Upside’s new report “The Income Divide” reveals that high- and low-income consumers are making fundamentally different decisions about where and how much to spend.
The findings, drawn from more than 10 billion transactions and surveys of 3,500-plus shoppers, show consumer behavior splits sharply at $75,000 in household income.
Above that threshold, consumers report increased spending and growing confidence in their financial outlook. Below it, they are pulling back – and the gap shows no sign of closing.
Lower-income shoppers are cutting essentials, not just discretionary spending.
Groceries and fuel – categories most Americans consider non-negotiable – are among the areas where lower-income consumers report reducing trips and spending less. The financial pressure on this group is more acute than topline metrics suggest.
Higher-income shoppers are the most active loyalty program participants.
Consumers earning $150,000 or more hold an average of 3.7 fuel loyalty memberships – nearly double those earning $50,000 to $74,999. The group is seeking value, even as it spends more.
Mass promotions risk missing both groups
According to the report, released April 13, blanket offers to higher-income consumers give away margin on transactions that would have happened anyway. Insufficient offers to lower-income counterparts mean fewer trips.
The report finds that the same strategy can underperform with both populations at the same time.
Thomas Weinandy, Upside’s principal research economist, said the divergence creates a difficult environment for retailers attempting to serve a broad customer base.
“Right now you can ask two people how the economy is doing and you’ll hear three different answers,” Weinandy said. “The income divide means households are experiencing widely different realities while looking at the same thing. This becomes a challenge for retailers on how to provide the most value for consumers with such disparate behavior.”
As the divide widens, retailers face a choice about how to allocate their promotional spend and who they’re actually trying to reach.
The full report includes a detailed breakdown of how each consumer group makes purchase decisions by category, and what retailers can do to influence both.
About Upside
Upside is a technology company whose platform uses personalized, performance-based promotions to bring customers more value while ensuring businesses earn more profit, with no changes to their operations.
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