like these, suppliers will need to help keep the independent channel more competitive by ensuring their pricing is always competitive in every category they operate in, including entry-level, mid-range, and premium.

“If the independents are not competitive at entry-level, they run the risk of losing the premium segment,” Aarons said.

Aarons said if the independent channel doesn’t remain a strong competitor, suppliers will become even more reliant on mass retailers and online-only channels.

“These are hugely aggressive and focus on a narrower and more entry-line market segment,” said Aarons.

He said that if mass market and online channels come to dominate electronics retail, consumers will have less opportunity to see suppliers’ wider range of products.

This reduces their ability to sell premium products to the market, which in turn affects profitability.

“Chasing market share at the expense of price stability is not a good strategy,” Aarons said.

Aarons previously told MyBroadband that independent retailers in South Africa account for about 35% of sales in the electronics and appliance markets.

Iser-Expert targets product categories such as small and large appliances, houseware, air conditioning, cell phones, tablets, wearables, personal care, and outdoor.

The buying group also operates a website for Expert Stores, which sells consumer electronics and small and large appliances.

Aarons said Iser-Expert has 450 independent stores in its South African network, which makes up around 65% of the local independent market, excluding Hirsch’s.

Seventeen of its stores have been granted permission to use the Expert brand.

For example, Kloppers and Tafelberg co-brand stores carrying products sourced through their purchasing venture as Expert Kloppers and Expert Tafelberg.

This strategy has proven successful, with Iser-Expert achieving an annual average compound growth of 17% over its previous three financial years.

Aarons said there is a common misconception that prices at independent stores are necessarily higher than at major retail chains.

Buying groups have ensured that this is not true, allowing independent retailers and owner-managed groups to compete on an even footing with the larger players.