Consumer spending is a biggie, to put it mildly. It accounts for more than 70% of the United States’ GDP; a juggernaut economic driver. The grocery industry, of course, has a big stake in how much Americans spend, and it spends a great deal of time, effort, and capital anticipating and adapting to how consumers behave.
Absolutely none of that is earth-shattering news, and I mention it only because of some interesting findings in CPG analytics firm Big Chalk’s Trade-Off Consumer report.
See, you could be forgiven for thinking that spending has become weaker in the face of ‘permacrisis’ and the rise and fall and rise of inflation. I’ve certainly had that thought myself, but that turns out not to be the case. At least, not quite.
Big Chalk has found that consumer spending has become more selective rather than simply weaker. The firm’s research found that 34.5% of U.S. households qualify as “Trade-Off Consumers,” defined as households actively reducing spending across four or more major budget categories – a figure that has remained remarkably stable over the past two years.
The notable change is in exactly where those consumers are found.
Trade-Off Consumer penetration among households earning $60,000 to $99,999 increased from 32.1% to 34.6% over the past year. Households earning between $100,000 and $149,999 also moved higher, from 30.6% to 31.7%. Lower-income households remained essentially unchanged at 43%, while participation among households earning more than $150,000 declined from 23.4% to 20.1%.
OK, so what do those numbers actually tell us? Well, they suggest value-oriented shopping is increasingly becoming a middle-class behavior rather than one confined to lower-income households. That finding practically flies in the face of “retailer’s intuition,” but the numbers are what they are.
Finding the Flexibility for Fun
They present an apparent contradiction. Consumers continue to spend on discretionary categories while remaining disciplined in grocery. More than 80% of U.S. consumers report dining out regularly, nearly 75% took a leisure trip during the past year, and more than 63% went to a movie. Even among Trade-Off Consumers, participation in restaurants, leisure travel, and entertainment remains surprisingly high.
Big Chalk characterizes this as a psychological willingness to preserve experiences despite very real, ongoing budget pressures. Could we call it fun? I think so.
Grocery occupies a different position in the household budget compared to leisure travel and nights out.
Mortgage payments, rent, insurance premiums, and vehicle loans offer virtually no short-term flexibility. Grocery purchases on the other hand are made several times each week and involve a myriad of potential decisions. Consumers can substitute products, change retailers, purchase private label products, delay purchases until promotions appear, increase coupon usage, or reduce impulse buying – any one or more of many different strategies to exact flexibility. Few household expenses provide that level of flexibility.
The report shows those behaviors remain widespread. Approximately 29% of consumers say they are shopping more grocery retailers than they did previously. Digital coupon use has increased to 27.1%, while 35.7% report purchasing whichever item is on promotion rather than remaining loyal to a preferred brand. At the same time, the percentage of consumers intentionally buying fewer groceries has declined to 21.1%. That’s the first meaningful improvement in 18 months, by the way.
Big Chalk suggests all this may indicate grocery volumes could eventually recover even if value-seeking behavior persists.
So consumers appear more willing to purchase more food… but they also expect retailers to help them manage household budgets, albeit indirectly. This drives home some of the changes we’ve observed over the past few years. Price, for instance, is becoming a less-complete measure of value – at least price alone. Promotional effectiveness, digital offers, loyalty programs, private-label quality, and pricing transparency all contribute to purchase decisions in a way that didn’t happen often in 2019.
Grocery Merchandisers Take Note
For much of the inflation cycle, retailers could rely on broad pricing actions to support revenue growth. That environment is changing. Consumers have accumulated several years of experience comparing prices across retailers, understanding unit pricing, combining digital offers, and evaluating private-label alternatives. Those newfound chops are unlikely to disappear simply because inflation moderates.
Big Chalk’s findings suggest the industry’s competitive focus is shifting toward middle-income households. These shoppers continue spending across much of the economy, but when it comes to groceries, they’re applying greater discipline than they did before the pandemic. Retailers that make value more obvious, easier to “understand,” and easier to obtain are probably going to be better positioned than those who assume older shopping patterns will return. That kind of thinking is very “2019” and will likely cost in the long run.