US Consumers Trading Down to Cheaper Goods as Inflation Persists

Low priced items are accounting for a significantly higher share of online unit sales in numerous product categories compared to five years ago, according to Adobe Analytics data released on Thursday, Axios reported.

In personal care, the share of unit sales coming from the cheapest quartile of goods jumped 96% from January 2019 to April 2024, the firm found.

Similar jumps were seen in:
• Personal care (+96%)
• Electronics (+64%)
• Apparel (+47%)
• Home/garden (+42%)
• Furniture / bedding (+42%)
• Grocery (+33%)

"Within a category like groceries, the data showed that goods with low inflation saw revenue grow by 13.4%, while products with high inflation saw revenue drop by 15.6%," Adobe reported.

A slew of companies have noticed the shift, including Amazon, where CEO Andy Jassy noted on an earnings call last week, "Customers are shopping but remain cautious, trading down on price when they can and seeking out deals."

Shake Shack CEO Randy Garutti said that some of the restaurant's "lower income" customers are trading down.

Darden Restaurants CEO Ricardo Cardenas said the company is tracking "a few signs of some consumers trading down within our brands", including upper-income diners.

And it's even impacting pools. At Latham Group, customers are switching from pricey concrete swimming holes to cheaper fiberglass installs, CEO Scott Rajeski said.

For many people, it's a matter of necessity.

"Consumers have been drawing down excess savings since mid-2021, but as of March this year, excess savings dried up," writes LPL Financial Chief Economist Jeffrey Roach.

Store brands are a big winner — and retailers are responding by boosting their offerings.

Perrigo's CFO, Eduardo Guarita Bezerra, said the shift to store brands is helping the generic drug maker.

Target launched a new store brand, "dealworthy", focused on everyday items.

Walmart recently announced its biggest new store brand launch in 20 years with the "bettergoods" brand focused on affordability and food trends.