Electronic gadgets better and cheaper

JESSY EDWARDS
Last updated 05:00 26/04/2014
Electronics prices were dropping but sales volumes were increasing.

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Electronics prices are the lowest they have ever been - and prices continue to fall.

Statistics New Zealand has reported a 21.2 per cent drop in the price of telecommunication equipment - cellphone handsets and telephones - in the year to March.

Since 2004 the consumers price index shows the price of computing equipment is down 67 per cent, and audio visual equipment is down 84.3 per cent.

While good for consumers, is this painting a grim picture for retailers? Not necessarily.

Electronics prices were dropping but sales volumes were increasing, Noel Leeming executive general manager merchandise Jason Bell said, and new products were being added all the time.

"If you take tablets, for example, virtually a completely new market has been created," he said. "There is probably a degree of cannibalism in the market now but, when they came out, people were buying a laptop for home and a tablet for on the go."

The smartphone was another example; the rock star in a $400 million mobile market was now almost a fashion item. "The average length of time that someone owns a phone is shorter."

But other products were heading for extinction. Digital camera sales had dropped almost 50 per cent in the past three years. "The smartphone has basically killed the camera," Bell said.

However, Noel Leeming had experienced increased sales at the top end of the camera range.

"While the units have been significantly down, we have seen a rise in premium product around the $799 mark," Bell said.

Except for a spike from Kiwis buying big screens for the Rugby World Cup, television market growth had slowed too. The average price of a TV had dropped from $1100 to $798 in three years.

JustONE advertising agency managing director Ben Goodale said consumers never had it better, getting better gadgets at cheaper prices.

"Good quality technology is not something only rich people can enjoy, now most people can have a decent-sized flat-screen TV, a DVD player and even a home theatre sound system for under $1000.

"A few years ago you would pay $3000 for a reasonable-size old style CRT TV alone," he said.

Bargains are driven mainly by the rapid pace of technology development, economists say.

Westpac senior markets economist Michael Gordon said fast-evolving technology led to bigger price drops. "Other products where the technology is not rising as fast, such as household appliances, the price is falling at a much slower pace."

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He said the quality was constantly improving.

"Nowadays you could get an entry level PC for $800, and what constitutes an entry-level PC is much more powerful these days.

"And it's going to be ditto for phones. What a phone can be has changed dramatically over the last 10 years," he said.

ANZ chief economist Cameron Bagrie said the strong kiwi had a role to play, with a big chunk of electronic goods being imported from places like Korea and Japan.

"We've also had a surge against the yen, which means that prices come down," he said.

More than 85 per cent of all iPhone 5s were assembled in China, and parts were often made in Korea and Taiwan.

"What we're seeing in the computing arena today - it's truly incredible," Gordon said. "Some is related to currency, but the world price of these goods is on a downward trend."

This was in part because gadgets were now cheaper to make.

Take tablets: in just three years to February 2014, the average price of a tablet dropped 57 per cent from $1100 to $469.

He said prices started high as manufacturers produced a small number for early adopters, and became cheaper as demand rose.

The smaller size and more efficient components of today's devices also made them cheaper to make. There was also an oversupply of cheap labour, particularly in China and Vietnam, he said.

"There is no shortage in the manufacturing arena, which has a downward influence on prices."

As consumers bought cheaper gadgets, retailers sold more, and supplemented those sales with hi-tech support services.

Bagrie said it was all part of New Zealand's "winning lottery ticket" - importing new technology while exporting old-style products, such as lamb and seafood, that held their value.

"There's a reason [New Zealand terms of trade] are sitting on a 40-year high."

- Fairfax Media

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