Since the recession, US consumers’ feelings of financial insecurity have declined steadily: about 41 percent feel economic pressure today, compared with 43 percent in 2016 and 77 percent in the depth of the downturn (Exhibit 1).
Our survey revealed that millions of Americans—about 39 percent of shoppers who are changing their buying behavior—are switching stores to buy their preferred brands for less, up sharply from 29 percent in 2015. Strikingly, only about 35 percent of all shoppers say they’re looking for sales and promotions, down from 46 percent in 2014, and only 32 percent pay attention to prices, down from 50 percent in 2014. Evidently, once bargain hunters move to a retailer they perceive as less expensive, they spend more freely, paying less attention to price and using fewer coupons. This trend appears to be rising online and in brick-and-mortar stores alike.
About a third of shoppers with incomes over $100,000 say they’re spending more money online—mainly to save time—compared with just 18 percent of those making less than $50,000.
These findings suggest that middle-tier retailers could get squeezed along with middle-tier products, as about 8 percent of consumers who change their buying behavior trade down and 8 percent trade up. This trend may have long-term implications: 64 percent of shoppers who trade down to low-price or store brands say they are not likely to come back to the products they used to buy (Exhibit 2).
The news is brighter for premium brands, especially in categories such as beer, wine, spirits, deli meats, and cosmetics. Among consumers who trade up, 59 percent say they want higher-quality ingredients and 56 percent say they want better taste or performance.
As they try to keep pace with trade-off trends, marketing and product-development teams will want to track changing demographics carefully and by category. We found that millennials trade up selectively—18 percent in beer and wine, for example, but only 10 percent in spirits. Millennials also appear to have less emotional and physical brand attachment: about 18 percent buy the least expensive product regardless of brand, compared with 6 percent of baby boomers. On the flip side, 17 percent of millennials prefer premium store brands over national brands, versus 8 percent of baby boomers.
We’re surprised by how quickly definitions of healthy eating are changing. While Americans continue to say they want to eat healthier, they’re becoming less inclined to equate “natural” with “healthy.” They continue to read labels carefully, but they’re now likely to care more about sodium, sugar, and fat.
How marketers and retailers respond to these changes will continue to influence consumer behavior, and vice versa.