American consumers continue to spend, yet a significant shift is underway in what and where they choose to buy, according to company executives and retail analysts.
These behavioral adjustments, though subtle, are becoming increasingly evident, manifesting as altered routines for purchasing gasoline and fewer visits to clothing and furniture stores. The impact, however, is uneven, with lower-income households experiencing more pronounced cutbacks.
During recent earnings calls, leaders from major American companies like Walmart, McDonald's, and Dollar General noted overall shopper resilience but also highlighted noticeable reductions in spending by their lower-income clientele.
While generous income tax refunds have temporarily bolstered sales for major retailers, some economists and analysts anticipate a broader retrenchment once these refunds are depleted and consumers face the cumulative burden of escalating gas prices, food costs, insurance premiums, and other goods and services.
Trevor Chapman, a communications executive in West Hills, California, exemplifies this shift. He and his wife now strategically plan their fuel stops around Costco stores with filling stations, rather than relying on local independent gas stations.
The couple has also increased their online food shopping to curb impulse purchases.
"Gas is a kind of catalyst," Chapman explained. "It trickles down into the entire budget. We’re trying to keep everything as normal as possible. But it’s starting to feel like it’s adding up more and more."
Even before the recent surge in fuel prices, many consumers were already exercising greater discretion with non-essential purchases, fatigued by several years of persistent inflation and tariffs on imported goods imposed last year.
The U.S. Commerce Department reported last week that the growth in Americans' spending in April was primarily driven by higher prices, not an increase in purchases, as a key inflation gauge reached its highest level since October 2023.
Topping up instead of filling up
Members-only warehouse stores such as Costco, Walmart's Sam's Club, and BJ's Wholesale Club have reported increased traffic at their fuel pumps since geopolitical tensions began driving up fuel prices in late February.
Fuel typically costs less at these wholesale clubs, attracting budget-conscious drivers.
However, many drivers are not filling their tanks completely, as Walmart Chief Financial Officer John David Rainey informed analysts last month.
For the first time since 2022, Walmart customers and Sam’s Club members are purchasing an average of less than 10 gallons per trip.
"That’s an indication of stress," Rainey stated. Costco members are also adapting, visiting store gas stations more frequently to "top up in between what would have normally been a gap between getting the tank to empty because of the concern about what might the gas price be tomorrow," according to Chief Financial Officer Gary Millerchip in late May.
Conversely, the surge in gas prices has negatively impacted convenience stores, which account for 80% of all fuel sales in the U.S., according to Jeff Lenard, a vice president at the National Association of Convenience Stores.
An analysis by the trade group revealed that the number of pump transactions at 130 convenience store companies fell by nearly 10% across March and April compared to the same period last year. In-store sales at these companies also dropped by 10.4%.
"When you lose gallons to the big box, you also lose in-store sales," Lenard noted.
Changing eating habits
Initially, higher gas prices did not deter many Americans from dining out during the first two months of the conflict in the Middle East, partly aided by tax refunds, as reported by the National Restaurant Association.
Customer traffic at U.S. restaurants in April remained consistent with the previous year, though a 2.6% increase in restaurant spending was largely attributable to elevated menu prices, according to market research firm Circana.
However, cracks are now emerging as budget-conscious U.S. residents contend with the combined burden of increased costs for gas and other consumer goods, alongside ongoing inflationary pressures.
McDonald’s Chairman and CEO Chris Kempczinski stated last month that the price of gas will not help bring back customers with household incomes of $45,000 or less to U.S. fast-food restaurants.
This income group began reducing their fast-food purchases after the inflation period following the COVID-19 pandemic, a trend that accelerated last year.
A study by U.S.-based restaurant consulting firm Revenue Management Solutions, analyzing 14.6 billion restaurant transactions over the past four years, found that as gasoline becomes more expensive, restaurant visits gradually decline.
Chief Research Officer Sebastián Fernandez noted that the impact doubles when gas prices hit the $4 mark, a nationwide average reached on March 31.
Consumers are also making concessions at the grocery store, observed Stew Leonard, president of the eight-store supermarket chain Stew Leonard's.
He has noticed customers buying meat in bulk for freezing and being less inclined to purchase products showcased during live food demonstrations or offered for sampling. "It's telling me that people are sticking more to their shopping list," Leonard said.
Needs versus wants
Even before the recent fuel price hikes, retailers had spent multiple earnings seasons highlighting consumer caution and selectivity as factors that could dampen sales of nonessential products.
Shoppers appear to have further curbed their discretionary spending as the cost of buying gas increased, according to Marshal Cohen, chief retail advisor at Circana.
Between April 25 and May 23, U.S. retailers sold 6% fewer non-grocery products compared to the comparable four-week period last year.
Housewares, clothing, footwear, and sports equipment experienced the most significant declines, ranging from 5% to 7%. In contrast, toys and beauty items remained strong performers, registering at least an 8% increase in the number of units sold.
Location intelligence company Placer.ai, which tracks people's movements via cellphone usage, observed an acceleration in visits to the gas stations of BJ’s, Costco, and Sam’s Club stores starting in early March, coinciding with a sharp rise in fuel prices, according to R.J. Hottovy, the company's head of analytical research.
By early May, Placer.ai's data showed four consecutive weeks of reduced foot traffic at clothing, electronics, and home furnishing stores, alongside an increase in trips to grocery and dollar stores. "Consumers are prioritizing value-oriented retailers like warehouse clubs, superstores, and off-price chains," Hottovy concluded.
This article was written by Anne d'Innocenzio from The Independent and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.