PC Prices Rising: Is the Day of the PC Bargain Over?

By Susan J. Campbell December 14, 2010

With the recent surge in the adoption of tablet computers and smartphones, it would seem that the PC is faltering in its relevance in the industry. If this is the case, prices are not reflecting the same message.

According to a recent Wall Street Journal report, consumers are paying more for computers than they have in years. The retail price of a PC sold in the U.S. in November averaged $615, up 6 percent from last year’s $580. In fact, according to NPD Group research, averages prices have increased in six of the past eight months compared with levels in 2009.

Companies like Hewlett-Packard and Dell struggled with cut-throat pricing in recent years, now to find premium machines are a primary focus and profit margins are once again expanding. Dell’s chief marketing officer told the Journal that higher-end models are flying off the shelves.

The stabilization in the prices of laptops is also helping to drive the price reversal as such models dominate the mix of computers sold today. Laptops have also been feeling the pressure of tablets and low-priced netbooks, which has made the market somewhat volatile.

Apple has been another contributing factor in the market as the company has increased its U.S. market share to 10.4 percent in the third quarter from 9.3 percent a year ago. Apple has also been able to keep its average computer price at about $1,360 over that same period.

One NPD analyst claims that there isn’t anywhere lower to go in price when it comes to PCs. Low-end machines tend to sell for close to what it takes to make them. As a result, manufacturers have little room to add any profit.

The market did see an increase in October of 2 percent year-over-year in the price of laptops running Microsoft Windows software. This was the first jump since 2004 at least and the average Windows laptop price was essentially flat in November. Windows desktops, however, jumped to an average of $508 in November, up from $477 a year ago.

The rising prices could suggest that the PC industry has matured to the point that regular price declines are no longer feasible. Still, sales are growing even as the rate of growth is declining. And, as deals continue to disappear, the bargain shoppers may stay home, but those with disposable income will still need a new PC.

Susan J. Campbell is a contributing editor for TechZone360 and has also written for eastbiz.com. To read more of Susan’s articles, please visit her columnist page.

Edited by Tammy Wolf

TechZone360 Contributing Editor

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