Getting the Most Gadget for Your Money

The holidays won't be as merry this year for retailers. Shoppers are cutting their spending as they face some of the grimmest economic news in decades. Wallets snapped shut in the third quarter, with consumer spending down for the first time in 17 years. That trend is expected to accelerate in the fourth quarter.

One spot that's brighter: consumer electronics. Despite dire times, buyers still flock to the flashing, zapping, and whirring aisles of flat-panel TVs, video games, and notebook computers. The electronics industry continues to seduce shoppers with must-have products, says Stephen Baker, a market analyst with NPD Group. "Electronics are a little sexier, a little more interesting than other things—like shirts or ties."

Consumers are expected to spend about 4 percent more on gadgets and gizmos this year than they did last year, according to projections from the Consumer Electronics Association, which has a vested interest, and TNS Retail Forward, which doesn't. Overall retail spending, meanwhile, is expected to be the weakest since 1991, TNS says.

In short, consumers are spending more of their money on technology this year. That's unlike earlier recessions, when shoppers spent less of their discretionary income on electronic gear, says Shawn DuBravac, an economist at the electronics association. "Consumers now view [electronics] as a necessity rather than a luxury."

That may overstate the case. That 4 percent increase is still slower growth than has been seen in recent years, and frugal shoppers will look harder for bargains. Retailers need to offer deals early and often, says Ben Bajarin, a market analyst with Creative Strategies. It won't be enough to stoke sales just on the day after Thanksgiving, when stores often feature their best prices on electronics to draw shoppers. "We're talking Black Friday-types of prices throughout the season," Bajarin says.

Shoppers will focus on models that offer the most for the money. The biggest flat-panel TVs won't do as well as smaller models that cost less per inch and retail for under $1,000. Solid digital cameras, rather than costlier models with cutting-edge features, will appeal to the masses. "People will choose lower-spec PCs that are cheaper," says Roger Kay, who tracks electronics at Endpoint Technologies Associates.

So it is with the thrifty shopper in mind that U.S. News has assembled this year's tech-buying guide. Not all the devices are cheap, though some that aren't might save money over the long run. All, we think, offer a good deal and even some sex appeal.