The flooding in Thailand caused new hard drive prices to shoot up beyond the $80 mark for pretty much any mechanical hard drive in existence. Panic buying and speculative middleman purchasers fueled a massive drop in retailer hard drive stock, causing retailers to either run out, temporarily remove hard drives from their websites, or severely restrict purchases per customer.
However, it’s been three weeks since the mass hysteria and huge price spikes occurred, and something extremely suspicious has caught my eye:
Despite the cheapest hard drives more than doubling in price, brand new full-sized laptops are still readily available for around $300.
Why? If the cost of a $40 hard drive (the kind usually found in cheap new laptops) is now $90, how is it at all possible that retail prices on laptops might have risen $20-$30 per unit at worst? Where is the PC price spike from hard drive “shortage” that we should all be seeing? I simply can’t believe that it’s standard competitive forces, because if the cost to replace a laptop is $50 higher, the price at retail should be jumping at least by that much due to the fact that the next batch will cost more to acquire. You don’t buy a unit at $250, sell it for $300, and then buy the next batch of pretty much the same thing for $300 to sell at $330. That means taking a loss on current stock relative to new stock, and retailers simply can’t afford to do such a thing unless the stuff won’t sell at all and they’re intentionally liquidating items in order to lose less. However, does that mean EVERY retailer is doing a loss-leading liquidation right now? That seems pretty impossible.
Unless the hard drive “shortage” is artificial, and therefore a bogus, exploitative construct. Something we might even label “price gouging.”
In fact, that explanation makes the most sense to me. Western Digital has many factories outside of the flooded Thailand one. Nidec, the manufacturer of 80% of the drive motors for hard drives worldwide, also has places to shift production, one of which is apparently in the United States. Seagate’s raw production capacity is unaffected by the flooding, though their supply chain might be affected to some extent while the production shift occurs. I’ve read many (admittedly hearsay) accounts in comment sections and forums all over the Internet that explain that the factories outside of the flooded areas were not operating anywhere close to their maximum output capacity.
Only adding to my suspicion is that online retailers who only three weeks ago had completely pulled hard drives from their item lists (or severely throttled sales) now have almost the same selection of drives that they had before the whole disaster began…with pricing on the lower cost drives anywhere from double to triple the previous price, and higher units going for at least 40-50% their original price. How is it possible that, two weeks later, there are suddenly plenty of drives available, yet all at these grossly inflated prices?
I do have a personal stake in this mess: I run a computer service business in which we apply a slight markup to drives and charge labor to install them and shuffle data and Windows installations around. Our determination for our customers as to whether or not a repair is “worth it” has a ceiling in the form of the cost of a whole new computer vs. the cost of repair, and if the repair is due to hard drive failure, that repair cost has risen for us by no less than $50. We are essentially forced to lose markup on hard drives, and possibly even perform work below its actual market value, because a customer faced with a $200 repair quote (half of which is no-profit acquisition cost of a low-capacity new hard drive at this point) is apt to simply go for a brand new $300 laptop instead.
I want to know the truth. I want to know if the shortage is really caused by the flooding knocking out the manufacturing capacity, or if it’s now simply all of the retailers taking advantage of the situation and squeezing us little guys. I don’t like competing with brand new computers, and I happen to be based in a county where plenty of the residents don’t understand that a brand new computer isn’t always a great deal just because it has a low price. At $40 per drive, I can survive and even live a somewhat comfortable life. At $60, I could survive and perhaps take a minor hit that makes things tight, but manageable. When I’m having to quote $90-$100 just to get a replacement hard drive, I start having serious problems making money, and when I don’t see the same price spike happening to these “el cheapo” new machines that supposedly receive drives from the exact same sources, you can bet I’m going to get mighty suspicious.
I can guarantee that the first online retailer to cut hard drive prices down to the point that they’re somewhat sane again will suddenly become a favorite of many currently disgruntled small shops who are in the same boat as me.
Leave a comment with your thoughts, if you know something I don’t, or if I’m just completely off-base.