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photo: GETTY IMAGES (TECHNOLOGY INNOVATIONS) OVERVIEW American consumers are now redirecting more of their durable-goods spending to eye-grabbing technology. The electronics boom alone isn’t enough to sustain a recovery, but the trend toward buying electronics, rather than other goods, is leaving its mark on the economy. Apparel companies are seeing reduced sales, and travel spending is down as Americans seek more of their entertainment at home. LINKS |
'Who Needs to Eat?’
By EMMELINE ZHAO
If Americans are cutting back on big purchases for the home, they’re doing so while talking on their iPhones about their new flat-screen TVs. Recent government data show that after pouring money into all aspects of their homes during the previous decade, consumers are now redirecting their purchases to eye-grabbing technology and socking away more of what’s left over into savings. In the first half of this year, spending on televisions, computers, video and telephone equipment grew 1.8% from last year’s first half. By comparison, spending on appliances dropped 3.6% during the same period, and spending on furniture fell 11%. David Wu, a Los Angeles high-school teacher, says he has spent about $4,000 on new technology over the past two years, including a high-tech mobile phone and a large-screen television. The 25-year-old says that because computers and other electronics are constantly evolving, he has an incentive to keep buying the latest items. “With a toaster and microwave,” he says, “as long as it works, I don’t see myself buying a flashier one.” HARDWOOD FLOORS? NAH. In all, Americans spent $534 billion on durable goods of all sorts—items like appliances and cars that are designed to last three or more years—in the first half of the year, the Commerce Department reports. Home sales remain sluggish, and while car sales are perking back up, they remain far below pre-recession levels. But it’s electronics that are causing consumers like Spence Witten to reopen their wallets. Since September 2009, the 27-year-old has spent about $8,000 on new electronics. Among his buys are Apple’s iPhone 4, MacBook Pro, iPad and iPod. He also bought a Blu-ray DVD player and a $2,000 stereo system. Mr. Witten, who works in sales and marketing for a cyber-security company, says some home improvements fell down the list of priorities as a result of his electronics purchases. He could use a new toaster, microwave, professional wardrobe and hardwood floors for his Washington home. “But who needs to eat and buy more ties?” he asked. “I mean, come on, I have a great computer.” The electronics boom alone isn’t enough to sustain an economic recovery, says Chris Christopher, an economist at IHS Global Insight. Consumer spending on technology accounts for only about 1.2% of the overall economy. Still, the trend toward buying electronics, often at the expense of other goods, is leaving its mark. The manufacturing sector, which has led the economic recovery, has been especially strong in technology-related businesses. Corning, for instance, reported that second-quarter profit rose 49% as sales increased 23%. Corning makes specialty glass used in computers and smartphones. WEARING AN IPHONE Meanwhile, apparel marketers say the shift is eating into their sales. “Electronics has taken a huge chunk out of the average household spending budget,” says Eric Wiseman, CEO of VF, maker of JanSport backpacks and Wrangler jeans. Apparel executives say the iPhone in particular has become an ornament in its own right. “It’s a new fashion accessory, there’s no doubt about it,” says Richard Dickson, CEO of branded businesses at Jones Apparel Group. Earlier this year, clothing retailers used electronics to lure shoppers during the important back-to-school season, the second-biggest spending time period, behind the holiday season. American Eagle Outfitters gave away smartphones to shoppers who tried on a pair of jeans. Macy’s partnered with Microsoft to exclusively feature the new Xbox 360 Kinect system. Schaefer’s TV & Appliance in Lincoln, Neb., has seen about a 25% increase in sales of Blu-ray video players over the last two years as consumers are slowly lured away from washers and dryers toward flashy electronics. The number of flat-screen televisions going out the door keeps rising, says Schaefer’s President Ron Romero. Many hit by the weak economy cut spending on big-ticket items and services, including vacations. To substitute, families took “staycations” by taking time off at home and elected to upgrade their primary home entertainment, the television. Sally Manesis, a 56-year-old from of New Canaan, Conn., installed a $5,000 home entertainment system last fall, equipped with a 64-inch flat-screen television, surround sound and a Blu-ray video player. She says she thought about spending that money on a trip to Europe, but relaxing in the comforts of her home appealed to her more than long-distance travel.
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