The K-Shaped Economy Is Here. Here’s How Brands Should Respond
‘Tis the time when fresh stats get thrown around to help define the moment. One of the most striking things this year is that for the first time, a majority of consumer spending came from just 10% of the population. Drill further, and 3% of Americans now drive a quarter of all spending. Clearly, the K-shaped economy isn’t a theory anymore.
Black Friday was a perfect illustration. Record sales on the surface, but once you peel back the veneer, overall spend was up because prices and higher-ticket items were up, but volume was down as most households pulled back. Two economies are emerging in parallel. The 'haves' are powering headline growth and quietly keeping the country from falling into a formal recession. The 'have-nots' are tightening every discretionary bolt they can find.
The split is real
You can see the bifurcation everywhere. At the top end, Frette, a client in our luxury practice, had its best Black Friday ever. People shopping for $10k bedding still want to feel like they're getting a deal. Watches are roaring back as safe-haven assets for those hedging market volatility.
At the bottom: Hamburger Helper sales have doubled this year. Pet returns to shelters are rising fast. Lidl drew crowds in Brooklyn. 5Below is thriving as families cut gift budgets but still want to deliver joy. Brands that own their pricing, rather than apologise for it, are winning. Dupe culture isn't a trend. It's survival.
Even the middle is disappearing. Economists traditionally say everyday luxuries hold up in downturns – lipstick, chocolate, booze as small treats. But recent eMarketer data shows beauty down across categories. These affordable indulgences are now out of reach for most. In a K-shaped world, even 'luxury' splits in two: safe-haven assets at the top, unaffordable comfort at the bottom.
What does this mean for brands?
You can't market to an 'average consumer' in an economy that no longer has one. Running a single experience for everyone is out of step. The brands that thrive will build deliberately for both ends of the curve – value and aspiration – without diluting either.
These shifts aren't happening quarterly. They're happening weekly. Brands need real-time signals, rapid pivots, and the ability to address two completely different realities simultaneously.
Here’s how you navigate the split:
1. Don’t aim for the middle – it doesn’t exist anymore. You’re either stretching budgets or elevating experiences. Anything in between will underperform.
2. Let data guide the daily decisions. Track both ends, not the average. Your dashboards should show what's moving at $10 and $1,000 separately. The middle will mislead you.
3. Go high with conviction. Affluent shoppers want scarcity, collaboration and craftsmanship. Don’t whisper your premium story. Tell it boldly.
4. Make trade-downs feel smart, not shameful. Celebrate savvy choices and design value products that feel culturally relevant without compromise.
5. Protect your brand spend. Stay visible at your price point. Whether you're premium or value, going dark means competitors will own your space when consumers return. Cut today, and you’ll pay double tomorrow.
The economy isn't splitting evenly. Your marketing can't either.
