US consumers do not feel optimistic about their financial futures as they see the higher prices mark the shelves, McKinsey and Company stated in its report. As per the company, consumers are making spending decisions differently now than they did in the past. It added that consumer-packaged goods (CPG) companies need to understand and anticipate these changes.
According to company data, 75% of consumers reported that they are trading down, which includes either shopping from a lower-priced retailer, a lower-priced brand, buying brands for which consumers have a coupon, buy-now-pay-later purchases, or going for smaller quantities, among others. This trading down was seen across the income range, from low-income households to high-income ones. Within this segment, 87% of younger generations (between the ages of 18 and 25) have traded down rather, compared to 67% of older generations (above the age of 58), the report observed.
Even during the inflation period, certain channels have seen strong growth, the company reported. As per the company, wholesale clubs and grocery stores have witnessed high growth during the inflation months, which shows that even with changing consumer behaviour, they continue to spend. High-income millennial respondents had reported spending more across all goods, the report observed.
As per the report, consumers, especially lower-income consumers, have reported that they are delaying their purchases. With decreasing consumer spending, there is an increase in private labels as consumers have reported feeling satisfied with them. The report advised that to attract consumers towards their specific brands and categories, brand owners need to innovate.