Consumers Trade Down to Cheaper Goods and Services Amid High Inflation

The Rise of the Big Trade Down: Consumers Embrace Cheaper Goods and Services Amid High Inflation

As inflation continues to soar, consumers are feeling the pinch and turning to more affordable options when it comes to their purchases. According to data from Adobe Analytics, low priced items are gaining popularity across various product categories, with a significant increase in online unit sales of cheaper goods compared to five years ago.

In personal care, the share of unit sales coming from the cheapest quartile of goods has surged by 96% from January 2019 to April 2024. Similar trends were observed in electronics (+64%), apparel (+47%), home/garden (+42%), furniture/bedding (+42%), and grocery (+33%).

The data also revealed that products with low inflation rates are seeing revenue growth, while those with high inflation rates are experiencing a decline in revenue. This shift in consumer behavior has caught the attention of major companies like Amazon, where CEO Andy Jassy noted that customers are being more cautious with their spending and seeking out deals.

From restaurants to retail stores, businesses are adapting to this new trend. Shake Shack and Darden Restaurants have noticed their customers trading down, while Latham Group CEO Scott Rajeski mentioned a shift towards more affordable swimming pool installations.

For many consumers, this change is driven by necessity as excess savings have dried up. Store brands are emerging as winners in this scenario, with retailers like Target and Walmart launching new affordable store brands to cater to the demand for budget-friendly options.

Overall, the impact of inflation on consumer behavior is evident, reshaping spending patterns and driving a preference for cheaper goods and services. As the trend of the big trade down continues to gain momentum, businesses will need to adapt and innovate to meet the evolving needs of cost-conscious consumers.