Will 2023 Become Known as the Year of Trading Down?

New research shows that consumers are trading down to less-expensive products in a wide range of categories.

The study from Adobe Analytics finds that the tier of cheaper goods in 11 product categories gained online market share at the expense of pricier items between January 2019 and February 2023. Adobe tracked purchases in apparel, appliances, books, consumer electronics, furniture, grocery, home and garden, personal care products, sporting goods, tools and toys.

CNN reports that trading down has continued even as inflation has moderated in recent months.

The effect of rising prices has been most evident in online grocery shopping, according to Adobe’s findings. The most expensive tier of grocery items has seen its share of purchases fall from 24.5 percent in 2019 to nine percent today. The lowest tier has seen its share increase by 13 percent over the same period.

New research from Circana, formerly IRI and NPD Group, finds that consumers have reduced spending on products popular during the pandemic when federal stimulus spending put more money in their pockets. Purchases of home care, liquor and technology have come down as necessities such as food at home and pet care have increased.

• Circana’s research finds that consumer tradeoffs vary depending on the market segment.
  Millennials are spending more on food at home and dining out. They have cut back on home textiles, office supplies and technology.
• Hispanics spend 17 percent more than average on foodservice and have increased purchases of automotive, beauty and footwear. Cutbacks have been made in alcohol, home improvement and team sports.
• High-income households continue indulging in auto care, accessories, beauty products and handbags. Health and vitamin purchases are also substantial. Cutbacks have happened in sports equipment and video games.
• Low-income SNAP (Supplemental Nutrition Assistance Program) households have significantly pulled back on discretionary purchases, cutting back on non-food purchases at over three times the rate of food and beverages.

SNAP recipient spending will likely remain depressed following the end of added payments for low-income consumers allocated during the pandemic. Benefits have been reduced by $90 monthly for the average recipient, The Guardian reports.

Poverty was reduced by 9.6 percent and childhood poverty by 14 percent in states with the added payments, according to the Urban Institute.

• From groceries to clothes, inflation-weary Americans flock to cheaper products online — CNN

• Annual Consumer Spend Increased by 4.4% as Consumers Make Trade-offs — Circana/Globe Newswire

• Low-income Americans face a ‘hunger cliff’ as Snap benefits are cut — The Guardian