AUGUST 4, 2010 Tech Gadgets Steal Sales From Appliances, Clothes
By EMMELINE ZHAO Wall Street Journal http://online.wsj.com/article/SB10001424052748703545604575407580208239338.html?mod=WSJ_hps_MIDDLETopStories Americans are spending more on electronics like iPads and flat-screen televisions and less on durable goods like furniture, washing machines and lawn mowers, according to government data released Tuesday. The shift reflects a change in priorities for American consumers. After pouring money into all aspects of their homes during the previous decade, consumers are redirecting their purchases to eye-grabbing technology and socking away more of what's left over into savings. Apparel company executives are worried the lure of electronics will eat into their sales as the back-to-school season gets under way. Outlays for televisions, computers, video and telephone equipment grew 1.8% in the first six months of this year, compared to the first half of pre-recession 2007, the Commerce Department said Tuesday. By comparison, spending on appliances decreased 3.6% during the same period, and spending on furniture decreased 11% during that time. Overall, consumer spending stayed flat in June from the previous month, the Commerce Department said Tuesday. Meanwhile, the U.S. savings rate ticked up to 6.4% in June from the previous month, its highest point in a year and far above its pre-recession level. David Wu, a Los Angeles high school teacher, says he has spent about $4,000 on new technology over the past two years that included 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." Home sales remain sluggish, and while car sales are perking back up, they remain far below pre-recession levels. The big U.S. auto companies reported Tuesday that their domestic sales improved broadly in July. 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 video player and a $2,000 stereo system. Mr. Witten, who works in sales and marketing, 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 isn't enough to improve the economy, says Chris Christopher, senior principal economist at IHS Global Insight. Consumer spending on technology accounts for about 1.2% of nominal gross domestic product, a marginal portion of economic growth. "People have to be able to feel they can spend on big durable good items and housing, and these are not doing well," Mr. Christopher said. "Even if technology is growing well in retail sales, it helps, but it's nothing that's going to pull us out of this low level of GDP growth." Still, the trend toward buying electronics, often at the expense of other goods, is leaving its mark across the economy. The manufacturing sector, which has led the economic recovery, has been especially strong in technology-related businesses. Corning Inc., for instance, last month reported its second-quarter profit rose 49% as sales increased 23%. Corning makes specialty glass used in computers and smartphones. Sony Corp, maker of the PlayStation 3 game console, recently reported a better-than-expected 3.8% increase in revenue for its fiscal first quarter. Schaefer's TV and 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 bulky washers and dryers toward flashy electronics. Sales of televisions have flattened, Schaefer's President Ron Romero said. But that's only because prices are falling. The number of flat- screen televisions going out the door keeps rising, he said. Apparel retailers say the shift is eating into their sales, too. "Electronics has taken a huge chunk out of the average household spending budget," said Eric Wiseman, CEO of apparel maker VF Corp., 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," said Richard Dickson, CEO of branded businesses at Jones Apparel Group Inc., which includes Jones New York, Nine West and Anne Klein. Apparel retailers are using electronics to lure shoppers during the important back-to-school season, which is the second-biggest spending time period behind the holiday period. Teen retailer American Eagle Outfitters Inc. gave shoppers who tried on a pair of jeans their choice of free "smart" phone. Macy's Inc. partnered with Microsoft to feature exclusively the new Xbox 360 Kinect system. 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. "The price point is coming down to where, even though the economy has had some tough times, it's becoming a compelling purchase," said Jordan Selburn, consumer electronics analyst for market research firm iSuppli. 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 plasma 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. -- ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 Mail: antunes at uh dot edu _______________________________________________ Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
