Analysts: ‘Retail must cut PC prices’

Several analysts have warned that retailers and vendors may have to slash PC prices if they are to avoid stock gathering dust over the vital Christmas period, as consumers look to cut back on their spending.

Endpoint Technologies, Majestic Research and NPD are among the research firms warning that the date festive promotions begin on may come sooner than expected, resulting in pressure from retailers on distributors and vendors to cut their prices.

President of Endpoint Technology Associates Roger Kay warned that the date PC promotions begin has slowly crept forward over the previous couple of years, leaving retailers questioning whether or not they will be able to make it through October without slashing prices.

"People with a lot of money are still going to come out and buy whatever they want," he said. "But there’s a whole big pack of folks in the middle that are going to be looking at trade-offs."

However, the UK channel has hit back viciously at suggestions that they might have to cut prices. "Cut prices back to what, exactly?" snapped PCA chief executive Keith Warburton to PC Retail. "What margin do these analysts think is available?

"It’s the easiest thing in the world for them to say cut prices, but to what real benefit? If someone has to replace their computer they’ll replace it. A price change of ten per cent isn’t going to alter their decision to replace."

Majestic Research’s consumer electronics analyst Richard Klugman said that figures showed US consumers spent dramatically less on gadgets in September – warning that all signs were pointing towards a difficult Christmas period.

However, he said that netbooks were likely to continue selling regardless, thanks to their low price point. NPD’s Stephen Baker agreed, but warned that netbooks would be a wildcard this Christmas, but said that vendors were unlikely to push them too hard, encase they cannibalised sales of more profitable laptops.

Despite the risk of cannibalisation, Baker warned that this was not be biggest issue facing retailers, saying that the question isn’t whether or not price cuts or netbooks will appeal to customers, but "it’s whether such people will talk into the store in the first place."

Warburton agreed: "Discretionary sales might be hit. People who feel their personal finances are going to be tight will cut back on luxuries, in other words they’ll defer their spending, rather than try to save £20."

However, some within the industry are questioning the notion that PCs are still something people will cut back their spending on: "Is the PC space really discretionary spending," asked Acer’s US general manager. "Or, are people buying a personal computer because they need one for managing finances [or] continuing their education? I think we’ll still continue to see people invest in themselves."

Source: SMH