In 2023, consumer technology spending is expected to fall by 2.4%, marking the second consecutive year of reduced expenditure compared to 2022. This decline is not due to decreased purchases but is primarily because consumers are paying less for their tech acquisitions.
The modern world is in the throes of a technological revolution. However, this relentless wave of innovation is creating an unexpected challenge for consumers: rapidly depreciating technology.
Although consumer tech spending saw a robust 5% year-over-year growth in June 2023, it pales in comparison to the 9% growth observed in June 2022. The shift isn’t caused by consumers purchasing fewer gadgets; it’s mainly a consequence of consumers paying less for their tech.
The tech industry is a whirlwind of change. New, more advanced products hit the market at an astonishing rate, rendering yesterday’s purchases obsolete today.
The temptation to keep up with the latest gadgets is strong, with one in ten Americans upgrading their smartphones annually. However, amidst rising living costs, many are turning to the thriving second-hand tech resale market as a means to save money.
According to an Australian tech news website the market is flourishing. In 2022, a remarkable 282 million used and refurbished smartphones were shipped globally, a figure projected to reach 415 million by 2026.
The primary reason these pre-owned devices are more affordable is depreciation, similar to how new cars lose value when they leave the dealership. Smartphones, for instance, lose approximately 42.7% of their value within just one year of their initial release, surpassing the depreciation rate of new cars.
To identify which consumer tech brands and products experience the most significant depreciation over time, researchers conducted an exhaustive analysis.
Their study included 29 prominent consumer tech brands focusing on smartphones, earbud headphones, tablets, and smartwatches.
Data was collected on over 1,000 tech products listed in “used” condition on both Amazon U.S. and UK. A comparison was drawn between the original manufacturer’s suggested retail price (RRP) in USD when the products were new and their current standardized listed prices in “used: like new” condition.
For each product, the researchers calculated the average change in value (%) per year since its initial release. When multiple products within the same product line were launched in the same year, the researchers selected the one with the most significant annual change in value between new and used conditions.
The brands were then ranked based on the average change (%) in value per year for all of their listed products available on Amazon.com and Amazon.co.uk during the research period.
It is essential to remember that this data reflects only the products and prices accessible on these two Amazon platforms during the research period.
Despite the decline in tech spending, the consumer technology market remains strong. In 2023, it generated more than $1 trillion in global revenue, with annual growth expected to continue at a rate of 2.32%. This market presents consumers with a multitude of options, making it overwhelming to navigate.
Simultaneously, the increasing cost of living has prompted more consumers to consider the resale value of their tech acquisitions. In the United Kingdom, a survey revealed that two out of every three adults are more inclined to invest in a high-priced device if they can anticipate a guaranteed return through resale.
Among the brands experiencing the most significant depreciation, OnePlus leads the pack, with an average tech item losing 21.82% of its value over time.
This may be attributed to issues such as rapid battery depletion and unresponsive screens with their smartphones, which could deter consumers from investing in second-hand models.
In the second position, Google ranks, with an average product devaluing by 17.55% each year. Concerns arise regarding discontinued security updates for older Google Pixel models, potentially impacting their desirability in the resale market.
Apple, recognized as a premier technology brand, has a surprising entry on the list: the relatively recent Apple iPhone 14, released in September 2022, has experienced the most substantial loss in value, with a depreciation of 24.68% since its initial launch. SellCell attributes this decline to the phone’s high initial cost and lackluster new features.
The trend of rapid depreciation extends to other smartphone brands, with Samsung leading the list of phones experiencing the most substantial annual depreciation since their initial release. The Samsung Galaxy S22 tops this list, witnessing a considerable decline of 40% in its value since its debut in 2022.
Compared to Apple, Samsung’s frequent releases may explain why the value of their offerings tends to diminish rapidly. In 2014 alone, Samsung launched an astonishing 56 different smartphone models.
Securing the second spot is the Google Pixel 2, with an average annual depreciation of 38.07% since its initial release in 2017. Google’s maximum trade-in value for Pixel phones at $205 may also affect the resale value of older models.
In the tablet market, Microsoft secures half of the positions in the top 10 tablets that have seen the most significant depreciation in value since their initial release. Leading the list is the Microsoft Surface Pro 7+, with an average annual depreciation rate of 35.23% since 2021.
As for headphones and earbuds, Philips claims the top three models in the list of gadgets that have lost the most value over time, with the N7506 Headphones experiencing a 63.92% loss in value since 2022.
This trend raises questions about the long-term sustainability of tech investments. The primary reason for rapid depreciation is the breakneck speed of innovation in the tech industry.
Manufacturers are continually introducing new features, improved specifications, and cutting-edge designs, enticing consumers to upgrade regularly.
Market dynamics also contribute to depreciation, as fierce competition among manufacturers leads to aggressive pricing and frequent promotional offers, ultimately accelerating depreciation rates.
In this fast-evolving landscape, consumers are advised to adapt their purchasing strategies. They can consider buying slightly older models for reduced prices, protect their investments with quality accessories and insurance, explore trade-in programs, evaluate subscription services, and explore the resale market to maximize the value of their tech acquisitions.
The consumer electronics market, which was estimated at $3.3 trillion in 2023, is poised for continuous growth, with a projected Compound Annual Growth Rate (CAGR) of 5.8% throughout the forecast period. It’s expected to reach $5.8 trillion by 2033, driven by technological advancements, evolving consumer preferences, and a growing global population.
As consumers continue to navigate the world of consumer tech, managing the impact of depreciation on their investments is becoming increasingly important.