CEO Corie Barry of Best Buy recently addressed the decline in the company’s sales. According to Barry, consumers are shifting their spending towards experiences rather than purchasing new televisions or tech devices. This trend, known as “funflation,” has caused a surge in consumer expenditures on entertainment and experiences, consequently driving up their costs.
Explaining further during Fortune’s Most Powerful Women Summit, Barry emphasized that high-ticket electronic items are currently not capturing the interest of consumers. Instead, people are investing more in memorable experiences. This shift can be attributed, in part, to popular culture figures like Taylor Swift and Beyoncé, who have embarked on record-breaking tours. Additionally, the summer saw a viral phenomenon called “Barbenheimer,” resulting in a rush of moviegoers to watch both the “Barbie” and “Oppenheimer” films.
Analysts from Bank of America have taken note of this funflation trend. They pointed out that global live music revenue skyrocketed to $25.3 billion in 2022, nearly doubling last year’s figures. The Bank of America further stated that live entertainment currently shines as the brightest star in the media and entertainment landscape.
Morgan Stanley estimates that this summer’s concerts and blockbuster films contributed approximately $8.5 billion to the growth of the United States this quarter.
Overall, the increasing preference for experiences over material possessions has had a profound impact on consumer spending patterns. Funflation has not only changed the way people allocate their funds but has also brought about significant growth in the entertainment industry.
Consumer Spending and the Shifting Trends in the Post-COVID Economy
Consumer spending in the third quarter of 2023 has seen a boost from notable events such as the ‘Barbenheimer,’ Taylor Swift’s ‘The Eras’ tour, and Beyoncé’s ‘Renaissance’ tour, according to Morgan Stanley economist Sarah Wolfe. However, tougher times may lie ahead as these events come to an end, along with the expiration of the student loan moratorium. This combination is predicted to result in a 1.4% decrease in real Personal Consumption Expenditures (PCE) in the fourth quarter of 2023.
The aftermath of the COVID-19 pandemic has witnessed a shift in consumer behavior, with people prioritizing experiences over material possessions or goods. This emerging trend has been referred to by various names, including “revenge travel” or the “you only live once” (aka “yolo”) economy. Despite facing challenges such as high inflation rates, increased interest rates, and the resumption of federal student loan payments, U.S. consumers have remained resilient. The retail sector has experienced steady growth for the past five months, although a significant portion of this growth can be attributed to higher gasoline prices.
Nevertheless, Best Buy’s CEO expresses concerns regarding these trends. The company’s second-quarter revenues decreased from $10.32 billion to $9.5 billion compared to the same period in the previous year. During an analysts’ briefing in August, CEO Barry stated that she expects this year to mark the lowest point in tech demand following two consecutive years of declining sales.
Best Buy Co. Inc. has not responded to requests for comment at this time. As of 2023 year-to-date, shares of Best Buy Co. Inc. have declined by 12.17%.
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