Hardware prices likely to continue downward trend

by Jan K. Allen

SBJ Contributing Writer

The prices, they are a-changing. And they're changing for the better, according to local hardware retailers.

"The computer industry is the fastest changing industry in the world," said Joel Reeter, president and owner of SEC, a local hardware and software provider.

"Anyone who wants to stay up has to keep up with technology," Reeter said. And technology is moving faster than even the experts imagined it would.

A whole new generation of hardware is now available, making units even a few months old obsolete, Reeter said. Older equipment will be gradually phased out altogether.

Prices have decreased as much as 33 percent in the past 12 months, Reeter estimated. This trend may continue until all the older units are disposed of to make room for the new.

Monitors and other support equipment have also gone down, though not as much as the computers themselves.

Reeter said he believes prices will continue to drop, not only on older models usurped by faster machines with more memory, but on new models, as production methods are streamlined to make the manufacturing process more efficient.

One factor helping to keep costs down on new models is that manufacturers don't have to retool to make the newer models. Thus, they've been able to keep production costs down with the benefit passed on to the consumer, Reeter said.

Darin Lake, sales manager at Best Buy, said competition plays a big part in the pricing downswing. Retailers do not want to keep a huge inventory of units that may end up permanently on the shelf. This causes producers to lower prices in order to move stock.

"Retailers are leery to purchase more quantity than they know they can sell," Lake said.

Manufacturers are being creative in price reductions and rebates to get the merchandise out of the warehouse and into the stores.

Competition is fierce, not only among the big producers such as Compaq, Dell, Hewlett-Packard, and IBM, but the plethora of other, smaller companies trying to secure their share of the market, local retailers said.

The more competitors there are fighting for the consumer buck, the more prices slide downward.

Lake said that Windows 98 may have spurred a few sales, but the greatest factor is the attractive price of the units. People can get more machine for the money right now.

More product for the money has been a boost to sales at ComputerLand, according to James Barnett, sales representative. Like SEC, ComputerLand deals mostly with business networks with multiple stations hooked into a central system, rather than the the desktop computer for the individual.

Businesses are able to expand their systems for less, and some businesses are taking advantage of the opportunity, Barnett said.

Barnett said he feels competition and greater efficiency in production have been the main forces keeping prices low.

When coupled with the constant changing and upgrading of technology, computer prices are bound to continue to go down.

None of the retailers credit Windows 98 with having a great impact on sales. In fact, Reeter said that Microsoft indicated the program was merely a bridge to the the new NT 50 Technology it hopes to introduce in the year 2000.

Morgan Stewart, spokesperson for Circuit City, said the pricing downslide is a natural progression. The more mature the product, the more the price goes down.

The use of household computers has risen from 40 percent to 45 percent and continues to go up. This market forecast accounts for much of the competition in the marketplace.

It becomes a self-perpetuating cycle.

More users equals more sales, and that demand entices more competitors into the market, resulting in lower prices.

"If things continue as they are now, prices should continue to go down," Stewart said.

Shifts to newer and better have definitely driven prices down on older units and will until the older ones are phased out. Innovations always spawn excitement in a field as volatile as computers.

An example, according to Reeter, is the new flat-screen monitor which is thin, lightweight and less cumbersome than the typical model.

While the new screen is expensive to own right now, partly because of the new production equipment needed to build it, its cost will eventually level out as more of the units make their way into homes and offices.

Technology is here to stay, and as it advances and production becomes more efficient, prices should continue to go down, local retailers said.

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