Over the past few years, the American consumer has undergone a quiet yet profound shift in purchasing behaviour. With inflation surging to record highs and households facing mounting cost-of-living pressures, U.S. shoppers have increasingly "traded down" in their search for value, particularly in apparel. What once felt like a minor concession has now become a mainstream strategy: favouring discounted retailers and opting for lower-cost brands over the luxury of loyalty. This trend is underlined by new data from Bank of America, showing that discount retailers are outpacing overall retail spend—a reflection of the evolving dynamics in the American economy.

Bank of America’s latest consumer study offers a keen insight into this phenomenon. Using its own internal card data, the bank's economists examined how three tiers of apparel—premium, standard, and value—are being impacted by shifting consumer habits. Their findings are stark: since July 2022, spending at discount retailers has grown faster than overall retail spending, as customers seek to stretch their budgets. The report reveals that while overall apparel spending rose by 5 percent between July 2019 and July 2024, spending on value apparel leapt by a striking 13 percent.

These figures lay bare the extent of the renegotiation happening within household budgets. Notably, this surge in value apparel spending isn’t solely due to climbing clothing prices. Inflation is, of course, at play—non-essential goods like apparel are more expensive than ever—but when compared with grocery spend, which rose by nearly 30 percent in the same timeframe, a broader picture emerges. “In our view, this suggests the trade down to value apparel reflects the broader costs of living facing households, rather than the direct impact of higher clothing prices,” the Bank of America report notes. Essentially, as households adjust to new financial realities, apparel has joined the ranks of areas where compromise feels necessary.

Perhaps unsurprisingly, it is Millennials and Gen Z consumers leading this charge. Younger Americans have not only embraced the value-driven shift, but have also, in many ways, normalised it. Comfortable clothing, born of the remote working era, plays its part in this trend. Yet, there’s another, more systemic factor at play: younger generations are simply earning less than their predecessors, making them more sensitive to price. Fast fashion, with its quick-turnaround designs and lower price tags, becomes a clear ally in their pursuit of both affordability and style, allowing them to maintain a semblance of trendiness without the premium price.

The Bank of America report also highlights a crucial aspect: lower-income households have unsurprisingly driven much of the demand for value apparel. However, middle and higher-income earners are not immune from this trend. Since early 2021, even these more financially secure consumers have been shifting away from premium brands, though this shift is seen more as a reflection of changing attitudes towards dressing rather than pure financial strain. Comfort, ease, and the more relaxed dress codes of a post-pandemic world have made premium purchases less appealing, leading to a rise in high-end fashion retailers contending with stagnating demand.

The rise of discount retail speaks volumes about the times we live in. What was once considered a retreat—a move away from aspirational brands and the allure of the premium—is now seen as a smart, sensible choice. This shift in mindset has deeply rooted itself in the American consciousness, creating opportunities for value-driven brands to capture new markets, while simultaneously putting pressure on premium and standard retailers to redefine their value proposition.

As inflation continues to bite and consumer habits evolve, the focus on value is unlikely to fade anytime soon. This renegotiation of how Americans spend—particularly on apparel—may well reshape the landscape of retail for years to come.