Walmart is framing itself as a cheap option in times of inflation, with one recent ad beginning with the line “right now, every day seems to get more and more expensive,” while reassuring customers that “at Walmart, you can trust we’re helping you save money.” This approach of tackling inflation head-on is the right one, according to consultancy McKinsey, whose latest Consumer Pulse report shows that consumer attitudes about the economy are getting worse.
Consumers are growing more pessimistic about the economy—what brands should do
The results showed that consumer pessimism in the economy, which has been relatively consistent since the report debuted in March 2020, doubled from this past March to July. Thirty percent of respondents said that they felt negative about the economy, compared to a rough average of 15% in previous surveys. Despite containing “lots of warning signs” for businesses, the findings show “there’s also reasons to have some optimism in that there’s more resilience in the U.S. consumer base,” said McKinsey Senior Partner Kelsey Robinson, one of the report’s authors.
The report is put out every few months and surveys 4,000 adults and also includes third-party data including credit card spending, according to Robinson.
Below, main takeaways from the report, including how brands should approach consumers.
People are pessimistic and worried about inflation
Previous iterations of the survey showed consumers confident that the economy would make a comeback, but this report shows 30% of respondents saying they feel negative. The report also shows that people are largely concerned about inflation. Two-thirds of people surveyed said that inflation is their top concern.
But it’s not all negative. “Inflation-adjusted spend, while it’s slowing, is actually still growing,” said Robinson.
Consumers are also seeing inflation where it doesn’t exist
“There’s a halo effect” where real inflation in some categories turns into perceived inflation in all other categories, said Robinson. Although inflation has been less than 2% for some categories—including consumer electronics, skincare and makeup, and toys and baby supplies—30% of respondents think there’s a significant price increase in at least one of the categories, according to the survey.
For brands, it’s therefore important to “be really clear about the value you are providing when you’re able to provide a great value,” said Robinson.
Walmart’s ad messaging reflects the actions it has taken in light of inflation. In its second-quarter earnings call, CEO Doug McMillon said that “starting back in March, we knew we needed to act quickly and aggressively in some categories, and we have,” including moves to “reduce inventory levels” and price markdowns, according to the call transcript. The retail giant reported profits that exceeded expectations.
Walmart’s emphasis on its low prices is mirrored in campaigns from Mint Mobile, which ran a campaign called “Record Deflation” that announced its price slashing compared to other carriers.
Things are not all bad—if you already had money
The report shows that most consumers have savings—twice as much in cash saved as they did before the pandemic.
But this is seen most with wealthier households, which saved twice as much than before the pandemic. Middle-income households have seen smaller growth while low-income households have seen their savings drop by 0.5% between the fourth quarter of last year and this year’s first quarter.
Inflation concerns also vary across demographics and categories
When it comes to inflation, boomers and Gen Xers are the main ones worried—75% and 71%, respectively. For millennials and Gen Z, the percentage of those who name inflation as their most stressful factor drops to 55% and 44%. Personal and political issues dominate instead.
The spending also varies by category—consumers are more likely to buy necessities and save on nonessentials. Their spending is still higher than at the start of the pandemic, notes the report.
As a result, brands need to “know who their consumer is and figure out how to serve them,” said Robinson. She added that brands should be asking, “how do I serve the high-income versus low-income household, what do they need differently?