We’ve all heard the stories of inflation and how the retail landscape has changed. And while inflation is finally cooling, economic pressure hasn’t disappeared. But what has changed is how consumers respond to it.

Rather than sweeping lifestyle overhauls that we often expect with economic hardship, this time seems different. Shoppers are making quiet, calculated micro-adjustments – trading down in one category while holding firm in another, cutting frequency rather than basket size, shifting dollars between channels in ways that rarely surface in earnings calls or consumer confidence surveys.

With transaction data – the anonymized, real-time record of what consumers actually spend across merchants, channels, and categories – leading retailers are basing their decisions off a fundamentally different view. It’s not what shoppers say they’ll do. It’s what they’ve already done. And it’s revealing three signals that challenge conventional wisdom about how Americans are spending right now.

1. Premium brands aren’t dying – they’re polarizing

At the top of the market, ultra-premium brands are surprisingly still performing well. Louis Vuitton saw transaction counts increase roughly 4% year over year in 2025 – but consumers aren’t splurging on the $5,000 bag. They’re making three $2,000 purchases instead. Total dollars and trip frequency are up, but the basket has changed – signaling a more deliberate approach to luxury.

Where retailers are seeing the most pain is in the middle. Department stores like Macy’s and JCPenney are seeing meaningful erosion as dollars migrate down-market to off-price retailers like TJ Maxx or leave the category entirely. The “barbell effect” (seeing the middle market squeezed out due to market changes) isn’t new, but transaction data reveals how pronounced it has become as economic pressure drags on, and that loyalty among premium shoppers is actually concentrating, not weakening.

“Retailers only see a sliver of the market they participate in. A premium brand knows its own customer well, but it has no visibility into where that customer is cutting back elsewhere. The same is true for a Dollar General. Everyone has different blinders, and those blinders make it really hard to accurately foretell consumer health.”

— Lorn Davis, Chief Product Officer, Facteus

2. Trading down isn’t out of desperation, but rather optimization

Conventional thinking assumes trading-down behavior is driven by lower-income households. Facteus transaction data actually shows the opposite: upper-middle-income families are doing much of the trading down because they have more discretionary dollars to reallocate. Lower-income consumers, already spending near their maximums, have less flexibility to shift. We’re seeing this now, and we also saw a similar pattern during the 2020 pandemic for the same reason.

The behavior is category-specific and intentional. The same consumer might trade down to a dollar store for household essentials while maintaining premium dining spend. Generational dynamics also add complexity: Gen Z is actually increasing spend with brands like Chipotle, who has recently leaned into a premium position, choosing higher-end experiences in categories that matter to them. Understanding which cohorts truly drive growth and how is the difference between a factoid and a meaningful reallocation of marketing dollars.

3. There’s a quiet pullback in discretionary spend

The third signal is perhaps the most actionable. The pullback isn’t showing up as smaller checks – but as fewer occasions. Casual dining visits are declining while average ticket size remains stable. Midweek and impulse-driven trips are the first to go. Consumers aren’t spending less when they show up. But they are showing up less often in most cases.

Visibility into daily behaviors catches these frequency declines weeks before they surface in monthly or quarterly reporting, allowing you the opportunity to shift strategies before it’s too late. Too often, by the time a brand’s dashboards flag a revenue miss, the behavioral shift is already well underway and there’s no turning back.

How smart retailers are responding

McDonald’s recommitted to its value menu, using the economic downturn to their advantage, and the data shows the result: average order value decreased, but market share grew by roughly three percentage points. Yet Chipotle took the opposite approach – maintaining or increasing prices while leaning into premium positioning – and they also gained category share, fueled in part by younger consumers willing to pay more.

Both strategies worked because they were authentic to the brand – emphasizing the importance of knowing your consumer (especially during tough economic times when their dollars are vulnerable). The lesson here isn’t “discount” or “premiumize.” It’s “know your core customer and serve them with clarity.” The brands struggling most are those trying to be many things to many people – a market position that works during expansion but becomes a liability in a period of consumer optimization.

“The first question most of our clients ask is deceptively simple: ‘Who is my customer?’ They think they know, but when they see the full picture – where else those customers are spending, how their wallet is shifting, who they’re really competing with – it changes the conversation entirely.”

— Lorn Davis, Chief Product Officer, Facteus

The bottom line (and good news)

The U.S. consumer economy isn’t collapsing – but it is reorganizing. The signals appear early, well before earnings reports or Census Bureau figures. And the retailers who act on them gain a structural advantage over competitors still waiting for last quarter’s data to tell them what their customers already decided weeks ago.

Visibility into true consumer behavior via transaction data doesn’t replace retail intuition. But it does confirm or challenge it early enough to matter.

About Facteus

Facteus is an economic intelligence platform that transforms anonymized transaction data from a network of U.S. banks and credit unions into actionable consumer insights. Facteus helps leading retailers, restaurants, and brands understand their customers, benchmark competitors, and make faster decisions backed by real-world shopping behavior. If you want a clearer view into your customers (or your competitors’ customers), you can learn more at facteus.com.