Specialists See LG’s OLED Launch Through Magnolia As Negative for Brand Value

Reactions among specialty AV dealers ranged from frustration to resignation following LG’s announcement that it would sprinkle the initial rollout of its 55-inch OLED TV exclusively through Magnolia Design Center stores in Los Angeles, New York, Miami, Houston, Dallas, San Francisco, Chicago, Seattle and San Antonio. Over the summer, the $14,999 LG Curved OLED TV will roll out to select Magnolia stores nationwide, the company said.

Home Technology Specialists of America Managing Director Bob Hana expressed “disappointment” on behalf of his specialty AV member dealers Monday upon learning that LG is launching the TV exclusively through Best Buy’s Magnolia Design Center stores. HTSA members are “obviously well-positioned in the market to address the kind of high-end customer and early adopters that the technology offers,” Hana said. Not including HTSA dealers in the first distribution wave of the $15,000 product “is doing the market a disservice by not having what we consider some of the true specialists in the market being able to present and explain the technology to consumers,” he said. He said HTSA dealers are trained to show how TVs “can integrate with existing technologies in the home."

David Wexler, owner of The Little Guys in the Chicago area, said LG’s launch through Magnolia stores “dooms the product to failure” because sales staff in big box stores “don’t grasp the technology or the value of it” and that sends the wrong message to customers. “They can’t create a demand for it, all they can do is discount it,” he said, predicting the stores will discount the OLED TVs by a few thousand dollars “because that’s their basis for sales.” While acknowledging that 3D might not have made it anyway, he compared the situation to 3D where big box stores couldn’t generate the enthusiasm for the new format. But it didn’t help that electronics superstores didn’t know how to sell 3D. “I had a customer come in and say he didn’t want to wear the glasses if they had a cord on them,” Wexler recalled, after a customer had shopped at Best Buy. “The salesman didn’t know or care enough” to tell the customer that the cord was a theft-prevention device, he said.

The Little Guys probably won’t carry the LG OLED TV because Wexler has seen other products in the market that “look better.” The store has the 84-inch OLED from LG and hasn’t had “great results.” LG makes Wexler “nervous at this point in terms of what they think high performance means,” he said. Everybody may use the LG OLED panel, he said, but “there are guts and other things besides the panel that make the TV,” he said.

At LG dealer Stereo East, outside of Dallas, Vice President-Sales and Operations David Berman saw good and bad in LG’s decision. The existence of Best Buy validates the need for the specialty channel because consumers tend to shop for electronics at the electronics superstore “like they do for groceries,” he said. People are conditioned to shop for the brands they recognize, but at some point those consumers “realize there’s a level of service they can’t get from that kind of store,” he said. That leads some consumers to independent AV stores, “which gives the specialty stores an opportunity to compete,” he said.

On the other side, exclusive distribution through Magnolia Design Centers is “a short-sighted decision,” Berman said. “There’s no question in my mind that early adopters -- folks who are driven by technology -- don’t buy their stuff at Best Buy,” he said. OLED’s launch at Magnolia will give the advanced display exposure and validation, but “it won’t generate profitable sales for anybody,” he said. “It’s a good way to launch the technology but at some point they're going to recognize that people who buy leading-edge technology don’t buy it at Best Buy.”

Berman said Best Buy uses low-visibility brands such as Insignia and Dynex to generate profit and uses the leverage of brands with high turns and low volume “to bring people in the door.” LG will benefit from that approach in the short run because “everybody goes there, Best Buy floods the market with advertising and clients will see the technology and begin to gravitate to it,” he said. LG is “getting so crushed by Sony and Samsung in the market -- and by several years of bad product -- that this will begin to elevate them again as one of the four or five top players,” he said. Long term, Berman sees sales of OLED through Best Buy as a poor decision because “technology that could be profitable and could generate a reputation builder for LG will relegate itself to becoming another cheap commodity product with no margin in it.”

Bob Dodge, operations manager at Talk of the Town, Allendale, N.J., said, “When a new product is launched, and you are an authorized dealer, you have the expectation of having availability at the same time as other dealers.” He said he understood Magnolia having an exclusive shot at the product but wouldn’t expect that window to be very long. “I'm a dealer of a lot of quality TVs, and I understand that the strategy has to be limited in scope,” Dodge said: “There are no hard feelings and I hope the exclusivity is short-lived."

Bjorn’s in San Antonio isn’t an LG dealer, but sales manager Neil Viers is keeping tabs on his cross-town Magnolia rival. Viers expected the price of the LG 55-inch OLED TV to come in at about $10,000 and thought the $15,000 price was sure to put off customers who might have bought at a lower price. “At that price, it opens the door to a lot of really neat technologies,” he said, suggesting that customers who could afford $15,000 might choose to buy a pair of 65-inch 4K LED TVs for the same price. “OLED is great,” he said, but he’s doubtful the average consumer would see enough difference in picture quality to justify paying the price.

Bjorn’s is a Samsung dealer and Viers expects to have the product next month. CNET reported Monday that Value Electronics, an independent AV dealer based in Scarsdale, N.Y., expects to be the first dealer in the U.S. to carry Samsung’s 55-inch OLED and that the first shipment “is on its way.” Samsung did not comment on the report.

LG unveiled at Best Buy’s flagship Magnolia Design Center in Richfield, Minn., Monday a 55-inch OLED TV that will launch in coming weeks through Magnolia stores in Los Angeles, New York, Miami, Houston, Dallas, San Francisco, Chicago, Seattle and San Antonio. The OLED TV will roll out to select Magnolia stores nationwide, LG said.

The Curved OLED TV measures 0.17 inches in depth at the edge of the screen and the curved design provides an “IMAX-like” effect, Tim Alessi, director of new product development, told us. The “very gentle” curve of the screen, the result of joint efforts between LG Display and LG Electronics, makes a “viewer’s eyeballs equidistant from any point on the screen,” resulting in the illusion that the screen is “a bit larger than it is,” Alessi said. The screen is one differentiator LG brings to the OLED space, and the other is the WRGB four-color pixel system that uses a white light and color refiner for “superior color reproduction and great accuracy in resolution and color detail,” he said.

Design, too, is a key part of the appeal of the upscale TV, John Taylor, vice president at LG, told us. He noted that the acrylic stand that comes with the Curved OLED makes the 38-pound frame “appear to float in air.” Currently, the 55-inch model is the only one in the lineup for LG, and Alessi called it “quite a breakthrough as the first OLED in a home theater size.” It’s “quite likely” that future generations of the product will be in smaller and larger sizes, he said.

In a news release, LG said the contrast ratio of the Curved OLED is “infinite” regardless of ambient brightness or viewing angle, and the company positions the TV as “the first major design change in the industry” since flat-panel TVs began shipping to the consumer market more than a decade ago. LG invested years of R&D behind the optimal curvature of the screen, it said, to arrive at an IMAX-like viewing experience in the home. The LG TV is the first OLED model to achieve THX display certification, having passed 600 THX lab tests to ensure picture quality that matches that of a professional post-production display, LG said. In addition to THX, the Curved OLED TV has been certified by international testing and certification bodies TÜV Rheinland, Intertek and VDE, LG said.

The LG OLED smart TV comes with LG’s Magic Remote and voice recognition features to enable gesture and voice control, and it packs LG’s passive 3D technology for glasses-free 3D viewing, the company said. LG said the launch “solidifies LG’s early lead in the OLED TV race” and that it is the first company to commercialize both the flat-screen OLED TV and the Curved OLED, introduced in Korea earlier this year. It quoted DisplaySearch figures projecting global demand for OLED TV will reach more than 7 million units by 2016. Best Buy didn’t immediately respond to a request for comment.