The U.S. consumer market is increasingly bifurcated, with lower-income households canceling or delaying purchases while financially secure shoppers keep overall spending afloat, according to a Reuters report.
The split is evident across industries, from toymakers and hoteliers to financial services providers. Households living paycheck-to-paycheck are hunting for deals as inflation remains elevated, while higher-income consumers continue to spend. The trend could affect holiday shopping. A National Retail Federation survey found that nearly two-thirds of customers plan to wait until Thanksgiving weekend to take advantage of discounts, up from 59% last year.
Companies are responding by tailoring products to different segments. Coca-Cola and Procter & Gamble have introduced smaller product sizes to appeal to lower-income consumers. For example, Coca-Cola rolled out single-serve cans in U.S. convenience stores earlier this month.
“Our system in the U.S. is adapting to both the higher and lower end, and both offer opportunities and challenges. At the lower end, affordability and value are really important,” Coca-Cola CFO John Murphy told Reuters.
Retailers are also adjusting operations. Target announced plans to cut nearly 2,000 jobs, which Reuters suggests could relate to its focus on non-essential products that lower-income shoppers are deprioritizing in favor of essentials.
Financial institutions serving predominantly low-income clients, including PrimaLend Capital Partners, Tricolor, and PROG Holdings, have filed for bankruptcy or revised their outlooks amid the spending divide.
Hotel chains such as Hilton and Wyndham Hotels reported softness in their budget brands and offered discounts to attract price-sensitive travelers.
“Our franchisees in the lower chain scales are beginning to discount more to try to capture demand right now,” said Wyndham Hotels CEO Geoffrey Ballotti.
In the toy sector, Mattel and Hasbro reported steep drops in third-quarter sales as retailers delayed orders due to cautious customers. However, Hasbro’s gaming business, which targets wealthier consumers, helped the company raise its annual targets, highlighting how segments of the market remain robust despite overall consumer caution.
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