Buying Tech & Gadgets in a Recession

Circuit CityIn November of 2008, Circuit City, just a few years earlier one of the top dogs in the entire retail landscape, filed for Chapter 11 bankruptcy protection and closed 155 of its 722 stores in a desperate, last-ditch bid to remain afloat. Facing heightened competition, pressure from vendors, a severely troubled economy, and, some say, problematic management that refused to adapt to the times, the company did what it could in the following few months to stave off eradication. But despite its best efforts, Circuit City permanently closed its remaining 567 retail outlets on March 8, 2009, sending a total of 34,000 former employees into the jobless ranks.

Circuit City posted losses in seven of its final eight quarters, a familiar scenario in the consumer electronics sector during one of the most brutal economic downturns in history. Tower Records, once an international icon in the music biz, went kaput in late 2006. Specialty audio-video shop Tweeter filed for bankruptcy protection in 2006 and met its maker two years later, the same year electronics and gifts retailer The Sharper Image also crashed and burned.

Into this epidemic of closures, layoffs, and assorted recessionary evils, you, the innocent consumer, wade. You’re aware of the economic climate, you’ve quite likely been impacted yourself, and your thoughts are with those who’ve been most personally affected. Yet you know life goes on, and you wonder if this is a good time to procure one or two or more of those electronic gadgets you’ve wanted or needed for so long. Sure, you can probably get by without a new doohickey and lord knows you need the money for other, marginally less frivolous items such as food and rent, but hey, maybe buying now will save you a whole bundle of cash over what you’d spend once the economy is up and running smoothly again.

Liquidation SaleLiquidation across the nation

One way to do just that is via a liquidation sale, such as the one we’ve just seen from the aforementioned Circuit City. When times are good, banks will more agreeably loan money to companies that find themselves in a Chapter 11 situation. Yet those loans aren’t nearly as forthcoming during down economies, and the only choice for many is to wave their final goodbyes through Chapter 7. That’s when the liquidators move in. They essentially do what the bankrupt company itself would do – except in a more trustworthy fashion – in effect buying the remaining merchandise for a prearranged figure and selling it as quickly and as efficiently as possible.

Theoretically, liquidation sales are a great way to buy stuff at cut-rate prices. But they aren’t always what they’re cracked up to be. For one, the marketing push behind most liquidations is huge, as are the crowds, lines, and the sheer number of other like-minded, bargain-hunting consumers. Moreover, liquidation sales often involve merchandise that cannot be returned. For instance, if you buy a snapped-in-half DVD, you’re often out of luck on the refund front. And you can forget about using your gift cards during a liquidation – they usually aren’t honored.

But fear not – prices across the entire sector are down as a result of the downturn (we’ll get into some of the specifics later), and non-liquidation bargains are not hard to find. But where should you look first?

NewEgg.comOnline versus the street

A Consumer Reports survey from October of last year once again proved that the Web – and in particular, top-rated sites such as Amazon, Crutchfield, and NewEgg – is the best spot for electronics. Why? Price, for one. In the wild and woolly online world, where prices are so easily compared and retailers need not pay for hundreds of storefronts, the competition is fierce, with a capital F. There’s better selection online too. And no fuel costs. Or lines. Heck, you don’t even need to get dressed if you don’t want to. Add free shipping to the equation – which seems to be the norm recently – and the argument for online versus brick and mortar becomes rather convincing.

Still, there’s something to be said for seeing and touching products before you buy. Do we suggest you go online to narrow your choices and read user reviews, then head to a storefront retailer to experience the products in person, and then go back home to make your purchase online? No, because that would be wrong. But don’t forget to bargain for a better price. Arm yourself with info, grab some comparisons, understand what’s realistic versus insulting, and soldier forward.

LogicBuy.comCoupons, deals, and the pre-owned marketplace

And remember, you have another weapon at your disposal: the coupon. The following sites either specialize in or at least highlight consumer electronics coupons and deals, and all are rated highly by bargain-hunters: FatWallet.com, RetailMeNot.com, FreeShipping.org, Cheapstingybargains.com, DealCatcher, Deal Locker, and CouponCabin. Of course, there are also a number of shopping-oriented sites that offer quite a bit more than a virtual coupon book. LogicBUY, for example, scans for deals and encourages its user community to contribute opinions and comments.

And lastly, ask yourself the following question: Do you really need to buy new? If not, remember that the used market is, for better or worse, hot, hot, hot during a recession. EBay and Craigslist are good places to start, and even the venerable pawn shop looks more promising during a time when good people are forced to dump some of their belongings.

Forecasting the bargains

Which products are the more compelling purchase right now? How much time do you have before prices begin to escalate? Those aren’t easy questions to answer, because the needs and wants of each of us are unique, and price reductions are currently evident throughout the sector, often changing from week to week. Nevertheless, it looks like 2009 is a pretty safe bet for just about any consumer electronics device. Beyond that, the general feeling among analysts and trend-watchers is that consumers will have had time to shake the economic horrors, the economy itself will have had time to begin recovery, and the bankruptcy of some retailers will have reduced pricing pressure on those that survive. Therefore, 2010 is seen as a year of stabilization and partial recovery, a time when prices will begin ticking upward.

Blackberry SmartphoneIn times like these, many of us automatically rule out pure discretionary purchases. A recent survey by Forrester Research shows that 60 percent of respondents are less likely to buy "discretionary" items such as handheld video players, satellite radios, smartphones, video game consoles or portable GPS systems this year, but that slightly more mandatory products such as cell phones and HDTVs are much more realistic. Is that a rule you should follow? Not necessarily. If, for example, you already own a cell phone and are thinking of upgrading to a current model, do you really want to grab another cell when smartphones can do so much more, and are now priced lower than they’ve ever been?

There’s something else to consider. When times are tough, people tend to cocoon, staying home for their entertainment rather than going out. That may explain why video game sales were up 10% in February, seemingly bucking the economic trend.

The sectors

Let’s look at a few specific categories, in the hope we can assist you at least somewhat in your recessionary decision-making process.

LCD HDTVTelevision: HDTVs in general are a very good bet – particularly if you’re still stuck with an energy-gobbling CRT TV. Televisions are essential cocooning tools, and LCD manufacturers have significantly ramped up production in the past few months, flooding the market with product. Add a recession to the equation, and you have some extremely consumer-friendly pricing. And in all honesty, if you haven’t already made the jump to an HDTV set and an HDTV signal, the upgrade in quality will blow you away.

Moreover, if the TV you currently own has an analog rather than digital tuner, it’ll no longer be able to receive broadcast television after June 12, 2009. At that point, you’ll need either a digital-to-analog set-top converter box for your old set, or a brand new set with an integrated digital tuner. Fortunately, all TVs manufactured since March 1, 2007 have been mandated to have just that. Our advice? Go for an HDTV LCD of 42 inches or less (seemingly the current pricing "sweet spot"), with 720p resolution, rather than the far pricier 1080p. Yes, 1080p is more desirable, but the real world difference really isn’t that substantial on sets measuring less than 50 inches.

Our other advice? Avoid OLED. OLED is the way of the future, and it undoubtedly delivers awesome images, insane contrast levels, a profile so incredibly slim that some OLED screens can be rolled up like a hunk of vinyl flooring, and a substantially greener format. But this is far too early in the lifecycle of the technology to get involved. Right now, you can buy an 11-inch Sony OLED for $2,400. Puh-lease.

Blu-ray Player: Blu-ray offers a better picture and a better overall experience than DVD. Of that, there is no doubt. But the upgrade over DVD is nowhere near that of, say, DVD versus VHS. There, the picture and sound were not only vastly superior, the convenience factor was out of this world. Or perhaps you don’t remember the pure pain of rewinding VHS tapes?

Upscaling DVD PlayerAn upscaling DVD player (which you can find at the $50 mark) brings standard DVDs pretty damn close to Blu-ray quality. So much so, that once you get your upscaling DVD player home, we bet you’ll never regret the decision. And remember, DVDs are still cheaper than Blu-ray discs – to the tune of $10 or so apiece. Furthermore, Blu-ray discs will not play on standard DVD players. So you can forget about watching your shiny new discs in the back seat of your minivan, or on the old DVD player in the bedroom, or anywhere else your Blu-ray player is not situated.

And there’s one other factor – digital downloads. They won’t be mainstream for a while yet, but in a shoddy economy where spare dollars are few and far between, you must ask yourself if you really can afford to invest in a new technology when the Next Big Thing is kinda sorta already out there.

Playstation 2Video Game System: As of April 1, Sony’s moderately old school PlayStation 2 dropped to just $99. And Microsoft cut Xbox 360 prices by $50 last year. But those are minor moves. Truth is, the cocooning-friendly video game console market seems to be doing just fine during the economic downturn. And Nintendo’s Wii continues to sell crazily, which helps keep the sector as recession-proof as it seems. So, is now a good time to buy a new system? Probably, though you may want to hold off if you have Sony’s PlayStation 3 in your sights. The PS3 trails every other system in terms of units sold, and is rumored to be ripe for a price drop.

MP3 Player: With flash memory storage prices plummeting and the recession in full swing, the MP3 player sector witnessed a gaggle of price drops during the recent Christmas season. So if you prefer a straight-up MP3 player to a jack-of-all-trades mobile device, now is a good time to buy. But if you foresee yourself needing not only an MP3 player, but a phone, a handheld PC, and a decent camera, why not have all of those in one unit such as a smartphone?

Cell Phone: If you already own one, you can likely get by a little longer without all the spiff, but often extravagant features of a new model.

Samsung SL30Digital Camera: With plenty of recent innovations, improved video capabilities, and industry-wide price drops, the digicam sector had ridden out the downturn pretty well, until just recently. Things haven’t been quite so rosy since Christmas, so it’s no surprise that cameras such as Samsung’s new SL30 will deliver 10-megapixel resolution, 3X optical zoom, digital image stabilization, and a 2.5-inch LCD for just $99.99. Spring is typically a great time to buy a camera because the new models will have just appeared, driving down prices of current models. But now that the recession has finally caught up to the sector, it’s expected to continue affecting it throughout the year. How much it impacts it, or how good the bargains become, is anyone’s guess.

Automotive GPS: GPS units, considered by many to be not only ridiculously extravagant, but overpriced too, have taken big price hits in the past year, with prices tumbling across the board. In that sense, they are now a good buy. But do you really need a GPS when you could probably make do with a map or two, and have lots of money left over for the essentials? If you feel you absolutely must have a gadget that many consumers say they rarely use in practice, go right ahead. But be forewarned – that smartphone you’ve been eyeballing will likely include GPS functionality.

Smartphone: Smartphones are quickly becoming the productivity tool of choice amongst many professionals, and increased competition over the course of the past year has driven prices downward. But it’s the smartphone’s versatility that’s key. Depending on your needs, today’s top models might allow you to do away with a laptop, a digital camera, an MP3 player, a GPS, and, of course, a cell phone. If you’re a heavy user of mobile tech, a smartphone may just be the ideal purchase, recession or not.

Amazon KindleAmazon Kindle: Kindle is all the rage amongst literary types, but the technology is still relatively new, and therefore expensive, and you must pay even more money for material. The second generation isn’t quite as wonderful as some had hoped, and competition from the Sony Reader and others, such as Foxit’s eSlick Reader, will undoubtedly impact prices down in the near future.

Extended warranties: Extended warranties may give you peace of mind, but chances are you’ll simply never need to take advantage of them. Their coverage usually begins at the same time as the manufacturer’s warranty, thus partially overlapping it, and surveys prove again and again that the vast majority of electronics products simply do not break down during a standard extended warranty period. The warranties are rarely fully comprehensive either. They won’t cover stuff like a burnt out projection TV bulb, for example. Nor do they generally cover accidents or spillage, so you can forget about using them to compensate for your fumbles.

And if that doesn’t convince you, remember that in most cases, retailers see extended warranties as pure profit – a way to make money without any additional expenses. The profit margin on extended warranties hovers near the fifty percent mark, as opposed to a mere ten percent for the product itself.

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