…But the pace was unsustainable
By Bob Tancula, Senex
We all have heard about the surge in demand for products for our homes during the COVID lockdowns and the ensuing work-, learn- and play-at-home period.
Discretionary income that had been used on travel, dining out and commuting was shifted to home goods, consumer electronics, appliances and other products we decided we needed.
In a study SENEX ran for TWICE magazine, we researched household spending over the 2020–2021 timeframe to learn what people bought.
Looking at the numbers from our survey, combined with analyses of manufacturer shipments across the consumer electronics, major appliances, mattresses and auto categories, the size of the increase in purchases is staggering. Every product category shown in the accompanying graph experienced significant incremental sales lift off their pre-COVID trend.
For example, major appliances had been shipping on average 47 million refrigerators, dishwashers, cooking and laundry appliances in the pre-2020 years, according to the Association of Home Appliance Manufacturers (AHAM). In 2020 and 2021, both years saw incremental increases averaging over 5 million appliances per year. A surging new home market might lead one to think these extra units were going to new construction. Few of those went to new construction, since there was an average of 797,000 newly constructed homes sold each year, up from the 2016-2019 average of 619,000.
It was expected that computers and mobile phones would have experienced spikes in sales during this time because of working and learning from home. Besides those work essentials, we decided we needed to add and replace our TVs, adding about 7 million more per year. And you do not want to be using a game system that is not the latest, either. We bought close to 3 million more of those in 2020 and in 2021 than we had been buying before 2020.
Even less-than-entertaining products like furnaces, air conditioning and water heaters jumped up from their trends, driving 10% to 15% more purchases per year. And all that entertainment, work and new comfort must have made us crave a better night’s sleep — mattress sales jumped by 15% per year, too.
Finally, if we were not spending on these products, we decided we needed to move to a different home. On average, 600,000 more existing homes were sold/purchased each year, above the pre-2020 trend, which also helped contribute to these product purchases.
As you are all too aware, this prolific purchasing period is likely coming to an end. U.S. consumers are not very confident about the next years as reflected by our study, where over half predicted there would be a recession in the next six months.
To support that, the University of Michigan’s Consumer Sentiment Index has not fallen this quickly since just before the 2009 crash.
We are heading into another period of heightened uncertainty. The next couple of years will be marked by much lower sales of these products since so many were pulled forward, robbing 2023–2025 of some of their sales. Throw in inflation rates not seen since the early 1980s, increases to interest rates and loads of consumer debt, and some of these product industries will be fortunate to get back to sales levels seen in the 2016-2019 period before COVID.
Bob Tancula is president of Senex, a Louisville, Ky.-based research firm that provides market intelligence and strategic business insights for multiple industries. Contact him at firstname.lastname@example.org.