What Do iPhones and Designer Jeans Have in Common?

April 24, 2009 — -- Some things just defy gravity. Sales of the Apple iPhone are as hot as ever, recession or not. McDonald's is doing well too. So is Internet access.

Why, in down times, are some things still going up? Why do some things remain as can't-live-without necessities, even while they cut back on luxuries?

Make no mistake: there are not a lot of success stories. A survey just out from the Pew Research Center shows that "Americans are paring down the list of familiar household appliances they say they can't live without" -- so sharply that a microwave oven, labeled a necessity by 68 percent of those polled back in 2006, has now dropped to 47 percent. Air conditioners (down by 16 percentage points) and dryers (down 17) took a hit, too.

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Cars remain a necessity to 88 percent of those surveyed by Pew, though people obviously are keeping their old clunkers going instead of buying new ones.

Hot Sales in Cold Market

But look at this list of things that are holding their own:

Designer jeans

Wal-Mart and Costco

McDonald's

Internet access

High-definition TV sets

At first, the list seems to make no sense. Sure, fast food and big-box discount stores would do better than four-star restaurants and pricey boutiques. And one can see how a night at home would seem a better bargain than a day at the mall.

But why is the iPhone doing well, when it was widely seen as a geeky status symbol just a few years ago? Why is the BlackBerry, gradually spreading from business users to the broader consumer market, holding up, too?

The difference, say market analysts, is that when the value of their nest eggs goes down, people look for value in what they buy.

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"Even in down times," said Michael Gartenberg, vice president for strategy and analysis at Interpret LLC, "people still have some discretionary income. What happens is that they spend it more carefully."

So they look for things that will last for them -- which means, for instance, that a television set will look more appealing than, say, a vacation. "They'll get several years of use from the TV," said Gartenberg, "but when the vacation is over, well, you have your memories, and that's it."

If anything, that pattern is more intense with a handheld, since people use it repeatedly day after day. "Once you have an iPhone or a BlackBerry and you integrate it into your life, it's very unappealing to go backwards," said Mark Donovan, a senior analyst with the market research firm comScore, Inc.

Staying Attached

Donovan said he's known of people, particularly in the technology sector, who valued their iPhones more than ever after they lost their jobs -- apparently seeing them as a way to stay connected and find that next job.

He added that people may put off buying a new computer, but they won't give up broadband access to save money. "Broadband has become like the dial tone," he said.

"Besides," chimed in Jaimee Steele, a colleague of his at comScore, "if you're locked into a service contract, you can't get rid of it."

Fair enough -- but what do high-tech gadgets have to do with low-tech jeans? The NPD Group, which tracks consumer behavior, reports with a bit of surprise that sales of designer jeans -- those with a price tag over $100 -- rose 2.3 percent this winter over a year ago, a small pocket of success in an apparel business that otherwise shrank 6.3 percent. "The passion for denim is alive and well," said Marshal Cohen, the firm's chief industry analyst.

Ross Rubin of NPD (who writes the "Tech on Deck" column for ABCNews.com), crunched some numbers and found that people who make less than $75,000 a year are buying large-screen high-definition TVs in increasing numbers.

"The Affordable Luxury"

But, Rubin says, "there are other forces" to explain the jump, including the Super Bowl and the looming transition to digital broadcasting.

"High-income consumers," he said, "are now moving on to smaller screens for bedrooms and other rooms."

Not everything, though, is consumer lust, which brings us back to the iPhone where we started. Several analysts argued that when money is tight, people see practical appeal in that Swiss-Army-knife, all-in-one gadget -- and they say Apple has marketed it masterfully, lowering the price and bringing it within more people's reach.

"You can call it the affordable luxury," said Gartenberg.