The consumer market in the USA is undergoing a transformation. Both high-income consumers and low-income consumers are experiencing a significant downgrade in their consumption behavior.

Recently, a report from Goldman Sachs shows that high-income consumers in the USA maintain strong purchasing power, while low-income consumers exhibit weakness.

However, both types of consumers are shifting their consumption towards lower-tier products or services, known as "consumption downgrading."

Furthermore, due to the prices of necessities such as food, insurance, and housing still being higher than pre-pandemic levels, consumers are generally starting to reduce their spending. Retailers are discounting to attract customers back.

Consumption downgrading has spread to high-income groups.

Looking at Goldman Sachs' consumer basket, the performance of middle-income consumers is better than that of high-income consumers, while low-income consumers continue to face increasing pressure.

Goldman Sachs analyst Caitlin Burrows pointed out that grocery store foot traffic for high-end consumers continues to grow: foot traffic increased by 8.7% year-on-year in August, with a positive year-on-year trend in monthly foot traffic for the full year of 2024, showing double-digit growth compared to 2022.

Meanwhile, although low-income consumers' expenditure on necessities remains stable, their spending on discretionary items such as luxury goods and cosmetics is relatively weak. Feeling the pressure, low-income consumers are turning to discount retailers like Walmart, Target, and Sam's Club.

Goldman Sachs pointed out that this trend of consumer downgrading exists among both high-income and low-income consumers. For example, sales at Nordstrom (luxury retail chain) have plateaued or declined, while sales at Nordstrom Rack (discount retail chain) have increased.

The latest September inflation data has exceeded expectations across the board, and the persistent inflation has impacted middle and low-income households. A Goldman Sachs report further proves that the consumer slowdown has spread to wealthier families.

American consumers are downgrading their spending, prompting retailers to lower prices and offer promotions.

In recent years, American consumers have been suffering from inflation, with their cost of living continuously rising.

To cope with this situation, more and more Americans are reducing their spending on non-essential items (such as housewares or expensive sneakers) and focusing on essential goods.

This shift in consumer behavior has brought about significant impacts on the retail trade. In order to attract customers, retailers have resorted to using discounts as a "trump card" for promotions. It is reported that from housewares giant Ikea to sneaker giant Nike, all companies have started to attract customers back by offering discounts.

"This year, global consumers have been affected by inflation, with everyone paying more for housing, food, and energy," said Ikea CEO Jon Abrahamsson Ring. To boost demand, Ikea has lowered product prices by around 10% globally in this fiscal year, marking the largest annual price reduction in the company's history.

Analysts believe that although this year's inflation in the USA has eased somewhat, many consumers still feel significant pressure as prices of necessities such as food, insurance, and housing remain higher than before the pandemic. This makes consumers more cautious in their spending and more inclined to choose products with relatively lower prices.