Fears of a recession have faded if not totally disappeared, but several other economic pressures, along with post-pandemic replacement cycle lags, will dampen consumer tech spending by 1% YoY through the spring, according to Paul Gagnon, VP and consumer technology industry advisor for Circana, formerly IRI + The NPD Group.
“Electronics sales have been kind of tough for a couple of years now, and a lot of that stems from demand that was generated during the pandemic and [consumers] just kind of waiting around until a lot of those products that were purchased during the pandemic start to get refreshed or replaced,” Gagnon reports. “With that relatively challenged consumer market for electronics products, we’ve really been trying to time when we think some of that replacement activity will start.”
That replacement market continues to be stalled by economic pressures such as inflation and high credit card and buy now/pay later repayment debt for 50-plus consumers, as well as lower incomes and student loan repayments among younger consumers. “Consumers have to repay what they borrowed to finance their holiday shopping,” Gagnon quips.
Circana sales data essentially indicate that H1 2024 sales trends will carry over from last year’s overall consumer tech spending slump. According to Circana Checkout data for 2023, consumer tech spending for the 18-44 age demographic fell 10% YoY and was 1% down YoY for the 45-plus age group, while consumer tech spending among all consumers earning less than $100k a year was down 12% YoY. Consumer tech spending rose last year only among those with $100k-plus incomes, and then only by 2% YoY.
Up/Down 2024 Categories
Gagnon sees two categories buoying consumer tech spending in H1: notebook PCs and large-screen TVs. Specifically, Gagnon sees that PCs bought during the pandemic “should be coming due for replacement activity by late this year,” and projects that notebook PCs should generate $644 million in revenue growth in 2024.
Gagnon and Circana expect TV sales revenues to improve by $167 million on around 2% YoY unit growth, mostly a result of consumer replacing their pandemic purchases with larger screen models. “We actually didn’t experience decline in [TV] unit demand in 2023, but we did see a big mix shift toward lower price products,” Gagnon says. “Activity around larger TVs that were purchased in 2018, 2019, and 2020 are coming back around for upgrades by the end of this year.”
Weighing down potential H1 consumer tech revenue are continuing sales declines of headphones, specifically true wireless (TWS) models, as well as soundbars.
Gagnon believes sluggish TWS sales are a direct result of a lack “of new product innovation in the category. Some of the interest in headphones has been shifting toward the headband style, over-the-ear type headphones. But true wireless is such a large component of the overall wireless headphone market that that softness will probably weigh on the overall headphone market in 2024.”
Gagnon believes slower soundbar sales are a direct result of falling big-screen TV sale prices. “As the purchase price of TVs has downshifted…the attachment rate on soundbars has declined,” Gagnon reasons. “A soundbar has an average price of around $240, $250, [but] a lot of TVs being bought have an average price at around $300 to $400. So, as a percentage of the total price, it’s a lot to attach a product like a soundbar that is almost half or more of the price of the TV set. If we start to see people replacing bigger TVs that carry a higher price point, the attachment rate should start to improve.”
H2 Improvement?
While he views the first half of 2024 consumer tech market glass as half empty, Gagnon is more optimistic for a fuller sales container in H2.
“While some demographic pressures are gonna weigh on the market in the first part of the year, things should start getting better, we think, by the end of the year,” Gagnon predicts. “We really do think that especially by the fourth quarter, holiday season 2024 we’ll really start to see a return to growth.”
See also: Research Predicts Plunge In Global PC And Phone Revenue
