10-07-2025
5 Strategies For Thriving In A Divided Economy
Mikko Kärkkäinen, CEO, RELEX Solutions.
The U.S. economy is moving in two different directions. A growing segment of affluent consumers continues to spend confidently on premium goods and experiences. Meanwhile, the majority of Americans are feeling financial strain, seeking affordability and value wherever they can find it. For businesses, this widening divide has made one thing clear: There is no longer one consumer economy.
This split in the market requires a clear strategy. Companies must recognize and adapt to the two very different economic realities shaping today's environment. Those that do will be better positioned to grow in a landscape where staying strong, flexible and focused on customers are more important than ever.
Here are five ways businesses can succeed in a divided market:
Know The Two Markets—And The Motivations Behind Them
The 'luxury' economy includes older, wealthier consumers who remain resilient despite economic headwinds. Baby boomers, for example, hold a significant portion of U.S. household wealth and continue spending on travel, premium products and experiences. Their purchases are driven more by lifestyle preferences than necessity.
On the other hand, the 'value' economy reflects the growing portion of consumers under pressure from inflation and stagnant wages. These households are cutting back and shifting to discount retailers and dollar stores. They are also less likely to participate in wealth-building activities like stock market investing or homeownership.
Recognizing the different needs and habits of each segment is essential. Treating the market as homogenous risks missing key signals and mismatching offerings.
Recent retail trends reflect this divide. While high-end travel and dining brands are reporting record bookings, dollar stores have seen a spike in foot traffic from middle-income shoppers. These trends show just how differently consumers are reacting to the same macroeconomic conditions.
Align Your Offerings—Don't Split The Difference
A one-size-fits-all approach can leave businesses stuck in the middle, failing to connect with either segment. Companies that succeed will take a deliberate approach to serving one or both markets with tailored offerings.
This doesn't mean a business must choose one segment exclusively. But it does mean each product, service or experience must be clearly positioned for the economic audience it's designed to serve.
Streamline Your Operation For Cost Efficiency
Whether targeting premium or price-sensitive shoppers, cost efficiency is critical. Companies need to evaluate how they use their resources, manage inventory and optimize their supply chains. That includes reducing store costs through more efficient processes like one-stop replenishment and aligned planning. We find that stock handling typically accounts for 3% to 4% of revenue and better coordination can reduce those costs, considering labor costs are a major expense for retailers.
Even in the luxury segment, pricing decisions must be backed by strong operations. For value-oriented consumers, small price increases can create major friction, making lean operations and strategic cost management a competitive advantage.
Build Resilience With Smarter Planning And Data
Agility is nonnegotiable in today's market. Businesses must plan for multiple economic scenarios and be prepared to adjust quickly as conditions shift.
This requires closing communication gaps between teams and connecting planning functions with real-time data. AI and advanced analytics can support better forecasting, pricing and resource allocation. When teams work from shared insights, they can respond faster and make more informed decisions.
For example, a retailer might use demand forecasting tools to detect early signs of trade-down behavior, such as customers shifting from branded to private-label products. With that insight, teams can adjust inventory, pricing and promotions in real time to meet new demand without overstocking or disappointing loyal customers.
Use Disruption As A Growth Lever
While economic volatility can be a barrier, it also presents opportunity. The same uncertainty facing your business is also affecting your competitors. Those who know and control their costs can operate with the most accuracy and act most decisively. Organizations that embrace change and operate with strategic clarity can turn today's challenges into tomorrow's opportunities for growth.
The bottom line: Economic uncertainty doesn't mean you need to choose between cutting costs and driving growth. With the right tools, insights and focus, companies can navigate both sides of the divide and turn complexity into a competitive advantage.
The split between luxury and value-driven consumers isn't temporary. Success in this environment requires more than reactive cost-cutting or generic marketing. It demands a precise understanding of your customer base and a focused strategy to meet their evolving expectations.
Businesses that rise to this challenge won't just weather the economic divide; they'll emerge stronger, more adaptive and better aligned with the future of consumer demand.
Those who know and control their costs can operate with most accuracy—and most decisively.
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