CES continues to rebound from the pandemic years and this year attracted more than 130,000 attendees and 4,000 exhibitors. Attendance is still below pre-pandemic levels, but I expect this annual spectacle to continue its comeback as the consumer tech market begins its own comeback.
Impact of the Economy
Inflation and economic uncertainty continue to produce a shift in consumer spending that impacts the purchase and use of consumer electronics. There is pressure on consumers’ wallets as they are spending more money on basics like food, because prices, though not rising as quickly, are still significantly elevated compared to just a few years ago. Some products, though, including consumer electronics, are starting to see early signs of deflationary pressure.
In the three months ending November 30, about 14 of the 115 different categories of technology products enjoyed both unit and dollar sales growth. That represents about 5% of all sales. Growth has occurred in categories with new product introductions, where prices have fallen or where there has been innovation.
We also need to consider how these products are sold to consumers. The number of units typically sold on promotion is just under 30%; that’s up a little bit from last year. The average amount of the discount for those products sold is 21%, and that’s down a little bit from last year. Through most of 2023, brands and retailers largely refrained from using deeper promotions to drive demand growth.
We anticipate growth in tech spending for consumers who earn over $100,000 per year, although even those consumers, who are generally over the age of 50, are more selective and shifting their spend to lower-priced products when purchasing. Younger consumers are more budget constrained due to lower incomes and situations such as paying back student loans.
2023 Growth Trends by Category
The two largest CE product categories are TVs and computers. In 2023, retail sales revenue in the TV category was down 11% from the prior year, but on par with revenues from 2019. Consumers have focused primarily on the under $500 price segment, which gained nearly 5 points of share from the year before. Prices in the 75″ and larger TV size segment fell below $1,000 for the first time in November 2023, and unit volume increased almost 20% this holiday season versus 2022.
The computer category was down 12% on a dollar basis year over year for 2023 overall, but holiday season sales were down only 4%, a strong finish to the year. The growth came from an increase in ASPs as unit sales declined, with consumers purchasing more expensive PCs in 2023. There was even growth in some of the PC component categories, like CPUs, memory, SSDs and monitors.
There was also some growth in the portable audio category from strong promotions for the over-the-ear, headband-style stereo headphones that were previously premium priced. Unfortunately, the growth in the headband category was not enough to offset declines in the true wireless space.
Spending Varies by Region, with Surprises
Across North America through November 2023, spending was down about 10% versus the same period last year. The U.S. accounts for about 90% of all spending, and Canada has very similar spending profiles to the U.S. But I want to call out Mexico. Mexico has seen quite a bit of growth and was down only 1% year over year. In Mexico, the installed base for a lot of technology products is still relatively low. Income growth has been improving as a lot of manufacturers are investing in new industries.
The Road Ahead for 2024
We do expect that total dollars will be down about 1% in the first half of this year. Consumers leveraged credit cards and buy now/pay later programs pretty heavily during the holiday season. Circana’s latest Future of Tech report forecasts that the recovery will start in the second half of 2024, and the refresh cycle within product categories will determine when growth resumes. TVs tend to have a refresh cycle of about seven years, but the refresh rate for PCs is significantly shorter, made shorter still by trends such as working from home and remote working.
This recovery is not without challenges as economic headwinds remain. Consumers may decide to hold on to their devices a little longer by giving them new life through upgrades – the way many have upgraded mobile phone batteries – to make do with what they have. Delivering strong products with strong value, even in step-up lines of products, will be key to capturing today’s more thoughtful consumer.
Food for thought as we navigate 2024.
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