Cash poor punters spend on hot electronics despite downturn

18 Mar 2010

Despite the first drop in per capita income since the post-World War II era, consumers are content to spend freely on high-end electronics from smartphones to LCD TVs and netbooks.

Global revenues for hot electronic products increased for the year despite an unprecedented decline in global per capita income in 2009.

This reflects a fundamental shift in how consumers are prioritising their spending, says analyst iSuppli.

Worldwide per capita income in 2009 declined by 2pc to US$10,500, marking the first annual decrease during the post-World War II era, according to US government data.

By contrast, iSuppli estimates global revenue from shipments of smart phones rose by 9.6pc for the year, while LCD-TVs experienced a 14pc increase and netbook PCs surged by a stunning 90pc.

“There’s been a measurable shift in how consumers are spending their disposable income,” said Derek Lidow, president and chief executive officer of iSuppli.

“In a time of great economic distress, when people had less money and spending on essentials like food and rent declined, consumers surprisingly used a disproportionate amount of their money to purchase new consumer electronics products.”

In terms of worldwide unit shipments, LCD-TVs rose by 42pc in 2009, while smart-phone shipments increased by 13.2pc in 2009 and netbooks rose by 100.8pc.

“For global consumers, the latest electronic products have become top-priority spend items,” Lidow said.

“They are willing to spend on these products at the expense of other desirables, such as jewelry, vacations and dining out. This trend will continue as the economic recovery gains momentum, causing global revenue for consumer electronic products to rise in 2010 and beyond.”

Global factory revenue from shipments of consumer electronics devices, a category that includes LCD-TVs, will rise by 3.2pc in 2010 and will grow by another 7.8pc in 2011, iSuppli forecasts.

The wireless communications segment, led by smart phones, will experience a robust rise of 10.8pc in 2010, and a 13.1pc increase in 2011. The computer segment, partly driven by sales of popular netbook PCs, will rise by 7.8pc in 2010 and 7.9pc in 2011.

One major factor allowing consumers to increase their spending on certain electronic products is decreased expenditures on vacations.

“Rather than spending on travel, people are opting to take ‘staycations,’ where they stay home during their vacation time,” Lidow noted. “To make their staycations more enjoyable, consumers are buying products to entertain themselves in their homes, including LCD-TVs.”

Other factors also augmented the strong spending on certain consumer electronics products in 2009. China’s stimulus efforts helped promote spending on various consumer products in the nation, most notably on LCD-TVs.

Consumer connectedness is another trend that the global economy could not deter. Consumers around the world have been increasing their spend, in spite of the economy, on devices that enable them to be connected to the Internet as they move from place to place.

Consumers in the developing world spent a larger share of their income on becoming first-time cell-phone subscribers.

“The importance that consumers are placing on these electronic products when it comes to spending is very positive development for the global technology industry and should be a cause of optimism in the years to come,” Lidow observed.

By John Kennedy

Pictured – Devices like the forthcoming iPad have piqued consumer interest. On the first day of selling, the device notched up 120,000 pre-orders – selling at the rate of 20,000 per hour.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years