By choice or necessity, Americans have fallen in love with fancier smartphones, TVs, laptops, and cars. The companies that make this stuff are trying to gauge whether the transition to luxury is a temporary phenomenon or a new normal.
Some relevant statistics from 2021:
According to Counterpoint Research, more than one in four smartphones sold globally last year were higher-priced devices, the largest share ever for these top-tier phones.
Overall US laptop sales cooled after crazy sales in 2020 as Americans stocked up on gear for distance learning and work. But sales of laptops priced at $1,000 or more increased 15 percent in a year, research firm NPD Group told me.
TV sales also fell last year due to a pandemic-driven 2020 craze, but NPD said sales of TVs valued at $1,000 and up were up 47 percent.
Americans are buying more larger, more expensive vehicles and less fuel-efficient cars, which helps drive the average cost of new vehicles to record highs almost every month.
You may be thinking: INFLATION. Yes – but other factors are also shaping this shift towards high-end. I’ll go through some explanations for a trend that surprised me and what it might mean for us.
Bottom line: It’s still too early to know for sure, but it appears that pandemic-related changes have changed the reality for goods like electronics and cars. People who don’t want or can’t afford high-end stuff might be out of luck.
OK, based on my conversations with experts, let’s get to the bottom of why. First, the pandemic caused massive, ongoing disruption, leading to shortages of essential parts like computer chips and making electronics more expensive to ship from Asian factories. Some companies, unable to easily manufacture all of their usual products, instead focused on their more expensive, more profitable models.
“It costs the same as a $1,300 laptop to ship a $300 laptop,” said Stephen Baker, a longtime consumer electronics analyst at the NPD Group. A relatively larger supply of more expensive products is one of the reasons why it was sometimes easier to find an expensive laptop, smartphone or car than a cheaper model.
Baker and Maurice Klaehne, a research analyst at Counterpoint, also told me that some people have relied more on their home electronics during the pandemic and were willing to pay a little more for them than they were a few years ago. Many Americans also had more money to spend on things due to government benefits during the pandemic or lower spending on things like travel and dining out.
And in the US in particular, phone companies have offered discounts or generous trade-ins for buying new smartphones that connect to 5G networks, and those devices typically cost more, Klaehne said.
These factors have all contributed to a creeping shift in purchases towards fancy items. Likewise, discounts on many electronics and cars are lacking, again because manufacturers are reluctant to increase sales if they can’t stock all of their products.
My colleague Neal Boudette said auto companies and dealers could charge full sticker price or thousands of dollars more. Automakers are ok with it, even if they can’t keep up with demand. “Automakers are making huge profits even though they’re selling fewer vehicles than they normally would,” he told me.
It’s possible that at some point the pandemic-related curiosities will end and we’ll have the full price spectrum again, from budget to high-end. Or maybe not. Businesses that depended on higher profits from more expensive products may not be willing to give that up. And it’s not clear that parts and product shipments around the world will ramp up to 2019 levels.
Baker also said electronics manufacturers plan to experiment to see if our bias towards higher-priced electronics persists. Baker predicted that companies that a few years ago sold a basic Windows laptop for $300 or $350 will try to push entry-level models up to $550 or $600, and manufacturers might try $499 big-screen TVs cutting to see if it’s a $599 TV might sell almost as well.
“There’s going to be a lot of hunting and pecking over the next few years to understand what’s happening,” Baker said.
All of this suggests that more expensive cars and electronics could be here to stay.
Before we go…
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