Consumer PC Market Changing

The US consumer PC marketplace is undergoing a fundamental shift, as the average income of first-time buyers moves downward and as existing PC owners start upgrading to more powerful machines and premium Internet services. So says Forrester Research, Inc., [NASDAQ:FORR] in a market study titled "The PC Market In 1999," announced Friday.

Forrester says its survey data suggest the demographic of first-time buyers is moving toward low-income households, those earning less than $35,000 a year. At the same time, the first-time buyers of one to three years ago are starting to look for more powerful PCs and premium Internet services.

The demographic shift is changing a former niche, replacement buyers who want to upgrade their existing equipment, into a significant new consumer market segment, says the report.

Forrester now splits its buyer demographics into three categories to reflect the change. First-time buyers will account for 40 percent of the home PC market, replacement buyers will be 36 percent and buyers of additional equipment will be 24 percent of the consumer segment, the research firm predicts.

The profile of first-time buyers reflects the drop in average income in several ways, the researchers report. For example, the segment has more women (59 percent) with less education than earlier first-timers, only 37 percent having attended college. They also are less likely to be married and have children.

By contrast, most repeat buyers are male, 65 percent have some college education and most use a PC in some way at work.

Forrester says an "overwhelming majority" or 72 percent of first time buyers do not have a PC at work. This constitutes an important shift in its own right, according to the researchers. Until now, more than 70 percent of PC owners had computer experience before they bought a home PC.

One implication is that, for the first time, many first-time buyers have a primary objective of learning the technology. Vendors need to be aware, in the sub-$1000 PC arena where first-time buyers are found, that calls for help and hand-holding are likely to increase. The same need for support will increase calls to post-sale vendors like Internet service providers (ISPs) and software vendors, Forrester notes.

Replacement buyers, on the other hand, are more likely to "go for the gusto" and seek a more powerful and flexible PC. They will be less sensitive to prices and more tuned to processing power, modem speeds, and multimedia capabilities. Most of these buyers also want to go online, a significant number of them for the first time.

Forrester says its conclusions were drawn from a survey of 120,000 North American consumers conducted with The NPD Group in the fall of 1997. More about the firm and its reports can be found on the Internet at http://www.forrester.com.

(Contact: Michael Shirer, Forrester, 617-806-6025, e-mail press@forrester.com)