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Insight of the Day: Frugal revolution? How inflation 2024 is changing consumer habits

Findings:

  • American consumers are cutting back on discretionary spending due to inflation.

  • Lower-income households are struggling the most and prioritizing essentials.

  • Higher-income households are also becoming more discerning about spending but are still splurging on experiences.

  • Consumer spending is expected to slow down, potentially impacting the economy.

Key Takeaway:

  • Inflation is significantly changing consumer behavior, with a shift towards practicality and experiences.

Trend:

  • Consumers are trading down to discount stores or generic brands to save on groceries and other staples.

  • They are also postponing purchases of discretionary items or opting for less expensive alternatives.

  • Spending on experiences such as vacations, concerts, and jewelry is still relatively strong. Jewelry is seen as an "experience enhancer" that adds value to social outings and interactions. It is an item that people are willing to splurge on even during times of economic uncertainty, as it provides a sense of personal enjoyment and fulfillment.

Conclusions:

  • Inflation is causing cost fatigue among consumers, leading to a decline in sentiment.

  • Lower-income households are facing significant financial challenges.

  • Higher-income households are becoming more cautious but still have the means to splurge.

  • The economy's health depends on the spending patterns of higher-income groups.

Consumers are spending less on:

  • Discretionary goods: Clothing, furniture, and non-essential household items.

  • Dining out:  Especially at higher-priced restaurants, with some switching to groceries or cheaper dining options.

  • Name-brand products: Consumers are increasingly choosing generic or store-brand alternatives to save money.

Consumers are spending more on:

  • Experiences: Vacations, concerts, and certain movies are still popular, as they offer unique value and enjoyment.

  • Jewelry:  Considered an experience enhancer, jewelry is regaining popularity among consumers.

  • Essentials: Groceries and other necessary goods are still being purchased, although consumers are looking for ways to save money on them.

Overall, consumers are prioritizing experiences and essentials while cutting back on discretionary spending due to inflation. They are also becoming more price-conscious and seeking out ways to save money on their purchases.

Implications for Brands:

  • Brands need to adapt to changing consumer behavior by offering more affordable options and focusing on value.

  • Brands targeting lower-income households need to prioritize affordability and essential products.

  • Brands targeting higher-income households should focus on experiences and luxury items that offer unique value.

  • Brands need to understand the evolving dynamics of consumer spending to remain competitive in the current economic climate.

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