Why Do Electronics Depreciate In Value So Quickly?

broken Anyone who has ever bought a brand new car is very familiar with the phrase, "the moment you drive the car off the lot, it instantly loses 30% of its value". Is this true? For the most part, yes. And the auto industry will continue to do this as long as they can because they know people always need new cars.

Electronics of just about any kind can lose anywhere from 30% to 70% (or even greater) of their value in less than a year. But why is this? What’s the deal here? How can electronics drop like a brick in value so fast?

First I’ll tell you who’s not at fault here.

The consumer (you). You buy electronics, that being computers, cell phones, digital cameras and so on the same way you always have.

The manufacturers. These companies aren’t to blame because all they’re doing is building the stuff we want, and we almost never deal with them directly.

The retailers. Whether traditional brick-and-mortar or online storefronts, these businesses aren’t to blame either. Their job is to sell us stuff and they do so as best they can with what they’re given.

Who is to blame then?

The finger can be pointed at the companies themselves. No, not the retailers and certainly not the manufacturers. I’m talking about the companies whose logos are on the stuff you bought; they’re to blame.

The omnipresent problem that’s existed for several decades now is that companies are releasing new electronics products way, way, way too fast. When this happens, the market gets saturated quickly and the value of the products drops like a brick.

"Well, that’s good, right? Cheaper stuff for me!"

No, not good. In the fight to be #1 in electronics sales, companies will cut corners just to stay on top of the market. Sure, the price you get is cheaper, but the quality of what you get takes a nosedive. What good is a cheaper price if you have to keep replacing what you bought?

In addition, resale value for any electronic – and I mean anything – is abysmal at best.

My favorite statistic to point out is what Apple users say. "I spent $2,000 on my Mac, and it’s still worth $1,000 a year later!" Well, a $500 PC is worth $250 a year later. Do the math. 50% of the value was still lost and the downward curve is the same. Electronics are electronics, and no matter how much you spend on them, you’re still going to lose in the end.

Consumer confidence is completely shot at this point

This is the worst thing that happens to any market. When consumers get a bunch of crap thrown at them, and that crap plummets in value to the bottom faster than a lead zeppelin, ultimately they stop buying.

Then the consumer utters the words that make businesses tremble in fear, "I don’t need this." Uh-oh. Panic time.

What can companies do to gain consumer confidence back?

1. Throw that release-early/release-often nonsense out the window

Whoever thought this up should be tarred and feathered several times. Regardless of what age you are, people don’t like new stuff being thrown at them constantly because that makes consumers nervous, as in, "Gee.. I really don’t know if I should buy this. Why should I if the stupid thing will be obsolete in less than 6 months?"

2. Stop releasing half-assed products that obviously weren’t ready to be released

Nothing is worse than spending a good chunk of money on an electronic under the assumption it all works, then shortly find out it doesn’t work. Consumers hate companies for life when that happens and it’s just bad for business. Being first with newer technologies in the electronics industry is rarely the best choice.

Ask some gamers if they’ve ever bought super-expensive video cards with bleeding-edge tech, only to install them and find out the drivers don’t work because they weren’t tested properly by the OEM, and several of their favorite games are now unplayable. This happens a lot.

3. Stop ignoring the customer

Ever notice that not too many people are complaining about Microsoft these days? Want to know the reason why? They finally started listening to us, the users. In the late 2000s, they finally got on Twitter, finally got on forums, finally give the users a voice and (gasp!) actually listened. The end result was better products that made just about everyone happy.

Companies who ignore customers ultimately "get theirs", so to speak. Unfortunately there’s a ton of electronics companies who absolutely could not care less about their customers as long as they’re making money. This may last for a while, but at some point the customers do the one thing that hurts a company the most – they stop buying their products.

Your wallet is the loudest voice you have as a consumer. Everything you need to say without uttering a word can be done by not buying.

And no, I’m not saying to stop buying electronics altogether. What I’m saying is to become a smarter consumer. Research the items you want to buy more before buying. Read customer reviews. If you buy something that turned out to be junk, go to a site that allows you to rate the product, give it a poor rating and explain why you did.

What could electronics companies do to gain your confidence back that I didn’t mention?

You have a voice here. Post a comment or two with your opinions.

Comments

  1. If it comes down to a rapid pace of product innovation versus maintaining its value, I will take the rapid pace.

    I like seeing new stuff all the time.

    • Anonymous says:

      Ah. . .A willing disciple of the Epistle of the Neverending Upgrade

      But here’s a question…as tablet-like functionality encrouches on your vehicle dashboard– what happens wen you buy a vehicle– and then 6 months later, your dashboard functions can no longer connect reliably because the standards just got ramped up to the next version level. Not upgrading renders your User Dashboard useless for anything except checking the engine gauges. In short– all you can do is drive your vehicle

      How much would you be willing pay the dealer autoshop to bring you back up to full user/infotainment/commlink functionality before the next tech standard upgrade renders it only partially functional in the next 6 monhs?

      Mind you– The Auto Industry would have no problem with your need to be on the bleeding edge.

      • What you’re describing is exactly what happened to OnStar. Original versions were analog. When it switched to digital, the analog was phased out and rendered the OnStar-equipped cars with original analog useless. 500,000 users dumped.

      • Good design also tries to make things backwards compatible as much as is practical.

        Sorry, I still think it would be stupid to stop advances in technology in order to keep things the same as they were 10 years ago.

        We might as well stay with Windows 95 if we want to go by that philosophy.

    • If it were _truly_ new stuff, I might agree.  However, when it’s just a minor variation (take the latest iPhone), it’s just squeezing blood from a turnip…by getting a bunch of sheep who have to have the latest version (even if there’s practically no difference).

      Just like that Samsung commercial…my favorite line:  “but if it looks the same, how will people know I upgraded?”

  2. Companies can gain consumer confidence by offering longer warranties (90 days just plain isn’t enough time to give the buyer a warm and fuzzy feeling about the purchase). Some companies give 2 years and earn my respect for it. That tells me that they have confidence in their product.

    One other thing that is just as important is friendly and accessible customer service. It doesn’t mean 24/7 customer support, but that is nice when it’s available. Email support gives me a feeling that they are afraid of hearing my concerns about the product. A friendly voice over the phone goes a long way to reassure me that my broken product will be repaired.

    And, if the product is nearing the end of its warranty when it stops working, give the customer an additional 90 or 180 days on the replacement.

    That would win me over as a customer for life.

    I’ve had great customer service from Canon, Inc., on their printers and cameras. I had a Canon BJC-6000 that I purchased the Canon extended replacement warranty instead of the one from Sam’s Club, and I’m glad I did. It quit working and I was able to arrange for a replacement and had one in a couple of days. You had choices–you could pay for the replacement and they would reimburse you when they received the defective printer, or you could wait for a pre-paid box to arrive, ship your printer to them, and receive the replacement without temporarily charging your credit card. The replacement went bad before the 3 year extended was over, and they did the same thing again. That printer lasted beyond it’s useful life to me and I gave it away.

    That printer may not have been built to handle what I put it through, but Canon stood behind it, and they handled the replacement process in a friendly manner.

    I have two Canon cameras. I didn’t have the latest one very long before I saw an uneven gap where the cover for the memory cars was. I arranged to send it back for repair. They said, in the repair summary, that the camera had apparently been dropped. Of course, you all know that this wouldn’t be covered under warranty. Right? They sent it back, repaired, at no cost to me. It had been dropped, but I didn’t notice the gap right away. They went beyond what was required, I think.

    They have been great at technical support also, but I won’t get into details. They are just a great company!

    Donald

  3. Sinekonata says:

    It’s a very intelligent article in general, you’re a very good writer.

    I do agree with most of what you say, I would much rather prefer to see one new product per year, be able to buy the outright upgrade of what I already have if I liked it or switch models if I have new desires or even change brands if I was in general not satisfied with their general philosophy.

    Of course they would be of much better quality as they have one year to create a new product or upgrade an old one (same design/name, new hardware/ideas) and test it a lot which would of course bring the warranty back to 2 years maybe 3… And the manufacturer, they KNOW they will sell a lot of those high quality computers as they have very high loyalty (to the point of inertia) from every satisfied consumer…

  4. While it is not a matter of stopping technology as some prior comments have suggested, I do believe that modern electronics are built to be disposable.  And by disposable I don’t mean that they are not built to br repaired (most aren’t) but the fact that their useful life has shortened a lot in the last couple of decades.  I still have a 12 year-old CRT TV that works nicely even if only with cable TV due to the digital TV thing but I still use it.  I would not expect my other TV (a 4 year-old LCD) to last that long. Would not be surprised if the old CRT outlasts the LCD.   While there are people that like to be on the bleeding edge of technology and want the latest and greatest, there also many of us that expect our electronic devices to last much longer than they currently do.  I am in my fourth digital camera in less than 10 years.  The first two lasted 3 years.  The third is 3 years old now but its working like new and the fourth is less than a year old.  Old film cameras last a lifetime if given proper care.

  5. The only reason electronics are disposable is because the general public only spend a few hundred dollars on what they buy and when a computer repair person comes in and tells them that it will cost them one hundred dollars to repair a problem, the consumer, rightly, tell the computer tech that it is cheaper for them to buy another computer. I don’t blame them. When I put a computer together for myself, I buy products that are just being released or just before general release. This ensures me that my technology will be here for a little while. To date, my computer equipment now, the computer I put together last year, has the stuff that HP and Dell are now just putting into their high end computers. Yes, my PC cost me one thousand dollars just for the hardware to put together, but when I look at HP selling exactly what I have been using for the past year for at least fifteen hundred, that makes me feel good. I don’t however put myself under any delusion that I can sell my computer for that and make my money back. I can however not loose half.
    I do however blame the general public for not educating themselves enough to be able to see that that five hundred dollar computer that they are purchasing today will be a rock in a year. The software industry ensures that. I have seen many people purchase a computer that they think will service them for years only to find that they are having to pay someone like me to attempt to make that same computer run the new software on hardware that is insufficient. People have to realize that there are two parts to computers, the hardware and the software. If you do not plan on both, one will surely bite you.

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