By choice or necessity, Americans have indulged in more luxurious smartphones, televisions, laptops, and cars. The companies that make this thing are trying to gauge whether the shift to luxury is a temporary phenomenon or a new normal.
Some relevant stats 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 flagship phones.
Total U.S. laptop sales cooled after sales spiked in 2020, as Americans stocked up on devices for schools and remote workplaces. But sales of laptops priced at least $1,000 are up 15% in a year, research firm NPD Group told me.
TV sales also fell last year due to the outbreak of the pandemic in 2020, but NPD said TV sales of $1,000 or more rose 47%.
Americans are buying larger, higher-priced vehicles and fewer entry-level cars, helping to lift the average price of a new car to a near-monthly record.
You may be thinking: INFLATION. Yes – but other factors are also shaping this shift to the premium segment. I’m going to go through some explanations for a trend that surprised me and what this could mean for us.
The bottom line: It’s too early to know for sure, but it looks like the pandemic-related changes have changed the reality for items like electronics and cars. Those who don’t want or can’t afford more expensive things may be out of luck.
OK, let’s find out why, based on my conversations with the experts. First, the pandemic has caused massive, ongoing disruptions that lead to shortages of critical parts like computer chips and made it more expensive to ship electronics from factories in Asia. Some companies can’t easily make all of their usual products focus on their more expensive, more profitable models.
“The shipping cost of a $300 laptop is the same as a $1,300 laptop,” said Stephen Baker, longtime consumer electronics analyst with NPD Group. The relatively high supply of more expensive products is one reason why it’s sometimes easier to find an expensive laptop, smartphone or car than a cheaper model.
Baker and Maurice Klaehne, a research analyst with Counterpoint, also told me that some people have become more reliant on their home electronics during the pandemic and are willing to pay a little more compared to what they might have been a few years ago. Many Americans have also had more money to spend on many things, either for government benefits during the pandemic or lower spending on things like travel and dining out.
And especially in the US, phone companies have consistently offered discounts or generous exchanges to get people to buy new smartphones that connect to 5G networks, and those devices often cost more, Klaehne said.
All of those factors have contributed to the growing shift of purchasing towards preference. So does the discount on many electronics and cars, again because manufacturers don’t want to increase sales when they can’t keep all of their products in stock.
My colleague Neal Boudette says car companies and dealers have been able to charge full prices or thousands of dollars. Automakers are fine with this, even though they can’t keep up with demand. “Automakers are making huge profits even though they sell fewer cars than usual,” he told me.
Maybe the pandemic-related quirks will eventually come to an end and we’ll once again have a full range of prices, from budget to premium. Or maybe not. Companies that garner higher profits from more expensive products may not be willing to give it up. And it’s not clear that parts and products shipped around the world will recover to 2019 levels.
Baker also said that electronics makers are planning to experiment to see if our trend toward higher-priced electronics can continue. Baker predicts that companies that sold basic Windows laptops for $300 or $350 a few years ago will try to raise the low-end models to $550 or $600, and manufacturers Maybe try slashing the price of a $499 big-screen TV to see if the $599 TV can sell for nearly as well.
“There’s a lot of hunting and butchery going on over the next few years trying to understand what’s going on,” Baker said.
All of which suggests that more expensive cars and electronics might be here to stay.
Before we go…
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