Why Consumer Electronics Have Become Cheaper During the Pandemic
Introduction:
Inflation has been a significant concern for consumers since the Covid-19 pandemic began, with prices rising well above the U.S. Federal Reserve’s 2% target. Although inflation has slightly decreased since reaching its peak in June 2022, prices remain about 20% higher than pre-pandemic levels. However, there is a silver lining in the midst of this, as certain consumer electronics have actually become cheaper during this period.
The Influence of Hedonic Adjustments:
One reason for the decrease in prices of consumer electronics, such as telephones, televisions, audio equipment, computers, cookware, toys, games, and hobby items, is the concept of hedonic adjustments. The Bureau of Labor Statistics makes these adjustments to account for improvements in technology and changes in item quality. For example, smartphone prices may appear to be falling, but it is actually an indication that consumers are getting better and more advanced products at the same price.
Manufacturing and Competition:
While hedonic adjustments explain part of the reason for price drops, manufacturing and competition also play a significant role. Manufacturers constantly strive to lower production costs while maintaining product quality. With new technology and consumer electronics, a learning curve naturally occurs, resulting in lower production costs. This is especially true for smart TVs, where the technology has become widespread and competition is fierce. Manufacturers often have to slash prices to stay competitive and attract consumers’ attention.
Data Collection and Revenue Streams:
Another factor contributing to cheaper consumer electronics is manufacturers’ focus on data collection. Manufacturers use low-priced products as an entry point into consumers’ homes. Once connected to the internet and used with all the features a smart TV offers, manufacturers and app developers can gather valuable data about consumers’ entertainment habits. This data is leveraged and targeted for advertisers, creating new revenue streams for manufacturers.
Conclusion:
While inflation remains a concern for consumers, there are certain categories of consumer electronics that have become cheaper during the pandemic. Hedonic adjustments, manufacturing efficiency, competition, and data collection all contribute to the decrease in prices. As consumers, it is essential to be aware of these factors and take advantage of the opportunities to purchase consumer electronics at lower prices. Keep an eye out for door-buster deals and take advantage of the benefits offered by manufacturers in this competitive market.
