What, How, and Why Are Consumers Buying Now?
While inflation fears nipped at consumers’ heels through most of 2024, recent retail spending data reveals that despite economic uncertainty and pressure, consumers have and will continue to spend. But how, why, and on what they’re spending may surprise you.
Value has taken precedence in consumers’ choice, but what they value is changing. Retailers should be aware of these retail shopping trends and economic conditions as they adapt their strategies for 2025.
A Retail Consumer Spending Report
Consumer optimism rose to 47% in Q4, said McKinsey & Co. And even as shoppers navigated higher prices, MasterCard’s SpendingPulse™ found that 2024 holiday retail sales grew 3.8% over 2023.
The CNBC/National Retail Federation Retail Monitor reported that retail sales jumped in December. Reacting to the findings, NRF President and CEO Matthew Shay commented, “Calendar issues aside, value-conscious customers showed enthusiasm for celebrating loved ones with the right gifts at the right price points for their budgets in December. Households are in good financial shape amid low unemployment, growing income and continued deceleration of inflation for goods.”
Speaking of inflation, the 12-month inflation rate was 2.9% in December, down 14% from December 2023. The Feds’ September and December 2024 interest rate cuts bode a positive consumer spending outlook, too.
That said, consumers remain cautious in their spending habits and are expected to continue to seek out deals and discounts. Shoppers are looking toward more price-conscious choices, including “dupes” of high-end products. Although big-ticket sales may soften, expect an uptick in sales to bargain hunters.
For Shoppers, Value is in Vogue
Consumer spending should sustain its momentum, along with a resilient labor market and a gradual decrease in inflation rates. At the same time, that spending looks different right now.
According to McKinsey & Co., 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.
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 do that.
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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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