Business Outlook - The Price is Right! GPS Prices Drop for Consumers

In the April cover story titled Flying Off the Shelves: A White-Hot Market for Consumer GPS, I explored the consumer demand for personal navigation devices (PNDs). One of the key conclusions was that consumer demand was a factor of price, increased media, and general consumer satisfaction with the technology. In short, they can afford it, they understand it, and they have fun with it.

As any consumer will tell you, though, price is the grabber. Recently a new report came to my attention from a source whose sheer numbers of users and data support some of the reasons GPS sales are on the rise. Cost of GPS is on a slow decline, which will only build bigger volumes and increase the manufacturers' desire to create new features to the benefit of the consumer and their own market share.

PriceGrabber.com released a study this month that looks at the data. PriceGrabber.com boasts more than 24 million unique visitors, 11,000 merchants and vendors, plus more than 300 networks of sites.

Here are highlights from PriceGrabber.com's study:

Report Highlights

• GPS Pricing Comes Down: Pricing for GPS products dropped by 15 percent year-over-year in February 2007 compared to the same period last year. The average price of GPS products is now $433.

• Different Manufacturers Reflect Wide Price Range: Current actual pricing data reveals the following average price ranges for all GPS products by manufacturer:
$500 average price range — Garmin
$400 average price range — TomTom, Magellan, and Lowrance
$200 average price range — Mio and ViaMichelin

• Garmin Stays Ahead of the Pricing Curve: The GPS market is still considered a niche market. Although Garmin reaches the high-end consumer, offering GPS products in the average price range of $500, 70 percent of the most popular GPS products listed are Garmin products.

• Downward Trending of Prices May Continue: With the onset of lower priced products introduced by Mio and viaMichelin, we expect to see increased pricing competition between manufacturers. This will lead to further downward trending in pricing for GPS products, as more manufacturers realize the benefits of targeting mainstream consumers at low-end price points.

GPS Pricing Trends

• For February 2007 the average price of GPS products was $433, a 15 percent year-over-year decrease from February 2006. Holiday shopping in the fourth quarter of 2006 marked the quarter where prices dipped significantly below the $500 range, which the GPS market had maintained over two years.

• A closer look at average prices segmented by manufacturer reflects a wider range of pricing for GPS products. As of February 2007, the average pricing for Garmin products remained fairly constant and stayed close to the $500 range mark over the past two years, with a minor jump closer to $600 in October 2006. Garmin's consistent pricing strategy for the past two years has now placed it as the most expensive in average pricing for all its GPS offerings compared to other manufacturers in the first two months of 2007.

• Mio and ViaMichelin, which are newer to the GPS market, offer lower-priced alternatives for consumers, with recent average prices on GPS products now at the $200 range. Their pricing strategy is clearly targeting mainstream consumers. The rest of the GPS manufacturers such as TomTom, Magellan, and Lowrance have had fluctuating prices within the past couple of years, and they all have now reached an average price.

• Of the most popular GPS products, seven out of the top 10 are produced by Garmin. TomTom and Mio, both known for offering several affordable GPS products for the mainstream consumer, also made it on the top 10 list. Being the main manufacturer on this list, Garmin's GPS products had an average price of $467. Non-Garmin GPS products on the list had an average price of $307, priced 34 percent lower than Garmin GPS products.

• Prices for GPS products have come down substantially in 2007. Older models launched in 2005, with staying power in the top 10 list, reflect the large pricing decreases for GPS products. The Garmin Nuvi 350 Personal Travel Assistant dropped by 38 percent year-over-year in price, the Garmin StreetPilot c330 GPS fell by 45 percent year-over-year, and the price of the Garmin StreetPilot c550 GPS decreased 26 percent year-over-year in price.

PriceGrabber.com Conclusion

• GPS products have yet to hit the mainstream market. Pricing on GPS units are falling gradually, but the market as a whole remains a niche market with the average price in February 2007 still at $433. Much emphasis has been placed on offering an all-in-one product that includes a digital entertainment system such as music playback, image viewing and storage, and GPS-enabled handsets. As manufacturers roll out newer models into the market, just as much attention should be focused on targeting the mass market through lower price points.

• Manufacturers such as TomTom, viaMichelin, and Mio are offering GPS models with lower prices to attract a wider consumer range. We predict that substantial price drops in 2007 for GPS products are expected with the introduction of newer low-priced models and discounted prices on older models to draw an active marketplace for GPS products. We will track these pricing trends over the coming 12 months.

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The data presented by PriceGrabber.com reflects a reasonable overview of the pricing story going on in the industry, but it is one view and may or not reflect overall trends when combined with other retailers' data. Geographic segmentation may also not be included when compiling the whole picture. No one shops at the same place or the same way. But, all in all, I think this study certainly defines the picture of a robust market.

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