Who's still spending? New study finds younger consumers have a more positive take on spending, economy

COLUMBUS, Ohio – Oct. 23, 2023 – Bread Financial™ (NYSE: BFH), a tech-forward financial services company that provides simple, flexible payment, lending and saving solutions, today released a new study that found 65% of U.S. consumers are concerned with inflation as they approach the holiday shopping season, much in line with sentiment from 2022, forcing them to adjust their financial habits and prioritize cost-cutting shopping strategies. 

The State of the American Shopper, Bread Financial’s annual look into consumer behaviors, found the top changes consumers are making include: 47% are spending less overall because of rising inflation, up slightly over 2022 and 55% of consumers are pessimistic about the economy and looking for ways to stretch their dollars with non-traditional payment methods like gift cards and reward points to pay for small purchases. Additionally, 67% are shopping at mass retailers (e.g. Target, Walmart) to save and 42% are cutting back on non-essential purchases like entertainment and dining out. These changes in behavior have a potential for big ramifications with consumer spending accounting for 70% of the US economy.

Over half (56%) of consumers have become more budget-conscious and careful about what they spend, an upward trend from last year’s 53%. Yet, the shifts in behavior were expressed differently across generations:

• No loan is too small: The study found that while all generations are turning to non-traditional payment methods to make small purchases like gas and groceries, over a quarter of Gen Z (28%) are turning to installment loans/longer-term financing options to make these purchases. 
• Millennials are complicated: While millennials (40%) are the most optimistic about the economy, they are making the biggest changes to their spending behaviors despite being the generation with the highest house incomes with 28% surveyed earning over $100,000. Compared to last year:
  • 39% are cutting back on small splurges, up from 29%
  • 36% are shopping discount/off-price stores more frequently, up from 28%
  • 33% are cutting back on subscription services, up from 25%
  • 27% are shopping thrift/vintage stores more often, up from 18%
• Your age dictates where you shop: The study revealed that while 70% of Baby Boomers said they shop at mass retailers, only 59% of Gen Z said they had done the same. Gen Z, however, was more than twice as likely (30% vs. 14%) to shop at an off-price retailer than their Boomer counterparts.
• Savings vs. Reality: Despite feeling like they are on the right track financially, younger generations are the most likely to impulse spend. While 77% of Gen Z said they were fairly to very confident they were on the right track financially, nearly 1 in 4 (24%) of Gen Z respondents admitted to having little savings, having debt and spending impulsively.

“Economic volatility continues to impact retailers of all sizes as consumers deal with higher prices and the impact of persistent inflation. The data in our study uncovered actionable opportunities for brands to appeal to today’s consumers by deepening loyalty through personalized payment options and rewards,” said Nick Antonelli, SVP, chief marketing officer, Bread Financial. “Today’s consumers want to feel heard and supported. By offering payment choices that provide increased value and cater to the life stage of their customers, brands and retailers will see consumers stay with them through economic cycles.”