By choice or necessity, Americans have fallen for more sophisticated smartphones, televisions, laptops and cars. The companies making these products are trying to assess whether the shift to luxury is a temporary phenomenon or a new norm.
Some relevant statistics from 2021:
According to Counterpoint Research, more than one in four smartphones sold globally last year were more expensive devices, the highest share ever for such high-end phones.
Total laptop sales in the United States have cooled after the wild sales of 2020, when Americans stocked up on gear for school and remote work. But sales of laptops that cost at least $1,000 are up 15% year over year, research firm NPD Group told me.
TV sales also slumped last year on a pandemic-fueled craze in 2020, but NPD said sales of TVs $1,000 and above were up 47%.
Americans are buying larger, more expensive vehicles and fewer economy cars, helping to 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 upscale move. I’m going to go over some explanations for a trend that surprised me, and what it might mean for us.
The Bottom Line: It’s too early to know for sure, but it looks like pandemic-related changes have altered reality for goods like electronics and cars. People who don’t want or can’t afford high-end products may be out of luck.
OK, let’s dig into the why, based on my conversations with experts. First, the pandemic has caused huge ongoing disruptions that have led to shortages of important parts like computer chips and made it more expensive to ship electronics from Asian factories. Some companies that couldn’t easily manufacture all of their usual products instead focused on their more expensive and cost-effective models.
“It costs the same to ship a $300 laptop as it does a $1,300 laptop,” said Stephen Baker, longtime consumer electronics analyst for the NPD Group. A relatively higher supply of more expensive products is one of the reasons why it has sometimes been easier to find an expensive laptop, smartphone or car than a cheaper model.
Baker and Maurice Klaehne, a Counterpoint research analyst, also told me that some people have relied on their home electronics more during the pandemic and have been willing to pay a little more for them than a few years ago. Many Americans have also had more money to spend on things, due to government benefits during the pandemic or lower spending on things like travel and restaurants.
And particularly in the United States, phone companies have offered generous discounts or exchanges for people to buy new smartphones that connect to 5G networks, and those devices typically cost more, Klaehne said.
These factors have all contributed to a gradual shift in buying towards fantasy. The same goes for the lack of discounts on many electronics and automobiles, again because manufacturers are reluctant to increase sales when they can’t keep all of their products in stock.
My colleague Neal Boudette said automakers and dealerships have been able to charge the full sticker price or thousands of dollars more. Automakers are okay with that, 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 the pandemic-related quirks will eventually end and we’ll once again have the full price range, from budget to high-end. Or maybe not. Companies that have clung to higher profits through more expensive products might not want to give it up. And it’s not clear that worldwide shipping of parts and products will rebound to its 2019 level.
Baker also said electronics makers plan to experiment to see if our inclination towards higher-priced electronics can hold up. Baker predicted that companies that sold a basic Windows laptop for $300 or $350 a few years ago will try to push entry-level models to $550 or $600, and manufacturers may try to cut $499 widescreen TVs to see if a $599 TV could sell nearly as well.
“There’s a lot of hunting and foraging that’s going to happen in the next two years trying to figure out what’s going on,” Baker said.
All of this suggests that more expensive cars and electronics might be here to stay.
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Hugs to that
A duck has built her nest in the yard of a maternity ward in Florida. After the eggs hatched, Mama Duck (with the help of kind humans from the hospital) led her ducklings through the labor and delivery rooms and through the front door.