In contrast to the pre-recession boom times, consumers and businesses continue to be more careful about how they spend their money. This ongoing shift toward conservative spending habits in the US is having an impact on both PC hardware makers and channels resellers. Some consumers are holding off on making purchases this year, as evidenced by recent downgrades in PC shipment forecasts from IDC and Gartner. Others that still plan to purchase a desktop or notebook this year are trimming their budgets, seeking out good enough systems rather than those equipped with high-end components.
One indication of this shift in spending behavior is found in desktop PC retail pricing. Over the past 12 months, gap intelligence’s panel of US retailers has seen a nine percent decline in the average selling price of desktop PC assortments, or an average drop of about $80. Desktops priced under $500 now account for 35 percent of US retail channel placements, up from 25 percent one year ago. Performance systems priced over $1,000 saw an equally dramatic decrease in retail placement share to around 20 percent.
Yet despite the decrease in average selling prices, hardware vendors continue to increase storage capacity, installed RAM, and screen sizes (for AIOs and bundles). In fact, the majority of retail desktops today are equipped with 1TB or larger hard drives, including a large portion of entry-level (sub-$500) systems.
In order to lower prices while continuing upgrade cycles, hardware vendors often use a strategy of upgrading to a step-faster CPU from the same processor family, delaying upgrades to next generation technology. For instance, a vendor will upgrade its desktop from CPU X that has a speed of 2.5 GHz to CPU X2 that has a speed of 2.6 GHz, resulting in a considerable savings versus paying a premium to install CPU Y from a next generation processor family.
In the near-term, desktop retail prices will likely continue a downward trend as consumers remain wary of the economy and cognizant of their tight budgets. The ramping-up of new technologies in the fourth quarter and first half of 2012 will present an opportunity for vendors to increase shipments due to hardware replacement cycles, reflected in the more favorable shipment forecasts issued by IDC and Gartner for 2012. New technologies may also help vendors and resellers justify price increases next year. The question is, will buyers be confident enough in an economic recovery to replace their existing hardware, or will prolonged economic uncertainty again delay purchases like it did in 2008-09?