Harvey Norman boss Gerry Harvey has blamed slashing prices on televisions and computers for an expected 40 per cent drop in full year profit.
The high-profile entrepreneur on Monday admitted his business had been "belted" as he unveiled a seven per cent drop in full year sales.
Mr Harvey said while low consumer confidence was having an impact, fierce price competition from foreign websites selling electronics was also hurting business.
"The deflation is in technology," he said.
"Things are so cheap. A lot of things when you look at them you get surprised at how cheap they are. You think 'no one can make them for that amount'."
The electrical and homewares retailer's global sales for the year ending June 30, 2012 dropped seven per cent to $5.74 billion from 2011/12.
The drop in sales combined with property revaluations are expected to pull the retailer's annual profit before tax and minority interests down 39.1 per cent to $227.6 million.
Excluding the property revaluations, the profit result will still be 29.5 per cent lower at $252.6 million.
Global like-for-like sales, which exclude store openings and closures, for 2012 were down 6.5 per cent on the previous year.
The fall was partly due to currency movements, including a six per cent deterioration in the euro and a 4.7 per cent deterioration in the British pound.
Australian like-for-like sales were down seven per cent.
Despite the falling profits and sales, Mr Harvey said he expected the business to benefit from a large number of new technology products being released in the next five years.
"We've been belted at the moment but with all this new technology coming onto the market it's going to be a real big seller into the future," he said.
Mr Harvey said home appliances, furniture and bedding remained stable and were also well placed for any upturns in the housing market.
Harvey Norman shares closed half a cent higher at $1.975.
The retailer is due to report its full year results on August 31.