Sales volume has grown since last year, as well as average selling prices. GfK’s IT account manager, Dominic Ashford, examines why this means that customers are looking for more than low prices...
In contrast to the weather, June proved to be a particularly bright month for IT in Great Britain. Sales volume grew by seven per cent in GfK’s total tracked market compared to June 2011, and the value growth was a positive 12 per cent in retail channels.
Part of this value growth was due to high-profile, innovative products such as webbooks and e-readers, but, more interestingly, it appears that consumers are willing to pay more for products perceived to be premium, with overall average prices in retail channels growing 15 per cent year-on-year.
This price growth is caused in part by the supply issues that have affected hard-drives since the flooding in Thailand in 2011. However, even if hard drives are excluded, prices still rose by 11 per cent in retail channels year-on-year. Key product groups which saw price growths were desktop and mobile computers, keyboards, software and communication devices (networking hardware). The key conclusion for IT manufacturers and retailers is that whilst consumer confidence and willingness-to-purchase is low, when purchases are made consumers are willing to increase the money they spend if the benefits of paying more are communicated.
A key example of this can be seen in networking with the prices of communication devices (which includes routers, access points, switches and so on) growing four per cent year-on-year. Despite this rise, the volume sold also increased by one per cent over the same period. This shows that consumers are prepared to invest money in the networking infrastructure that underpins cutting-edge trends, such as cloud storage and the connected home, and are not merely looking for the lowest price. Furthermore, for this product group, the average selling price of products sold online was 47 per cent lower than traditional sales. This suggests that in this area, High Street stores have the advantage of being able to better sell the benefits of faster, more reliable networking hardware and additional services. Alternatively, consumers shopping online tend to opt for lower-priced options.
An interesting contrast to this comes in the form of webbooks (commonly known as tablets), where in June the average selling price of models sold online were 11 per cent higher than those sold offline. This might initially suggest that webbooks are more expensive online, but this is not the case. What appears to be happening is that when consumers are opting to purchase higher specification or more premium webbooks, they are doing so online where prices are lower than in- store. Conversely, there is not much incentive to search online for cheaper prices on budget products, leading to more impulse purchases in High Street stores. These combined factors caused the average price of webbooks sold online to be higher.
The conclusions to be drawn from the examples of networking and webbooks seem to be that in the IT market, traditional retailers can compete with online stores, but need to leverage their strengths to do so. These strengths include the ability to better tailor products to specific consumer needs by explaining what the technical features of products mean for them and by complementing them with additional services, such as home installation.
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