If consumers were savvy and resilient in 2025, they’re switching over to a more frugal mindset for the New Year, according to Katie Thomas, who leads the Kearney Consumer Institute.
“A lot of people are already participating in some of the ‘trade down behaviors’ or ‘thoughtfulness behaviors,’ but I really feel like I’ve heard an increase in people across income levels second-guessing purchases and thinking about where they really want to spend,” Thomas said.
Despite a record-long government shutdown, President Donald Trump’s trade war with everyone, the steady advance of AI and the rest of it, consumers have continued to power the economy.
It’s an attitude helped along by the impulse to make the holidays happen with gifts and cheer all around.
In the end, consumers appear to have produced a middling holiday season for retailers, with sales gains that appear to have just outpaced inflation.
But now consumers are reevaluating — monetarily, emotionally and more.
“There’s an intersection with the anxiety we’re all dealing with and uncertainty with the economy and the K-shaped economy, which made me ask, ‘Is it really just the money we’re feeling strapped by lately?’” said Thomas, who regularly surveys shoppers. “In talking to consumers, it’s not just money; it’s time, it’s energy, it’s being able to connect with friends and family.”
Thomas’ research showed that while 37 percent of consumers felt most constrained by money in their daily life, 21 percent of consumers pointed to time as the most limited and another 15 percent said energy.
While people who are feeling strapped by money are hunting for deals and looking closely at the price/value equation, consumers lacking time or energy are looking for other solutions. “That’s where you’re going to see a bit of a spend-to-save mentality,” she said. “I’m still open to delivery options, subscription options. Maybe I want to do rental.”
The K-shaped economy describes a divergence between the affluent, who can still afford to spend, and everyone else, who is feeling more constrained.
The top part of the K is where the luxury shopper lives and trends in general continue to improve. That accounts for just 10 percent of consumers, but 50 percent of spending, Thomas said.
Included in that group are the very wealthy as well as the upper middle class, where Thomas said people are starting to warily watch for a stock market crash and have jobs that can be disrupted by AI.
“Even within that top of the K, there is a group that’s exposed,” she said.
“The middle is the biggest challenge because arguably there is this declining middle class — it’s also a challenge from the brand side,” Thomas said. “That’s where we see these traditional mainstream brands are struggling. The price-value equation is just out of whack for a lot of those brands.”
Some brands are paying for price hikes made coming out of the pandemic.
“You hear people talking about private label — and I hate when people describe private label as a ‘trade down,’ because in reality, that’s a price-value equation that’s still working for the consumer,” she said. “Many brands exploited their ability to take price increases and now are bemoaning that.”
And shoppers now want more from what they buy.
“What we see is people wanting to optimize their basics,” Thomas said. “‘I’m going to get the best deal I can on a white T, whatever my basics are, but I still want to go a little bit maximalist. It’s the scrimp and splurge mentality. That’s what we’re seeing in 2026.
“For brands, it really is about finding that, ‘How do I make the basics affordable and then acknowledge people will still spend on the unique?’ Whether it’s bright, whether it’s ultra warm, it’s not like there aren’t still areas people are splurging.”
While there are times when the economy can simply push brands and retailers higher, it seems that 2026 will be a year when they’re going to have to fight for every dollar.
