PC Average Selling Prices: Decline Is Here To Stay

The plummeting decrease in the average selling price of PCs is both structural and permanent, according to research firm Technology Business Research.

All told, ASP decreases contributed more to PC vendors' revenue decline than lower unit sales. The combined unit volume sales of Hewlett-Packard, Dell, Lenovo and Apple fell only 5 percent in the fourth quarter of 2008, compared with a year ago. But their collective ASPs fell 13 percent in the quarter, compared with the year-ago quarter, according to Technology Business Research.

"While the addition of netbooks to the product mix directly drove down ASPs, their presence in the market affected ASPs across the product spectrum," wrote Ezra Gottheil, analyst at the research firm, in an e-mail. "Netbooks showed both consumer and business purchasers that, for most uses, they do not necessarily need top-of-the-line PCs."

In addition, the recession is driving customers to more value-based decisions that they will retain even after the economy recovers, Gottheil wrote.

The fact that unit volume fell only 5 percent is evidence of the price elasticity of the PC market, Gottheil wrote, because the lower prices spurred some sales.

"With useful PCs available at a much lower price point than ever before, unit sales would have mushroomed under typical economic conditions," according to Gottheil.

The decline of ASPs will further challenge PC vendors because lower-priced models typically have lower profit margins, according to Technology Business Research.

"The lower-priced PCs are increasingly seen as interchangeable and disposable commodities, and vendors are having difficulty differentiating. To drive sales of more than one PC per customer, vendors must make it easier to manage data and programs on more than one PC at a time. The lower price point makes it difficult to profitably provide adequate and expected service and support," Gottheil wrote.

Because the PC market has changed so radically, vendors must look to establish more long-term relationships with buyers and provide more valuable post-sale services, according to the research firm.

"PCs are becoming a service business. The change in the market presents vendors with threats and opportunities," Gottheil wrote. "Companies that can figure out how to embrace this trend most quickly and profitably will emerge as winners, and the winner's circle may contain different players from those who stand there now."

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