What, How, and Why Are Consumers Buying Now?
While over half of consumers McKinsey & Co. recently surveyed (53%) report mixed feelings or pessimism about the state of the economy, they’ve continued to spend. But on what and how long that spending trend may last may surprise you.
Here’s how retailers can make sense of and be responsive to out-of-sync consumer sentiment and behavior.
A Retail Consumer Spending Report
McKinsey & Co. found that, thanks to stable inflation, low unemployment, and ongoing job growth at the end of 2024, 46% of US consumers felt optimistic in the first quarter of 2025. However, not all consumers shared this sentiment. Just over a third of surveyed consumers reported mixed feelings about the economy, and pessimism ticked up slightly from Q4 2024.
While the greatest share of consumers felt optimistic about the economy in Q1 2025, sentiment around household finances was more mixed. With many forecasters predicting higher inflation on the horizon, consumers reported their plans to decrease spending across many discretionary categories. This suggests that even optimistic consumers, in addition to consumers who feel uncertainty and pessimism about the economy, may hold back when it comes to spending.
In response, many consumers are expected to continue to seek out deals and discounts. Shoppers are looking toward more price-conscious choices, including “dupes” of high-end products. In fact, McKinsey found that three quarters of surveyed consumers traded down—especially in the grocery category—in Q1 2025. Although big-ticket sales may soften, retailers should expect an uptick in sales to bargain hunters.
For Shoppers, Value is in Vogue
Typically, consumer spending aligns with consumer sentiment. Cautious consumers’ spending habits usually reflect their concerns. According to McKinsey & Co., consumer sentiment plunged when pandemic-driven inflation surged and has never really recovered. But the inverse is true for spending. Their research shows that collectively, consumers are spending more than they were before the pandemic and are spending more each year.
What gives, and what does this mean for retailers and brands? McKinsey & Co. says we’re entering a new era of consumer behavior defined by a “value now” mentality. In response to discouragement about the economy, consumers aren’t just chasing low prices—they’re focused on getting the best bang for their buck. And, depending on the category, they’re oscillating between trade-offs and splurges.
Adding value means delivering what matters most to consumers. It amounts to exceeding expectations in ways that convince them that the benefits of their purchase outweigh the monetary cost.
Consumers are prioritizing certain categories over others based on the value they ascribe to the product or service. For example, experience-based goods—or goods that might elevate a consumer’s experience through their use or are a means of self-expression, such as jewelry—are growing faster than goods less associated with experiences.” Source: McKinsey & Co.
Combining value with speed and convenience, retailers may be able to avoid consumer brand-switching—which has become more common in the face of price concerns—and instead build brand loyalty.
For more insights on understanding your customers’ value sweet spot, read our blog, 5 Retail Value Strategies to Attract Price-Conscious Consumers.
A Brick-and-Mortar Comeback Creates an Omnichannel Imperative
Despite Amazon’s dominance in e-commerce and a rise in retail e-commerce market penetration overall, look for a brick-and-mortar resurgence.
Nearly two-thirds of respondents in a global survey say they would prefer to shop from a retailer or brand that has both a physical and an online store.
Since consumers expect a cohesive digital + physical shopping experience, retailers who successfully blend digital and in-store operations across multiple platforms will gain a powerful performance differentiator.
AI Retail Influences Deepen
The infusion of generative AI into retail is giving rise to greater emphasis on hyper-personalization. AI has the potential to direct consumers to products and services that match their purchase patterns and practices.
As retailers begin to use AI and automation more broadly to improve the customer experience, some routine tasks of retail employees may be eliminated so they are free to tackle higher-level duties.
For more on leveraging AI for your retail business, read The Retail AI Imperative.
Sustainability Never Goes Out of Style
63% of global shoppers say they like to shop with retailers and brands that have a purpose beyond just selling their products or services.
Retailers that align their brand and operations with sustainability and social responsibility values continue to resonate with consumers.
To respond to today’s market conditions and retain a competitive edge, retailers must remain consumer-focused and nimble. Outsourcing all or portions of your sales operations to a 3PL provider is one way to reach your goals faster.
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Author: Karen Salamone
Karen is Head of Marketing for MarketSource. She is a transformational B2B and B2B2C leader with a history of building marketing organizations, content teams, and demand generation centers of excellence from the ground up. She is recognized for delivering meaningful insights and fresh approaches and for earning best-in-class content, design, and multi-media awards.
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