From today's WSJ:
Gadgets Priced
For Frugal Times
By CHRISTOPHER LAWTON
June 3, 2008; Page D1
Recession worries were on Chris Medico's mind when he went looking recently for a new digital point-and-shoot camera. So he skipped over a Canon Inc. G-series model camera that costs roughly $500 and bought a Canon PowerShot A470 for $129.
Mr. Medico, a pharmaceutical engineer in Efland, N.C., says that on account of the shaky economy and layoff concerns, he is being more careful these days with all of his purchases. "We all have this threshold at which it starts feeling uncomfortable," he says. "For me, $200 is it."
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Samsung
A Samsung flat-screen TV
Concerned about economic woes and rising food and gasoline prices, U.S. shoppers like Mr. Medico are rethinking their purchase plans for consumer electronics -- especially big-ticket items like flat-panel television sets and Blu-ray DVD players. Now, some consumers are focusing on less-expensive electronics -- MP3 players, digital photo frames and digital cameras -- with a price tag under $200. Analysts and manufacturers say that since these items are priced in the sweet spot, where shoppers still pick them up on a whim, they're considered to be somewhat recession-proof.
"It's money that a consumer can part with ... without compromising other financial priorities or other parts of their lifestyle," says Susan Kevorkian, an analyst for IDC, a market-research firm.
Consumer-electronics makers and sellers have spotted this trend and are expanding their lineup of lower-priced tech toys to lure those frugal shoppers. Canon, for instance, increased the number of cameras it sold for below $200 to three at the start of this year from two last year. The $129 model Mr. Medico chose is the least expensive camera the company has ever offered.
While it's true that technical advances often drive down prices of consumer electronics over time, industry executives say their current emphasis on low-cost products goes beyond those regular declines. "With the dollar situation the way it is, a camera that is less than $200 is really not that expensive," says Chuck Westfall, technical adviser for Canon U.S.A. "These are almost becoming impulse buys."
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Canon
Canon PowerShot A470
It's not just cameras. Robert Woodson III, who works in medical billing in Darby, Penn., was thinking about buying Apple Inc.'s iPod, but he found them too pricey. While at a RadioShack Corp. store, he instead pulled out his wallet for a SanDisk MP3 player costing $90. "It was probably an impulse buy," he says. "When I happened to see it there, I said, 'I think I will go ahead and get it.'"
That MP3 player's purveyor, SanDisk Corp., says it now has eight MP3 players that cost less than $150, compared with five last year. At the same time, the company is phasing out players costing more than $200. Among the company's latest offerings are the Sansa Clip, a $40 MP3 player with a gigabyte of memory, and the $80 Sansa Fuze, which comes with 2 gigabytes of memory. Because of the lower price tags, SanDisk can sell the devices at mass-market retailers such as Walgreen Co., giving them added visibility to bargain-conscious shoppers. Meanwhile, Apple launched a new 2-gigabyte version of its iPod Shuffle for $69, and lowered the price of its 1-gigabyte Shuffle to $49 from $69, its lowest price ever for the Shuffle.
Another strategy in a soft economy is pushing products that not only cost less, but which tend to be bought as gifts, making them extra resistant to a downturn. In March, for example, Circuit City Stores Inc. doubled the shelf space -- to eight feet -- dedicated to digital photo frames. These frames, which typically cost a bit more than $100, seem to sell well despite any downturn, analysts say.
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Apple
iPod Shuffle
Things don't look as rosy at the top of the gadget food chain. Kurt Scherf, an analyst with Parks Associates, a market-research firm, says that one of its surveys of U.S. households with Internet connections found that 35% of the 1,090 households where members originally planned to buy a high-definition TV set this year would be delaying the purchase, with the economy getting the blame. That's one reason Sony Corp. recently said it would introduce more "entry-level" TV sets this year that cost between $500 and $1,200 -- that's about $200 less than Sony's premium line of TV sets. And Samsung just cut the prices on part of a new line of flat panels by $200.
Retailers are also pushing the price down on Blu-ray DVD players, which sell for $550 on average, according to Parks Associates. This month Wal-Mart began selling a Blu-ray high-definition DVD player from Magnavox for $298. "We think that we have an opportunity to help lead in price on this," says Gary Severson, senior vice president for home entertainment at Wal-Mart Stores Inc.
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H-P
H-P Mini-Note PC
Personal computers are also looking recession-proof these days. Analysts and computer vendors say that PCs do well even in uncertain times because the machines are fast becoming a commodity necessary for school, work or simple communication.
PC makers such as AsusTek Inc. and Hewlett-Packard Co. have in the past year added smaller bare-bones notebook computers to their lineup. An EEE PC made by AsusTek costs $300 and targets users who mainly intend to surf the Internet and send email, says Donald Leung, a product manager for the company. Meanwhile H-P's Mini-Note PC costs $500 and aims to attract both students and traveling professionals.
Mr. Scherf of Parks says Father's Day will be another test of consumers' threshold for electronics prices, but he adds that analysts and industry executives will be watching what happens later in the fall as the holidays approach. "If gas prices remain the way they are and the economy continues to sputter along, I would be very worried come October or November," he says.
