The tech industry tends to be focused on early adopters, and generally that’s a proxy for younger consumers. They are the first digital-native generation to emerge. They are new to the workforce and changing the way teams access and leverage technology at work. But we’re seeing challenges with respect to the ability of these consumers to spend and invest in consumer technology. This is just one of the emergent signals that the traditional retail approaches require some adjusting.
Aggregated consumer tech spending by millennials and Gen Zers for the period of April 2020 to March 2021 totaled $48 billion. For the period of December 2022 to November 2023, that spending slipped to $36 billion, a decline of about 25%. Spending among consumers under 34 represented 24% of total consumer technology spending in November 2023, down from 28% two years earlier. Four percentage points doesn’t seem like a lot, but in the context of a $170 billion industry, it accounts for a lot of dollars.
Millennial and Gen Z consumers are spending more on detachable cameras, notebooks, PCs, camcorders and graphic cards. Gaming is very important to these consumers, as is their interest in digital creation. Sales of digital point-and-shoot cameras jumped 72% between November 2022 and November 2023.
Older consumers, those age 45+, have taken up a lot of the slack left by younger consumers. They may have a more comfortable job position and have skipped ahead to current technology generations, maybe going from simple HDTVs to 4K or OLED. However, the income factor doesn’t just reflect differences in the prices of purchases; it reveals differing interests as well. Consumers with income under $50,000 are spending on products such as drones, remote controllers and car stereo speakers. Those earning 50,000-$100,000 are spending more on digital point-and-shoot cameras and e-readers. Consumers earning $100,000+ per year are interested more in lenses/filters/adapters, again related to digital content creation.
Young consumers are the bellwether who will drive growth in this industry to an increasing degree, but older consumers still possess enormous purchasing power and shouldn’t be ignored.
Innovation vs. Value
One way we track innovation is by looking at how many new products are coming to market. The percentage of new consumer tech products relative to total consumer tech products has declined recently, going from 18% in 2021 to 17% in 2022 to 13% in 2023. We believe this has resulted from the pandemic, logistical issues, supply chain disruptions and problems with getting products into consumers’ hands and onto retail shelves.
Although there were new product introductions in 2023, consumers had to balance that with value. We saw a lot of consumers opting for the less expensive product as a way to get that new innovation into their house, even if it wasn’t the most advanced or feature-laden product available. Consumers are making sacrifices because of higher costs on everyday purchases like food and gas. Innovation takes a backseat to value in times of economic challenge.
It will continue to be critical to understand differing shopper thought patterns in terms of product selection, price and channel. The consumer tech brands and retailers who dig into the details will find pockets of opportunity with different consumer cohorts and product categories, even when the economy is weak. Savvy brands will enjoy a rebound in the second half of 2024, along with a respite from more than two years of weakness in consumer tech.
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