There’s a premium option for every other consumer product, from cereal to cars. But increasingly, Americans aren’t willing to pay big, challenging companies to rethink their pricing power.
Here are the receipts: FedEx (FDX) said last week that its customers are no longer opting for faster shipping options, and sticking with lower-priced standard shipping instead. Southwest (LUV) found itself forced to discount non-peak ticket prices in the fall, and Target (TGT) lowered its sales expectations as Americans tighten their budgets.
Consumer demand is down and price sensitivity is up.
Across sectors, companies are finding it tougher to profit without raising prices, and more difficult to retain customers if they do so.
American consumers have been through the ringer in the past years. The fact that consumer spending has kept up with the relentless inflation of the past years has baffled economists and investors. Time and time again, the conclusion was that something would have to give, eventually.
People’s pullback from premium options may be a symptom of just that, giving us an area to watch closely as the new year gets going.
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