The introduction of the lightweight, convenient and inexpensive netbook has some computer manufacturers worried. Although these manufactures expected and planned for the mini-laptop to be purchased as a complement to consumers’ laptops and PCs, the recent economic downturn has turned the product into a supplement.
Although the mini-laptop lacks the storage and software capabilities of the larger laptops and PCs, the dramatically lower price is convincing the consumer they can manage. The article quotes one consumer who, being concerned about the rough economy purchased the mini because it was less than half the price of a traditional laptop.
Normally the computer manufacturers would be thrilled to see a product’s sales to go from 182,000 to 11 million in one year, but not at the expense of more profitable products (i.e. Laptops and PCs). The mini has not only cannibalized laptop and PC sales, but has put pressure on the prices of these items. The article states that the estimated average selling price of portable computers will drop 8-12% in the next two years, partly because of the netbook.
The text outlines options for mitigating product cannibalization. The computer manufacturers could upgrade the high-profit products and/or degrade the mini-laptops to highlight the differences between them and help the consumer directly discriminate. This strategy might be a short-run solution to cannibalization, but comes with the obvious risk of damaging a product, that could be profitable in a different economy.