Prices on tech gadgets remain low, but the pace of declines is slowing and may reverse course if component costs bottom and demand revives
 Apple |
If there were ever a time to hunt for bargains in tech, it's now. Prices for many must-have gadgets are low as lackluster demand forces manufacturers and retailers to slash prices. "Most categories continue to see [above seasonal] price declines," says Stephen Baker, vice-president of industry analysis at researcher NPD Group. The Consumer Electronics Assn. expects consumer electronics sales to slump 0.6%, to $171 billion this year. According to PriceGrabber.com, average selling prices on laptop computers, flat-panel TVs, navigation devices, and the like are on the decline.
But there are signs that the pace of price declines may slow in the coming months. Serial price slasher Circuit City has closed its doors, reducing pricing pressure on other retailers. Demand is expected to rebound in the second half, and component prices are starting to rise.
| More from BusinessWeek.com: • Best Tech for the Buck • 20 Most Important Inventions of the Next 10 Years • A Mobile App Bonanza |
Prices of components such as flash memory, used in cell phones, and some types of digital storage used in items like computers are starting to recover, says Bill McClean, president of researcher IC Insights . Suppliers of many types of components have already increased prices by 2% to 23% since December, in some cases for the first time in two years, he says. Component prices may rise even more in the second half as electronics manufacturers gear up for the holiday season, McClean says. With component prices rallying, gadget manufacturers like Hewlett-Packard (HPQ), Sony (SNE), Nokia (NOK), and others may be forced to choose between raising prices on finished items or holding prices steady at the risk of cutting their margins.
Less Pressure on Best Buy
Circuit City, which historically has accounted for about 10% of total U.S. electronics sales, closed its stores in March. After filing for bankruptcy protection last fall, the electronics retail chain slashed prices through the holiday selling season. Its disappearance reduces pressure on other retailers such as Best Buy (BBY).
Other retailers have additional reasons to avoid selling wares at any cost. An inventory pile-up that left unsold items on shelves through Christmas is working itself out. "A lot of inventory has been taken out of the system," says Shawn DuBravac, economist with the Consumer Electronics Assn.
Consumer demand is expected to bottom out this year. On Mar. 13, the U.S. Census Bureau announced that sales of appliances, TVs, and cameras jumped almost 10% in January from December, though they're still down 3.2% from a year earlier. "TV sales have been surprisingly strong," says Gary Balter, a retail analyst with Credit Suisse First Boston.
| More from Yahoo! Finance: • 8 Cars for Under $18,000 • Decision Time: New vs. Used Cars • How to Score Secret Airline Perks Visit the Family & Home Center |
Staying Home and Watching TV
Some consumers are opting to buy new televisions instead of going out for entertainment. "Many of our customers are taking advantage of lower prices by trading up in larger sizes of TVs, and more functionality and features," Paul Ryder, vice-president of consumer electronics for Amazon.com (AMZN) writes in an e-mail. In 2007, Amazon's top-selling screen sizes were 46 in. and 40 in.," he explains. Last year, as average sale prices went down, Amazon's top seller remained 46 in., but the second best-seller increased to 52 in. "So customers were making up that cost savings in size," Ryder says.
Discounting is doing its part to jump-start demand. Wireless carriers, for instance, are increasing their subsidies on smartphones. While the prices at which handset manufacturers sell handsets to carriers are still declining at a slow 4% annual rate, smartphone prices for end users are plummeting, to about $150 recently, from $300 two years ago, says Michael Morgan, an analyst at consulting firm ABI Research. Carriers have been eating up the difference and both manufacturers and consumers have benefited. Recently, Amazon.com began selling the T-Mobile G1 smartphone for less than $100 with a new service plan. When introduced last fall, the phone cost $179.
Introduction of new devices later in the year could help prop up average selling prices as well. This year, the Consumer Electronics Assn. expects prices of MP3 players to climb to $128, from $126 in 2008, in large part due to price moves by Apple (AAPL). On Mar. 11, the electronics maker introduced its new iPod shuffle for $79. The earlier iteration of the shuffle sold for less than $50. Analysts expect Apple to release a larger iPod Touch this year as well. As more gadgets are introduced in the second half of 2009 in time for the holidays, price declines may reverse course.
Which Gadgets Represent the Best Value for Your Money
 Philips |
To find out which new, lower-priced tech items give buyers the most for their money, we turned to Consumer Reports. These products combine performance, features, and value, and are less likely to break down than some other products.
Check out our slide show for a sneak peek at the best values in LCD and plasma TVs, point-and-shoot cameras, camcorders, laptops, MP3 players, GPS systems, printers, and digital picture frames.1. Philips DVP5992/37
Price: $50
This DVD player offers "very good overall performance and a good choice for use with an HDTV; but there are better choices for use with a standard-definition TV," according to Consumer Reports, which praises the device's ease of use.2. Canon PowerShot A590 IS
Price: $109 - $180 (PriceGrabber.com)
This point-and-shoot camera "is one of the most versatile compacts you can get for the money," according to Consumer Reports. "It offers many shooting options, such as manual and exposure controls, plus practical features, such as an optical viewfinder, which can be helpful in composing in bright light situations. Produces images with very good sharpness, although we did notice visible noise."
 SanDisk |
Price: $120
Looking for a digital music player that's not an iPod? This one from SanDisk (SNDK) is "a smart, no-nonsense player that can grow with your library," Consumer Reports says. "Rotating the Fuze's control wheel provides a quick and amusing way to access the player's menu icons...Good quality sound and recording from FM radio. Good quality recording from built-in microphone. Easier to handle than other players while walking or jogging."4. Canon Pixma MP520
Price: $150
This all-in-one printer is "a very good all-around choice, with reasonable printing costs," according to Consumer Reports, which notes the device offers high photo and text quality.5. HP df800
Price: $150
This digital photo frame from Hewlett-Packard (HPQ) "performed well in our tests and is recommended in its category," Consumer Reports says.6. TomTom One 130
Price: $150
This entry-level navigation device "might be appealing to shoppers looking for a good device at a great price," according to Consumer Reports.
 Canon |
Price: $587 - $890.19 (PriceGrabber.com)
This camcorder "is a fine choice," according to Consumer Reports. "It has excellent video picture quality and an excellent image-stabilizer."8. Samsung LN40A550
Price: $899.99 - $1,399.99 (PriceGrabber.com)
This 40-in. LCD TV scores high marks for "excellent picture quality across the board and a very easy to use menu system. Images have excellent detail, great color, and some of the deeper black levels we've seen on LCDs, though the viewing angle is only average," according to Consumer Reports.9. Apple White MacBook
Price: $1,000
Apple's (AAPL) "entry-level laptop is very good, with exceptional battery life," according to Consumer Reports. "Display was bright. Battery life was exceptionally long. Thin and lightweight. Speakers were good."10. Canon EOS 40D Digital
Price: $1,029.95 - $1,339.99 (PriceGrabber.com)
This camera "has one of the fastest burst modes, being able to fire off 6.5 frames per second for as many as 75 JPEGs or up to 17 RAW files," according to Consumer Reports. "It has excellent image quality, a large live-view LCD, and excellent battery life."
Click here to see the full list.
Kharif is a senior writer for BusinessWeek.com in Portland, Ore.
There are no comments yet