How Cost-of-Living Pressures are Altering the Consumer Electronics Landscape

By Toluna

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The rising cost of living is influencing consumers’ preferences when purchasing electronic products. To understand just how much it has impacted usage and purchase of media, entertainment, and electronic devices, Toluna conducted extensive research in late 2023 involving 3,086 interview participants from the UK, aged 18 to 74.

The interviews revealed a prevailing sense of pessimism regarding the financial outlook for the upcoming year—a sentiment that can be attributed to significant increases in interest rates and persistently high inflation, which remains well above the 2% target. Consequently, it appears that people will continue to experience financial pressures as we move further into 2024.

Approximately one-third of the surveyed individuals reported financial difficulties and a majority of the population—at least two-thirds—claimed to be worse off compared to the previous year. Younger generations were more likely to face financial challenges, with 50% of 18–34-year-olds reporting struggles, in contrast to only 20% of those aged 55 or older.

However, when asked about feeling worse off compared to 12 months ago, it was the older generations that exhibited a greater sensitivity to the cost of living. Two-thirds of those aged 35 and above reported a decline in their financial situation, while only half of 18–24-year-olds expressed a similar sentiment. In summary, 64% of the participants in the survey acknowledged feeling worse off compared to a year ago.

While those who felt financially worse off intended to continue using digital media and entertainment services, they also expected to reduce spending on these services and purchase fewer devices to access them. Consequently, the financial pressure is poised to influence consumer behaviour in the market for electronic devices, such as TVs, soundbars, wireless headphones, laptops, cameras, and printers.

Take smart TVs, for example. Only 24% of those who felt worse off expressed a desire to purchase one this year, compared to 32% of those who reported no change or an improvement in their financial situation—a difference of 8%. This trend was even more pronounced for laptops, cameras, and printers, where there was a 10% gap in purchase interest between individuals facing financial challenges and those with stable or improving finances. Given that most people are feeling the pinch, consumer electronics manufacturers and retailers should anticipate a noticeable decline in sales.

Furthermore, a significant portion of those who did not intend to make a purchase this year expressed their intent to delay their purchases until next year. The proportion of people delaying their purchases varied between 9–12%, depending on the electronic device category. Smart TVs and wireless headphones were particularly affected, with 12% of respondents indicating a delay in their purchase plans.

When asked why they were delaying the purchase of Smart TVs, 76% of those who felt worse off cited the increasing cost of living as the primary reason, compared to just 35% of those who reported no change or improvement in their financial situation. This reveals that people are apprehensive about their spending power in the future, in some cases even when they haven’t yet felt the full impact.

Those who reported delays in their purchases also expressed their intent to spend less on electronic items next year. For example, individuals planning to purchase a Smart TV this year indicated an average budget of £870, whereas those delaying their purchase expected to spend only £749 next year. Similar patterns were observed for other electronic devices; consumers who intended to buy wireless headphones this year expected to spend an average of £124, while those delaying aimed for an average expenditure of £98. Likewise, for laptops, those who planned to make a purchase this year were willing to spend £910 on average, whereas those delaying budgeted an average of £673.

In conclusion, not only is a reduction in sales likely, but more consumers will be seeking budget-friendly options this year, and next. Manufacturers can use this research to identify areas where consumers may compromise due to reduced spending power. For example, when considering Smart TVs, those who felt worse off financially were less inclined to compromise on features (42%) compared to those who reported no change or an improvement in their financial situation (35%). This suggests that individuals feeling financial pressure expect consumer electronics manufacturers to provide better value for their money during this cost-of-living crisis.

In this environment, brands must prioritize understanding their customers’ and prospective purchasers’ needs in a market characterized by financial constraints. While premium options were more prevalent in the past, consumers on average are now seeking to spend less while obtaining greater value for their money.

This article was first published in the Q1 2024 edition of Asia Research Media

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