A prime time to buy high-tech TVs

Sarah Larsen wanted a 55-inch Sony LCD television for her husband's Christmas present and refused to settle for anything less than a bargain at Circuit City.

The 31-year-old New Hampshire mother negotiated, threatened, and even walked out of the store. When she returned a half-hour later, she got what she wanted: $300 off, free delivery, and a bonus TV stand for a set that cost almost twice as much last year.

Aggressive price wars over flat-panel televisions, the Cadillac of TV sets revered for their big screens, clear pictures, and sleek physiques, have given shoppers the upper hand this holiday season. Merchants have slashed prices 40 percent on average over the past year, and electronics chains are offering years of no interest and no down payments as they try to fend off discounters and newcomers, such as Home Depot, Office Depot, and Toys "R" Us, that are now selling low-cost LCD and plasma TVs.

"Prices are dropping faster than TVs are growing in terms of screen size," said Scott Erickson , a partner in Deloitte & Touche's consumer business practice. "The average American household that a year ago could only dream of putting in a 50-inch or greater television is actually doing it this year."

The cost of consumer electronics products often decreases after several years on the market, but some analysts say the plunging prices on flat-panel TVs were unexpected this season, prompted by cutthroat pricing and manufacturers with large amounts of inventory. A 37-inch Polaroid LCD television that was advertised for about $1,800 last year at Circuit City was discounted to a low of $929 at the chain this month, according to Prudential Equity Group.

Consumer electronics gifts are estimated to account for a quarter of all holiday gifts -- about $21 billion this season, according to the trade group Consumer Electronics Association. But some retailers might not see as big of a boost as they expected. Best Buy Co. and Circuit City Stores Inc. both recently reported that the competitive environment and declining profit margins, particularly on TVs, are hurting their bottom lines.

Prudential Equity Group analyst Mark J. Rowen wrote in a recent report that analysts assumed discount retailers would squeeze the excess profits out of the flat-panel TV business "but we did not expect to see it occur this holiday season."

And he predicted more bargains to come. "We believe the competitive environment will only become more intense next year," he wrote.

The price chopping intensified after Thanksgiving, when Wal-Mart Stores Inc. promoted a 32-inch LCD screen for $598 -- a price some analysts estimated was below cost and was being used to drive traffic into the behemoth's discount stores.

Consumers have fallen for higher-quality TVs that boast newer technologies such as plasma, liquid crystal display (LCD), and digital light processing (DLP). The result: bigger screens, clearer pictures, and sets that can hang on the wall because they are only 4 inches deep.

After checking out the televisions at Wal-Mart this week, John Windley convinced his wife the prices were too good to pass up. They liked the selection better at Best Buy, and on Thursday, bought a 40-inch LCD Samsung television that was originally $1,699 for $1,299.

"I looked briefly last Christmas, but couldn't afford the TVs so I let the dream go," said Windley, of East Boston. "Now I can't wait to bring this home. I love the way the picture just jumps off the screen."

Darrell Rigby of Bain & Co., who leads the firm's global retail practice in Boston, said shoppers are seeing such aggressive pricing this season because it works.

"Consumers are very interested in these products, and the lower the prices, the more they are willing to consider what was once an unthinkable luxury," Rigby said. "This has been a good shopping season for customers."

Meanwhile, Home Depot Inc., which began selling flat-panel televisions this season, has been rolling back prices on its plasma and LCD sets. A 42-inch Magnavox plasma television that started at $2,000 at the beginning of November is now selling for $1,200. A 20-inch Magnavox LCD television with DVD player that went on sale last week for $500 is now priced at $399.

"This has really helped drive sales and make Home Depot a holiday destination," said Josh Dube , Home Depot's assistant store manager in Natick.

Still, for hard-core bargain hunters, like Mauro Moraes of Waltham, it's all a waiting game. The 32-year-old browsed televisions at Best Buy, BJ's Wholesale Club, and Toys "R" Us over the past week, but wasn't convinced.

"I'm holding off until I can get an even better deal in January," Moraes said.

Jenn Abelson can be reached at abelson@globe.com.