Laptop prices: How low can they go?

By Deron Kershaw, Notebook market analyst

Consumers in the U.S. aren’t buying as many laptops as they used to so vendors and retailers are responding the best way they know how … by lowering prices. Scan the notebook assortment at most major retailers and you’ll get the sense that the holidays have come early. Sale prices that were previously reserved for Black Friday are now becoming a regular occurrence. Best Buy, Walmart, and Fry’s Electronics have offered 15-inch laptops for as low as $259 in recent weeks. The aggressive pricing is no longer limited to a handful of vendors, as many of the top manufacturers are now competing for the opening price point.

During the first half of the year, the average selling price (ASP) of notebooks (excluding netbooks) in the brick-and-mortar retail channel (Retail) dropped by over $100, from $755 to $653, according to Gap Intelligence data. Notebook prices in the online channel of brick-and-mortar retailers (Retailer Online), which offers a larger proportion of better-equipped and more expensive options, has seen comparable price declines over the same period.

From April to July of this year, notebook prices dropped 7.7 percent in the Retail channel and 7.5 percent in the Retailer Online channel. Last year, during the same period, prices dropped just 4.9 percent and 3.7 percent, respectively.

The drop can be attributed to a variety of factors:

• The economic slowdown in the U.S. continues to sap or delay consumer demand for PCs.
• The rise of tablets has delayed laptop upgrades. Not coincidentally, the current $650 price floor for laptops is close to the generally accepted price ceiling for tablets.
• As the netbook market dies off, manufacturers are looking for lower-cost full-sized laptops to serve as their entry-level offering. Most of the models are equipped with AMD’s new low-priced Fusion processors, which integrate the graphics and processing on a single chip.
• Beyond the immediate trends, the laptop market is simply a mature category that has seen increased competition from a wide range of manufacturers.

Despite the price declines, there is still a large number of premium laptops available to consumers. Due to cyclical pricing trends, laptop costs are expected to increase slightly in August before dropping again in September and October. The holiday refresh in November and December should see prices increase again before retailers offer heavy discounts. Manufacturers are also expected to launch higher-priced ultrabooks in the fourth quarter, which should serve to boost average selling prices (ASPs) as vendors attempt to stop the slide. As with any technology market, the largest vendors will continue to use their manufacturing scale to reduce prices. The big winners, of course, are consumers, who continue to get better laptops for better prices at a faster rate.

Deron Kershaw is a notebook market analyst for Gap Intelligence, a San Diego-based independent technology research firm with emphasis in helping product manufacturers and retailers understand current market trends in order to respond to customer demands.