Out of choice or necessity, Americans have fallen for more expensive smartphones, televisions, laptops and cars. The companies that make this stuff are trying to assess whether the shift to luxury is a temporary phenomenon or a new normal.
Some relevant statistics from 2021:
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More than one in four smartphones sold worldwide last year were higher-end devices, the largest share ever for those top phones, according to Counterpoint Research.
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Total laptop sales in the US have cooled off after the insane sales in 2020, when Americans stock up on supplies for school and remote work. But sales of laptops costing at least $1,000 rose 15 percent in a year, the research firm NPD Group told me.
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TV sales also fell last year due to a pandemic-fueled 2020 craze, but NPD said sales of TVs $1,000 and above were up 47 percent.
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Americans are buying more larger, more expensive vehicles and less fuel-efficient cars, pushing the average cost of new vehicles to records almost every month.
You may be thinking: INFLATION. Yes, but other factors are also shaping this high-end shift. I’ll run through some explanations for a trend that surprised me, and what it could mean for us.
The bottom line: It’s too early to know for sure, but it seems that pandemic-related changes have changed the reality for goods like electronics and cars. People who don’t want to or can’t afford more expensive stuff may be out of luck.
Okay, let’s get into the why, based on my conversations with experts. First, the pandemic caused massive, ongoing disruptions that resulted in shortages of key components such as computer chips and made shipping electronics from Asian factories more expensive. Some companies that couldn’t easily make all of their usual products instead focused on their more expensive, more profitable models.
“It costs as much to ship a $300 notebook computer as it does a $1,300 notebook computer,” said Stephen Baker, a veteran consumer electronics analyst with the NPD Group. A relatively larger range 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 Counterpoint research analyst, also told me that some people relied more on their home electronics during the pandemic and were willing to pay a little more for them than they did a few years ago. Many Americans also have more money to spend on stuff, due to government benefits during the pandemic or lower spending on things like travel and dining out.
And especially in the US, phone companies have discounts or generous trade-ins for people to buy new smartphones that connect to 5G networks, and those devices typically cost more, Klaehne said.
Those factors have all contributed to a creeping shift from purchase to luxury. Similarly, there is a lack of discounts on many electronics and cars, again because manufacturers are reluctant to boost sales if they can’t keep all of their products in stock.
My colleague Neal Boudette said auto companies and dealers have been able to charge the full sticker price or thousands of dollars more. Automakers are fine with this, even if they can’t keep up with demand. “Car makers are making huge profits even though they are 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 spectrum of pricing from budget to high-end. Or maybe not. Companies that have become addicted to higher profits from more expensive products may not be willing to give that up. And it’s not clear that shipping parts and products around the world will return to 2019 levels.
Baker also said electronics manufacturers planned to experiment to see if our penchant for more expensive electronics would linger. Baker predicted that companies that sold a standard 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 back on $499 big-screen TVs to get the most out of the box. to see if a $599 television could sell almost as well.
“There’s going to be a lot of hunting and pecking over the next few years to try and understand what’s happening,” Baker said.
All that suggests that more expensive cars and electronics could be here to stay.
Before we go…
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Operating an essential communication technology in wartime is not easy. My colleagues report on the whiplash for Meta employees, whose rules sometimes change daily about whether gore, calls to violence and other emotional posts related to the war in Ukraine are allowed on Facebook and Instagram.
Related: Why did almost 11 percent of global tweets with a popular pro-Russian message come from India? Kate Conger and Suhasini Raj write about why it is so difficult to know what is real or fabricated in online sentiment.
The Normcore Tech newsletter, written by a Russian-born data scientist, Vicki Boykis, explains why the Telegram messaging app was so essential during the war.
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