5 Strategies For Thriving In A Divided Economy
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.
Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
36 minutes ago
- Yahoo
Yankees are paying 3 players a combined $43.8 million to not play for them
The New York Yankees have always been known for having a lot of money. They may not be the richest franchise in baseball anymore, though. The New York Mets and Los Angeles Dodgers seem to be shelling out even more dough. But the Yankees have one financial flex going for them, if it can be called a flex. And it's this: They're currently paying three players a combined $43.8 million not to play for them. Those three guys are DJ LeMahieu, Aaron Hicks and Marcus Stroman. The number works out to $43,785,714, to be exact. MORE: Cubs' Matthew Boyd has mastered the balk pickoff move Baseball contracts, unlike many of those in other professional sports, are fully guaranteed upon signing. That means when the Yankees get rid of Hicks in the past, or LeMahieu and Stroman this season, they're still owed their money. Stroman was just released after his last start, a bit of a surprise move. And like Stroman, both Hicks and LeMahieu were better before getting their latest Yankees contracts than they were afterward. MORE: Red Sox leapfrog the Yankees in the standings for first time since March As a big-market club with deep pockets, the Yankees can afford to make mistakes in contracts every once in a while. It's still not ideal that these mistakes are costing more than $43 million to guys not currently wearing the pinstripes in any form. The $43 million might not come in handy now, but it could matter greatly down the line. That's very real money that the Yankees won't have from production they aren't getting anyway. MORE MLB NEWS: White Sox batters have turned into 1927 Yankees Steven Kwan shows kindness on the most stressful day of his MLB career Marlins' Jakob Marsee starts his MLB career in a way no one ever has Rockies' Warming Bernabel is red hot Oneil Cruz makes one of the best throws in MLB history Red Sox phenom Roman Anthony makes MLB history not done since Elmer Valo in 1940
CNN
40 minutes ago
- CNN
Boeing's second strike in less than a year begins at three defense plants
Labor unionsFacebookTweetLink Follow Boeing on Monday was hit with its second strike in less than a year, as 3,200 hourly machinists walked off their aerospace jobs in the St. Louis area. Members of the International Association of Machinists (IAM) voted to authorize a strike at three defense plants starting Monday at 12:59 a.m. ET. '3,200 highly-skilled IAM Union members at Boeing went on strike at midnight because enough is enough,' the union wrote on X after the walkout began. The union overwhelmingly rejected a tentative agreement a week ago that would have given many of the members raises of 40% over the four-year life of the contract. The members voted Sunday to reject a revised contract that removed scheduling provisions that had prompted objections from rank-and-file members. 'IAM District 837 members build the aircraft and defense systems that keep our country safe,' IAM Midwest Territory General Vice President Sam Cicinelli said in a statement Sunday. 'They deserve nothing less than a contract that keeps their families secure and recognizes their unmatched expertise.' The strike is the latest blow to Boeing, following six years of massive financial losses and setbacks in many areas of its business, including the defense and space unit affected by this strike. The company has rung up core operating losses of $42.2 billion since the second quarter of 2019. That was after the fatal crashes of two commercial 737 Max planes and the subsequent 20-month grounding of the model. The company's problems in its commercial plane unit have, understandably, gotten the most attention. But Boeing Defense, Space and Security unit also logged nearly $11 billion in losses from late 2021 through the end of last year. That was largely due to Pentagon contracts that made the company responsible for cost overruns, including two new Air Force One jets. But so far this year, the unit has been profitable. The workers in St. Louis and St. Charles, Missouri, and Mascoutah, Illinois, build such military aircraft as F-15 and F/A-18 fighter jets, the T-7A Red Hawk trainer, and the MQ-25 Stingray unmanned refueler. The F-47 stealth fighter jet, the Pentagon's next-generation fighter plane, is due to be built at a Boeing plant in the St. Louis area, though the company has not said which plant will build it or when production will start. Boeing also operates some nonunion plants in the area. 'We're disappointed our employees rejected an offer that featured 40% average wage growth and resolved their primary issue on alternative work schedules,' said a statement from Dan Gillian, Boeing general manager and senior St. Louis site executive. 'We are prepared for a strike and have fully implemented our contingency plan to ensure our non-striking workforce can continue supporting our customers.' Earlier this week, Boeing said that a $5,000 signing bonus that was part of its offers to the union would be withdrawn if the members did not ratify a deal before the strike deadline. The IAM negotiating committee had recommended that members ratify the deal presented last week. 'With stronger pensions, real wage growth, and better work-life balance, we've delivered a contract that meets the moment,' the committee said at the time. But less than 5% of the rank-and-file workers of IAM Local 837, which represents the defense workers, voted for that tentative agreement. The union did not give precise results in Sunday's votes. Despite years of serious financial problems, Boeing is still one of the nation's largest manufacturers, with contractors spread across all 50 states. It also has a huge backlog of contracts, for both commercial and military aircraft, that will keep it in business. Boeing CEO Kelly Ortberg said in the company's earnings call last week that he believes the company will be able to weather the costs of the strike, which he suggested would be far less than the cost of last year's strike of 33,000 commercial plane unit workers. 'The order of magnitude of this is much, much less than what we saw last fall,' he said. 'I wouldn't worry too much about the implications of the strike. We'll manage our way through that.'
CNN
40 minutes ago
- CNN
Boeing's second strike in less than a year begins at three defense plants
Labor unionsFacebookTweetLink Follow Boeing on Monday was hit with its second strike in less than a year, as 3,200 hourly machinists walked off their aerospace jobs in the St. Louis area. Members of the International Association of Machinists (IAM) voted to authorize a strike at three defense plants starting Monday at 12:59 a.m. ET. '3,200 highly-skilled IAM Union members at Boeing went on strike at midnight because enough is enough,' the union wrote on X after the walkout began. The union overwhelmingly rejected a tentative agreement a week ago that would have given many of the members raises of 40% over the four-year life of the contract. The members voted Sunday to reject a revised contract that removed scheduling provisions that had prompted objections from rank-and-file members. 'IAM District 837 members build the aircraft and defense systems that keep our country safe,' IAM Midwest Territory General Vice President Sam Cicinelli said in a statement Sunday. 'They deserve nothing less than a contract that keeps their families secure and recognizes their unmatched expertise.' The strike is the latest blow to Boeing, following six years of massive financial losses and setbacks in many areas of its business, including the defense and space unit affected by this strike. The company has rung up core operating losses of $42.2 billion since the second quarter of 2019. That was after the fatal crashes of two commercial 737 Max planes and the subsequent 20-month grounding of the model. The company's problems in its commercial plane unit have, understandably, gotten the most attention. But Boeing Defense, Space and Security unit also logged nearly $11 billion in losses from late 2021 through the end of last year. That was largely due to Pentagon contracts that made the company responsible for cost overruns, including two new Air Force One jets. But so far this year, the unit has been profitable. The workers in St. Louis and St. Charles, Missouri, and Mascoutah, Illinois, build such military aircraft as F-15 and F/A-18 fighter jets, the T-7A Red Hawk trainer, and the MQ-25 Stingray unmanned refueler. The F-47 stealth fighter jet, the Pentagon's next-generation fighter plane, is due to be built at a Boeing plant in the St. Louis area, though the company has not said which plant will build it or when production will start. Boeing also operates some nonunion plants in the area. 'We're disappointed our employees rejected an offer that featured 40% average wage growth and resolved their primary issue on alternative work schedules,' said a statement from Dan Gillian, Boeing general manager and senior St. Louis site executive. 'We are prepared for a strike and have fully implemented our contingency plan to ensure our non-striking workforce can continue supporting our customers.' Earlier this week, Boeing said that a $5,000 signing bonus that was part of its offers to the union would be withdrawn if the members did not ratify a deal before the strike deadline. The IAM negotiating committee had recommended that members ratify the deal presented last week. 'With stronger pensions, real wage growth, and better work-life balance, we've delivered a contract that meets the moment,' the committee said at the time. But less than 5% of the rank-and-file workers of IAM Local 837, which represents the defense workers, voted for that tentative agreement. The union did not give precise results in Sunday's votes. Despite years of serious financial problems, Boeing is still one of the nation's largest manufacturers, with contractors spread across all 50 states. It also has a huge backlog of contracts, for both commercial and military aircraft, that will keep it in business. Boeing CEO Kelly Ortberg said in the company's earnings call last week that he believes the company will be able to weather the costs of the strike, which he suggested would be far less than the cost of last year's strike of 33,000 commercial plane unit workers. 'The order of magnitude of this is much, much less than what we saw last fall,' he said. 'I wouldn't worry too much about the implications of the strike. We'll manage our way through that.'
