Frugal but Picky: How Customers Are Redefining Value

Economic uncertainty, tariffs and inflation pressures are clearly reshaping consumer behavior. Customers aren't just trading down, they are becoming more selective in how they spend their money.

In some categories, they are tightening spending to the essentials. In others, they are still willing to pay a premium.

For businesses, this is both a challenge and a rare opportunity. Competitive advantage is now being won not by lowering prices, but by understanding exactly where and why customers are still willing to spend.

Here’s what I’m seeing across industries and what data you can use to make your next moves:

In April, consumers showed a clear shift toward essentials, according to Fiserv’s Small Business Index. While overall small business sales rose 3.2% year-over-year and service spending outpaced goods, discretionary categories like travel, retail and restaurants saw slowing growth.

Restaurant sales grew just 1.8% year-over-year but dipped slightly month-over-month, with ticket sizes down 7.8%, despite a rise in foot traffic. Essentials like healthcare and grocery drove gains, while spending declined at gas stations and in personal care.

April’s CNBC / National Retail Federation Retail Monitor further confirms that consumers are not retreating from spending altogether - they are reallocating their budgets in more intentional ways.

Year-over-year and month-over-month gains were seen in eight out of nine major retail categories, but the growth was not evenly distributed. Instead, it showed a continued pattern of selective spending, where essentials and emotionally meaningful categories are outperforming traditional discretionary ones.

• Digital products led the way with a 27.67% year-over-year increase, suggesting that convenience, utility and entertainment remain high on the consumer priority list.

• Electronics and appliance stores also saw solid growth, up 10.5% year-over-year.

• Grocery and beverage stores posted a strong 9.51% annual gain as essentials continue to attract wallet share even as prices rise.

• Sporting goods, hobby, music, and bookstores were up 9.19% year-over-year.

• Health and personal care stores grew 8.51%, pointing to a sustained consumer appetite for wellness and leisure-related purchases.

• Clothing and accessories, while historically vulnerable to economic tightening, grew 5.14%.

• Furniture and home furnishings stores were nearly flat year-over-year at 0.09%.

• Building and garden supply stores declined -2.1% annually despite a strong month-over-month rebound.

In April, consumers were clearly buying up to avoid higher prices that are expected to come with tariffs, which will inevitably lead to higher prices.

Here are what smart brands are doing right now in the midst of these changing consumer spending trends:

• Running granular, category-specific customer research

Broad surveys and macroeconomic forecasts only tell part of the story. To help uncover what is really driving customer behavior, you need targeted consumer insights through custom surveys and focused market research.

In my recent work, I’ve helped clients identify surprising gaps between what they thought drove value and what customers actually prioritize. These insights have shaped more effective positioning, product focus and a better competitive strategy.

• Auditing competitors for messaging and offer timing

Competitor audits help you uncover shifts that may be pulling share away from you, even before pricing changes hit. Successful brands make the customer feel that their spending is worth it. Competitor auditing can show you gaps to capitalize on to win their purchase.

• Identifying value drivers through competitive benchmarking and customer analysis

As customers redefine what “value” means to them, smart brands are tracking not just what they are buying, but why. By combining competitive benchmarking with targeted customer research, you can pinpoint the emotional and functional drivers behind purchasing decisions.

Here’s how I’ve been helping clients respond more effectively:

• Running targeted customer surveys to uncover what today’s buyers actually value in specific product and service categories.

• Monitoring competitor messaging to track how other players are repositioning in real time.

• Using affordable secondary research tactics and trend analysis to identify early signals of shifting sentiment, value drivers and new white space opportunities.

The brands succeeding right now aren’t simply cutting prices or chasing trends - they are investing in a clearer understanding of why customers spend where they do.

If you’re wondering how competitors are adapting or looking for clearer signals to guide your next move, you can reach me at kristen@kklresearch.com.

Until next time,
Kristen