The Two-Speed Consumer: Polarization Redefines Retail in 2025.
Affluence sustains spend while austerity reshapes the value end of retail.
A Market Split in Two
Consumer Edge’s 2025 outlook makes clear that general merchandise is no longer moving as one market. High-income households continue to sustain spend, even stretching into premium categories. Lower-income groups, by contrast, are trading down harder, shrinking discretionary baskets and shifting to value formats.
The result is a structural divide: a two-speed consumer economy where the same category must simultaneously serve affluence and austerity.
Affluence Anchors the Top
At the upper end, high-income consumers are largely insulated from inflationary pressure. Their discretionary spend has held, allowing premium-positioned retailers to maintain momentum.
Macy’s, for instance, has reported that more than half of its customer base now earns over USD 100,000, and this group is leading its turnaround in 2025 (Business Insider).
For these shoppers, product differentiation, brand equity, and experience matter more than price compression. Retailers with credible premium plays are finding that their affluent base remains sticky, even as broader demand softens. But the risk is complacency: if they over-index on this segment, they ignore the erosion happening below.
Austerity Reshapes the Base
The other side of the market tells a sharper story. Lower-income households are pulling back harder on discretionary categories, pushing into off-price, resale, and private label. The global discount stores market was USD 628.5 billion in 2024 and is projected to reach USD 965.3 billion by 2033, reflecting a clear shift toward value as a permanent habit (DataHorizzon Research).
For this segment, price is the filter, but sustainability and repeat value are also shaping purchase decisions. Trade-down is not episodic, it’s behavioral. Retailers that fail to flex pricing architecture or expand value ranges will lose this consumer entirely to formats that treat value as a core proposition rather than a discount gimmick.
The Middle Squeeze
Middle-income households straddle the line, making them the most volatile. Some lean up into premium for select categories, while others lean down into value formats. Euromonitor notes that discounters, warehouse clubs, and variety stores are increasingly attracting mid-income shoppers, proving that value channels are no longer stigmatized, they’re mainstream (Euromonitor).
This volatility makes the middle the battleground: whoever wins the middle wins the market. But capturing them requires precision. Generic “one-size” assortments won’t work in a landscape where the middle itself is fractured.
Global Patterns of Polarization
The polarization is not confined to the U.S. KPMG analysis of FMCG sectors highlights the same pattern: premium-oriented brands continue to outperform on growth and margin, while value-oriented segments capture volume and reach (KPMG).
Retailers worldwide are being forced to run parallel strategies: one for the affluent who want differentiated experiences, and another for consumers who need functional value at scale.
Bottom Line
Retail in 2025 runs on two tracks. Affluence sustains premium, austerity drives value, and the middle is up for grabs.
The winners will not be those who pick one lane, they will be the retailers agile enough to run both simultaneously, delivering premium experiences for the top while embedding value as the baseline.
Sources: Consumer Edge: State of Retail 2025 — General Merchandise
Business Insider: Macy’s comeback driven by high-income shoppers
DataHorizzon: Global Discount Stores Market
Euromonitor: Top Retail Trends 2025
KPMG: Market Polarization in FMCG