01 Why is “affordability” suddenly the biggest word in business?

Picture a company’s quarterly earnings call — the meeting where executives explain their numbers to investors. In early 2021, the word “affordability” barely came up. By early 2026, it was mentioned constantly, and the trend keeps building.

Executives at consumer discretionary companies — the businesses that sell things people want rather than need, like clothing or electronics — brought up affordability 478 times in the first quarter of 2026, compared with just 167 times five years earlier. Consumer staples companies, which sell everyday necessities like groceries and household goods, saw an even bigger jump: from 91 mentions to 323. In plain terms, the language boardrooms use now matches the conversations happening around kitchen tables. Businesses have noticed that shoppers are watching every dollar, and they are changing how they talk — and sell — because of it.

02 Why do everyday prices feel so much higher than the inflation headlines suggest?

Official inflation numbers say prices have cooled a lot — from a peak of 9.1% in 2022 down to 4.2% in the most recent US reading. So why doesn’t it feel that way at the checkout counter?

The answer is “sticker shock” — the jolt of seeing a price that feels unexpectedly high, even if it rose gradually. A simple bacon, egg, and cheese sandwich with coffee in the US climbed from USD 1.87 in January 2020 to USD 2.58 in May 2026, a 38% jump. A bacon cheeseburger deluxe with fries rose 42%, from USD 3.12 to USD 4.43. These are not abstract statistics; they are the exact numbers a person sees on a deli menu board every single morning. That daily, visible reminder is why so many people feel like they are falling behind financially, even when the big-picture inflation number looks better.

Consumer mood data backs this up. The University of Michigan’s Consumer Sentiment Index — a survey that measures how optimistic or pessimistic Americans feel about their finances — collapsed from around 100 in 2020 to an all-time low of 45 in May 2026, before ticking up slightly to 49 in June. Those readings are normally only seen during recessions. Europe tells a similar story: its sentiment index fell from -12 in February to -18 in June, its sharpest two-month drop in years. On both sides of the Atlantic, households feel like they are losing ground.

03 If people feel this gloomy, why does spending keep growing?

Here’s the twist: despite all that pessimism, people are still spending — and spending more.

The reason is simple: most people still have jobs. US unemployment has risen from a very low 3.4% to 4.3% in May 2026, but that is still considered a healthy level, and it has been trending down slightly in recent months. Other regions look solid too — Europe’s jobless rate sits around 6.0%, Japan’s is a very low 2.5%, India’s is 5.5%, and China’s is just above 5%. When people have paychecks coming in, they keep spending, even if they’re complaining about prices while doing it.

Real-world spending data confirms this. Retail sales are growing across major economies and accelerating in the US, EU, and Japan. Payment volume — the actual dollar value flowing through the payments system — grew about 9.0% through April in the US, up from 7.5% in the first quarter. Globally, payment volumes grew 9.0% in the first quarter, up from 8.0% the quarter before. This gap between what people say (gloomy) and what they do (keep spending) leads to a simple investing lesson: watch what consumers do, not what they say.

04 What is the “K-shaped” economy, and why does it matter?

A “K-shaped” economy is a simple way to describe two groups moving in opposite directions at once — like the two strokes of the letter K, one rising, one falling.

Interestingly, US wage data tells a more hopeful story than the mood suggests. Since the start of 2019, workers at the lower end of the income scale (the 10th and 25th percentiles) have actually seen their real, inflation-adjusted wages grow faster — 41% and 39% respectively — than higher earners at the 75th and 90th percentiles, who gained 32% and 29%. Prices rose a cumulative 26% over the same stretch, meaning every income group technically came out ahead of inflation, with lower earners catching up the most.

But spending tells a different story. Higher-income US households (earning above USD 125,000) have increased their grocery spending by 5% to 10% since the start of 2025. Households earning under USD 40,000 have seen spending growth below 5%, and at times negative. Wealthier consumers are also spending freely on travel and premium experiences — luxury hotel brand Hyatt, for example, reported roughly 7% growth in premium demand in the first quarter of 2026. Meanwhile, more budget-conscious households are pulling back wherever they can. Wages caught up on paper, but confidence and spending habits have not caught up in practice.

This split explains why companies increasingly have to speak to two very different customers at once: the wealthier shopper who is still happy to pay for quality and performance, and the squeezed shopper who needs everyday prices to come down before they’ll buy at all.

05 How are shoppers actually changing their behavior?

Value-seeking has moved from a niche habit to a mainstream way of life, and it now spans every income level.

According to McKinsey’s State of the US Consumer research, roughly three in four households are trading down to cheaper brands and retailers, and half are delaying purchases they don’t strictly need. A YouGov survey found that 53% of Americans set a household budget for 2026, up from 46% the year before. Among people who expect their finances to get worse, two out of three plan to cut back on eating and drinking out.

This isn’t just a lower-income habit. Even households earning above USD 150,000 a year report switching to store-brand products and using cash-back apps. Tariffs introduced in 2025 added a new layer of price pressure on top of years of inflation, and research from consultancy Simon-Kucher suggests shoppers now have far less patience for further price hikes.

Importantly, “affordability” does not simply mean “cheapest.” Market intelligence firm NielsenIQ describes today’s consumer as having redefined the word to include trust, reliability, and quality alongside price. Shoppers are comparing unit prices, stacking loyalty points, and choosing brands they genuinely believe deliver good value — not just the lowest number on the shelf tag.

06 Which companies are winning the affordability battle?

Retailers that have made affordability a permanent part of how they operate — rather than a short-lived promotion — are pulling ahead of the pack.

Walmart has grown its grocery reach to 72% of US consumers, and for the first time, households earning over USD 100,000 a year now make up the majority of its new market share gains — a striking reversal after decades of the store carrying a lower-income stigma. The company pairs everyday low prices with convenience, including same-day shipping to more than 90% of US households, and is expanding its private-label Bettergoods range.

Amazon is leaning on its size and delivery network to offer sharp prices, especially in everyday essentials and groceries — a category that grew nearly twice as fast as everything else on the platform in 2025 and now makes up one in three units sold. It recently began offering delivery of urgent items in 30 minutes or less for an extra fee.

Costco continues to post best-in-class same-store sales growth of around 7%, with membership fee revenue growing about 14% year-on-year. Its Kirkland Signature private-label brand alone generates an estimated USD 80 billion a year — bigger than nearly every branded consumer-goods company on Earth. Notably, many shoppers now actively prefer Kirkland to the name brands it competes with, and research firm Numerator projects Gen Z will spend a higher share of their budget on private-label goods than any other generation by mid-2026, suggesting this is a lasting shift rather than a passing trend.

Off-price retailers are booming too. TJX (parent of TJ Maxx, Marshalls, and HomeGoods), Ross Stores, and Burlington have all seen sales growth accelerate to between 9% and 12% in their most recent quarter, capitalizing on department store closures and consumers who enjoy “treasure hunting” for name-brand goods at 20% to 60% off.

In China, where retail spending has slowed sharply, e-commerce giant Alibaba has refocused its Taobao and Tmall platforms around price competitiveness after losing ground to rival Pinduoduo, with management now naming affordability a top strategic priority on earnings calls. Chinese automakers have also gained roughly 5 percentage points of market share from international brands over the past year through aggressive discounting.

07 Why is second-hand shopping suddenly mainstream?

Buying used used to carry a stigma. In 2026, it’s increasingly seen as smart, not settling.

Online marketplace eBay has become a quiet winner of the affordability shift, with its “Certified Refurbished” electronics business posting double-digit growth. Management has pointed out that pre-owned and re-commerce shoppers skew younger and higher-income — people who see second-hand as both a money-saver and a more sustainable choice, not a downgrade.

The trend goes well beyond one platform. Resale apps like Vinted, Depop, and Poshmark keep growing, and ThredUp’s 2026 Resale Report projects the global second-hand apparel market will reach roughly USD 350 billion by 2028 — growing several times faster than the overall clothing market. For many shoppers, paying half-price for a barely used designer item now feels like a savvy win rather than a compromise.

08 How is the restaurant industry responding to the value squeeze?

Fast food shows just how quickly a value message can swing customer traffic — in either direction.

McDonald’s spent much of 2023 and 2024 losing lower-income customers after a series of menu price increases pushed diners away. Its comeback strategy — a national McValue menu with USD 5 meals, a USD 4 breakfast, and a “buy one, add one” promotion — has restored momentum across most markets, with same-store sales rising 4% to 6% over the last four quarters, up from flat or negative growth before. Traffic among lower-income customers has also started recovering. Taco Bell, Wendy’s, Chipotle, and even fast-casual chain Panera have rolled out their own value menus in response.

Chains that fail to communicate value clearly — those that look expensive on the menu board even if they quietly offer app-only discounts — continue to lose customers. Fast-casual dining has been hit especially hard, facing the added headwinds of more people eating at home and the growing use of weight-loss medications reducing how much people eat out overall.

09 Why are cruise lines thriving in a cost-conscious world?

Cruises might seem like a luxury, but in 2026 they’re being marketed — and bought — as one of the smartest value trips available.

The world’s two largest cruise operators, Royal Caribbean and Carnival, have posted record bookings and pricing in 2025 and 2026. The logic is simple: a cruise bundles lodging, meals, and entertainment into one fare, which often works out cheaper than piecing together a comparable land-based vacation once every cost is added up. Cruise executives explicitly point to “value relative to land-based alternatives” as a key driver of bookings, with onboard spending and repeat-guest rates both running at record highs.

10 What separates the companies that win from the ones that lose?

Across every industry in this report — grocery, e-commerce, apparel, fast food, and even cruises — the winning companies share the same three habits.

11 What does this mean for long-term family stewardship and portfolio thinking?

For principals thinking generationally about capital, the affordability story is less about any single stock and more about a structural shift in how value itself is defined and rewarded.

The 2026 consumer landscape rewards businesses with durable moats in scale, logistics, and private-label trust — the kind of structural advantage that compounds across market cycles rather than fading with the next promotional calendar. At the same time, it punishes businesses that mistake a temporary discount for a genuine value proposition. For multigenerational capital, the discipline is the same one that has guided prudent stewardship for centuries: distinguish what is transient from what is structural, and allocate patience — and capital — accordingly.

FAQ Frequently Asked Questions

Is the affordability trend the same as inflation?

Not exactly. Official inflation has cooled substantially, but the cumulative effect of years of price increases is still visible in everyday purchases, which is why consumers feel financial pressure even as the headline inflation rate improves.

Why does consumer sentiment matter less than what people actually buy?

Sentiment surveys capture mood, which can be swayed by news headlines and general anxiety. Retail sales and payment volume data capture actual behavior, which has proven to be a more reliable signal of economic strength in 2026.

What is a K-shaped economy?

It describes an economy where different groups experience opposite trends at the same time — in this case, wealthier households increasing spending on premium goods while lower and middle-income households pull back, resembling the two diverging strokes of the letter K.

Are private-label and store brands actually lower quality?

Not necessarily, and increasingly not at all. Brands like Costco’s Kirkland Signature have built strong quality reputations, and Gen Z shoppers are expected to allocate a higher share of their spending to private-label goods than any other generation.

Why are cruises considered a value play?

Because a single cruise fare bundles lodging, food, and entertainment, it frequently costs less overall than assembling a comparable land-based trip piece by piece, which is why cruise lines are seeing record bookings during a cost-conscious period.