Computer & Software Retail Industry Trends

Fewer Outlets

The number of computer stores has been declining, primarily due to intense competition from alternative outlets and market maturity. Needing less technical help in making purchase decisions, computer-literate consumers turned to retailers like consumer electronics stores and Internet merchants. Both small and large computer stores have suffered, as competition drove lower prices and pressured margins. Some companies resorted to closing store locations and focusing on Internet operations, which carry lower overhead costs.

Falling Manufacturer Prices

Decreasing manufacturer prices have allowed computer stores to lower retail prices, driving industry sales. Over the last decade, manufacturer prices have declined at an average annual rate of almost 10 percent, driven by increased productivity and lower component costs. Intense competition among manufacturers helps keep prices low. Manufacturer rebates are a common, alternative way to deliver discounts directly to customers.

Growth in Video Game Segment

Retail sales of video game hardware, software, and accessories have grown rapidly in recent years to over $11 billion annually. A strong portable game market drove market growth, with portable hardware and accessory sales almost doubling. High-end portables, like Nintendo DS and Sony PSP, have attracted older gamers. Next-generation console systems from Sony and Nintendo should continue to drive industry growth.

Growth in Portable, Wireless Products

Growing demand for mobility, in both work and leisure activities, has driven sales of portable and wireless products. Unit sales of laptops continue to approach that of desktops, as laptop prices fall and performance improves. The greater number of people who work from home or are on the road frequently will drive the demand for portable and wireless products.

Increasing Internet Use

Computer stores can leverage growing demand for networking products and more powerful computers as Internet use continues to grow and expand capabilities. More consumers and businesses rely on the Internet for information, entertainment, and day-to-day tasks. About 75 percent of US households have access to the Internet, and about 35 percent use broadband access, according to AC Nielsen. Due to high-speed connections, broadband users can better leverage the Internet and use personal computing devices as media and entertainment portals.