Charting shifting U.S. consumer behavior

To me, the lynchpin of the New Normal business environment – or whether one exists – is the behavior of the American consumer. It has been American consumers, flush with borrowed cash collateralized by their bloated assets, that have smoothed out the economic cycle for exporters around the world for almost two decades.

This dynamic is not dead, but it is undergoing significant changes, according to data from McKinsey. The prolonged recession and tepid recovery has shifted the balance of power in the marketplace toward the providers of extreme value, i.e., low-priced products, and away from the providers of extreme high-quality or luxury. This new trend won’t impact just the manufacturers of, say, yachts and fine crystal, but any product situated at the higher end of the price-quality spectrum. So that means packaged-food and household good manufacturers will potentially experience declines in premium brands like Tide laundry detergent.

The data is difficult to apply across industries and product classes, but the McKinsey researchers sense that the shift they are seeing is real and broadly applicable. They conclude, “There’s evidence that the shift of consumers away from more expensive products is a widespread trend.”