“‘Funflation, Taylor Swift … those experiences are really where people are willing to pay.’”
That was Best Buy
BBY,
CEO Corie Barry blaming the electronics giant’s slipping sales on shoppers spending their money on experiences instead of products like new TVs or tech devices.
Barry said this “means the bigger ticket items in electronics are not right now where people are interested” while speaking at Fortune’s Most Powerful Women Summit recently.
Funflation, a combination of the words “fun” and “inflation,” refers to the recent boom in consumer spending on entertainment and experiences, with the high demand running up the cost of enjoying those experiences. Analysts say that current funflation has been partially driven by pop culture icons like Taylor Swift and Beyoncé going on record-breaking tours, as well as the viral “Barbenheimer” phenomenon that had moviegoers racing to see both the “Barbie” and “Oppenheimer” films over the summer.
What’s more, Bank of America’s September “Funflation in Full Force” analysts note said that global live music revenue soared to $25.3 billion in 2022, which is nearly double what it was in 2021. “Live entertainment is currently the brightest star in the broader media and entertainment universe,” the Bank of America
BAC,
note added.
Indeed, this summer’s concerts and blockbuster films added an estimated $8.5 billion to U.S. growth this quarter, according to Morgan Stanley.
“Consumer spending in 3Q23 is benefitting from large one-offs in consumer spending on ‘Barbenheimer,’ Taylor Swift’s ‘The Eras’ tour, and Beyoncé’s ‘Renaissance’ tour,” Morgan Stanley economist Sarah Wolfe also wrote in an August note. But tougher times may be ahead. “The unwinding of these events, combined with the expiration of the student loan moratorium equal 1.4% downside to real [Personal Consumption Expenditures] in 4Q23,” she added.
The shift to people spending their money on experiences rather than material goods or products in the wake of the COVID-19 pandemic has had many names, including “revenge travel” or the “you only live once,” aka “yolo” economy. U.S. consumers have remained resilient in the wake of high inflation, high interest rates, and the recent resumption of federal student loan payments. Overall, U.S. retail spending has increased for the last five consecutive months, but most of the increase is tied to higher gasoline prices.
But that’s apparently bad news for Best Buy, the CEO says. The retailer’s second quarter revenues fell to $9.5 billion from $10.32 billion in the same period last year. And Barry told analysts in August that she expects this year “will be the low point in tech demand after two years of sales declines.”
Best Buy did not immediately respond to MarketWatch’s request for comment. Shares of Best Buy Co. Inc. are down 12.17% in 2023 to date.
This story originally appeared on Marketwatch
