The sales of expensive everyday items are experiencing somewhat of a reprieve from the consumer slump other retail sectors are facing.
At first, it may seem obvious that consumers would be pulling back from buying big-ticket items such as appliances, vehicles and electronics, as they have pulled back from other discretionary retail spending. And some sales have slumped amidst the forecasting of a “very, very soft outlook” for the sector’s year and disappointing earnings reports by major players. Best Buy, for example, has had it especially hard, with an expected outlook of a 3% to 6% sales decline as domestic appliance purchases have already plummeted 13%. This has led the electronics retail giant to announce the elimination of hundreds of in-store consultant roles.
While sales numbers such as Best Buy’s may be softer than in previous years, the January “New Reality Check: The Paycheck-to-Paycheck Report,” a PYMNTS and LendingClub collaboration, revealed that big-ticket items are proving relatively resistant to that line of thinking.
The share of surveyed consumers unlikely to buy expensive appliances or electronics in 2023 is significant at 46%. However, it is the only one to not reach 50% or above, meaning 46% is actually a relatively low figure. Why might that be, when consumers are cutting back on day-to-day indulgences, much less more expensive items?
Multiple reasons may be behind this gap. Primarily, many everyday big-ticket items can quickly go from nice-to-haves to need-to-haves. Appliances can only go so long before needing to be replaced, after all, and even furnishings can go past the point of repair. The same mindset may be applied to auto purchases. While U.S. car sales may be at their lowest point in over a decade, the slump is only 8% year over year. That means there is still a significant market for auto purchases, including older used cars, and auto repair and parts stores are seeing a bump in sales as consumers try to make their vehicles last a bit longer.
Another possibility behind consumers’ reluctance to swear off this spending is due to promotional financing regularly offered by retailers in the big-ticket space. Consumer retail promotional financing applications for in-store furniture purchases rose 10% year over year in January. The month also saw the approved financing total increase 9.6% over the previous month and 26% above January 2022.
Whether consumers are taking advantage of promotional financing or they’re simply not able to put off purchasing any longer, big-ticket retail spending is currently experiencing a notably soft sales slump. As with other retail sectors, the economic landscape may have to further settle first for that to change.
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