Value Is a Behavior

Deloitte describes value-seeking as a structural shift; 70 percent of retail executives plan to expand value-priced assortments, even as 82 percent expect margins to improve.  Changing consumer behavior is also executives’ greatest challenge to volume growth, while the business-model change has become a top CEO profitability priority.

That is today’s value collision. Deliver more value. Protect margin. Change the business model. And do it while the customer keeps rewriting the rules for what she considers worth paying for. The great value allocation is the power of the consumer who is calling the shots, and assigning value to retailers, brands, products, and the entire consumer landscape.

So, why are there so many retailers stuck in the middle of our C-shaped economy that are so out of sync with their customers? The boardroom question should not be, “How much lower do we need to go?”  It should be, “What are we actually worth paying for?”

Read on for a field-report overview of these issues and download a comprehensive update on the value retail sector and the shift in consumer behavior in a special report.

The Consumer Is Reallocating Your Value

Retailers can stop searching for the value consumer: She is everyone now. We see the affluent shopper buying private-label groceries who may still pay full price for the beauty product she trusts. A middle-income customer may keep her preferred brands but move the basket to a lower-priced retailer. A younger shopper may buy secondhand apparel and redirect the savings toward an experience that feels worth it.

These consumers are conducting portfolio reviews of their lives. They are pragmatic and deciding where sameness is acceptable, where convenience deserves a premium, where quality still matters, and which brands have earned the right to charge more. In my conversations, I often run into a wall with executives who refuse to admit that the consumer is in the driver’s seat, not only about what is worth paying for, but more alarmingly, what the brand stands for and therefore its value to them.

Let’s use private label as a test case. Alvarez & Marsal found that among households earning more than $100,000, 75 percent considered store-brand grocery equal to or better than national brands, and 77 percent said private labels met their dietary and lifestyle needs.  At the same time, consumers continue to trade up when quality, fit, performance, or trust justifies the difference. And this goes across all consumer segments. Affluence no longer gives retailers automatic permission to charge more.  Economic pressure does not make every customer uniformly cheap.  It makes her more selective. The important takeaway is that she is not trading down across her life; she is trading across her basket. And that can lead to a loss of loyalty quickly.

Nike offers a cautionary example. Consumers have not abandoned athletic footwear or wellness. They are redirecting spending away from familiar but less compelling legacy products toward brands and innovations that feel more relevant. Nike’s challenge is not simply price. It is proving that its premium still buys something meaningful. The recent numbers validate this. Nike shares have fallen about 39 percent so far in 2026, and they are looking at their worst annual return since 1993. The Swoosh still matters but it just no longer gets an automatic hall pass.

You Can’t Discount Your Way Out of a Bad Economy

Earlier downturns taught consumers to try private labels, warehouse clubs, dollar stores and off-price retail.  Many entered the value sector because they needed to save. They stayed because the products and experiences were better than they expected.

The pandemic accelerated another reset by normalizing substitution, channel switching, and new definitions of convenience.  Consumers do not automatically unlearn those behaviors when the emergency ends.

Today’s value cycle has an accelerant previous downturns did not: unprecedented transparency. Prices can be compared instantly. Reviews expose quality differences. Resale has normalized previous ownership. Social platforms validate alternatives.  AI shopping assistants increasingly compare price, performance, fees, return policies, and substitutes before the customer even reaches a store or website. Retailers spent years making it easier to buy; technology is now making it easier to question whether something is worth buying at all.

Consumer behavior proves that a private-label trial can become a preference. An off-price visit becomes a habit. The retail industry can’t underestimate the intelligence and sophistication of today’s consumer. Here’s the existential risk: A customer who discovers acceptable quality, credible pricing, and reasonable convenience elsewhere may simply not return when the economy improves. Loyalty is a fragile relationship that must be earned.

The Bigger Risk Is Abandoning the Retailer

The more serious threat is not that consumers will replace a national brand with a lower-priced product. It is that they will take the entire shopping trip somewhere else. In Alvarez & Marsal’s fall 2025 research, 49 percent of grocery shoppers were more likely to switch to less expensive brands at their current store, while 16 percent planned to keep preferred brands but switch retailers. By spring 2026, brand-switching intent had dropped to 35 percent, while retailer-switching rose to 27 percent.

When a customer chooses a cheaper product inside the same store, the retailer may lose margin on one item.  When she changes retailers, the business risks losing the basket, the trip, customer data, loyalty participation, retail-media exposure, and future wallet share. She is not merely substituting her cereal brand; she is transferring the relationship.

Erosion of Trust and Credibility

Promotions can create urgency and move inventory.  They can also become an expensive way for retailers to avoid harder decisions about the underlying proposition or even the state of the business.

Blanket discounting ignores situational value distinction. It gives away margin on products customers may still value and will pay more for and does not clarify why other products deserve to be discounted. Two examples: Current 2026 results provide a useful test case; consumers are rewarding value propositions they can understand.  Five Below offers a current example of discretionary value.  In its second quarter of fiscal 2026, net sales increased 22.9 percent, and comparable sales rose 14.1 percent.  Its proposition is not simply low price.  It combines trend-right product, discovery, and affordable indulgence in stores designed to feel fun and easy to shop.  The customer understands both the promise and the risk: not much money, not much regret, and no household budget stress. 

Macy’s Inc. offers a revealing contrast. In the first quarter of 2026, comparable sales rose 1.6 percent at Macy’s, compared with 10.2 percent at Bloomingdale’s and 6.4 percent at Bluemercury.  One quarter does not settle the future of any brand, and the comparison does not prove one simple cause.  It does illustrate the power of clarity.  Modern luxury at Bloomingdale’s and beauty expertise at Bluemercury are easier for the customer to understand than a broad middle-market proposition still being rebuilt.  The lesson is not “be cheap” or “be premium.”  It is “be unmistakable.”  The middle is not doomed; ambiguity is.

Abercrombie &. Fitch provides a great lesson because the brand demonstrates what happens when a retailer improves the product proposition instead of reaching first for a larger percentage-off sign. The brand implemented its “Always Forward” plan, pivoting its audience and refreshing its merchandise mix accordingly, tightening inventory, and reducing promotional activity. The company attributed higher average selling prices and improved operating results partly to reduced promotions. The point is not that Abercrombie discounted less frequently; it gave customers more of a reason to pay full price through better product, clearer styling, improved fit, and a more relevant brand.  Unlike Kohl’s, Abercrombie does not try to persuade customers to value the same tired product at a higher price.  It changed the product mix and upgraded the brand so that the price made sense to customers.

Constant promotions teach customers not to trust. They anticipate the cadence. They postpone purchases and stop believing the original price.  Eventually, the promotion becomes the real price, and the ticketed price becomes retail fan fiction. The result is an erosion of credibility; discounting can move merchandise without moving the customer relationship.

Sitting in the Middle Is Sitting in the Crosshairs

Value retailers have a clear proposition:  We will save you money. Strong premium retailers have another:  We offer something better, more distinctive, or harder to replace. The most vulnerable retailers sit between those positions, and this is the retail space where I see the greatest threat.  They are not structurally cheapest, meaningfully differentiated, or exceptionally convenient. Their assortments are widely available elsewhere, their operating models carry more cost, and their answer to weakening traffic is another promotion.

That is not a strategy; it is an expensive identity crisis. The winners are not defined by one price position. Walmart and Aldi make structural costs visible in price. Costco converts membership and trust into loyalty. Trader Joe’s reduces comparison through exclusive products and discovery. TJX combines savings, scarcity, and the emotional payoff of the find. Each is a different model, and all share one common discipline. The customer understands the promise, and the business can afford to keep it.

When I speak with retail CEOs and board members, three uncomfortable questions come into the conversation.

• Where must we be price-competitive?
• Where are we demonstrably better?
• Where are we charging more without giving the customer a credible reason?

They are quick to admit that the third question may require protective eyewear!

Who Pays the Price?

Lower prices, better products, improved service, and greater convenience do not pay for themselves. Savvy retailers know that sustainable customer value must be funded through operating advantage, better buying, a more relevant assortment, fewer markdowns, lower shrink, faster inventory turns, smarter fulfillment, and more productive use of labor and capital. The smart retailers have price credibility, and customers notice. They offer visible proof where they charge a premium and have fine-tuned convenience to create enough conversion or retention to justify its cost. They provide transparency everywhere.

Customers tolerate bad news more readily than they tolerate feeling played. If the customer needs an app, coupon, membership tier, and a decoder ring to understand the price, the retailer is not creating value.  It is assigning homework. The CEO and board should be able to answer one essential question: How much of our customer value proposition is funded by real operating advantage and how much is being borrowed from future margin? If the answer is unclear, the promotional calendar may be hiding something far more serious than a muddled value proposition.

The Customer Gets the Final Vote

Retailers cannot be the cheapest on everything. They shouldn’t try.  That is a fast race to the bottom. They do need to decide where the company will be cheaper, where it will be better, and where it will be easier. Then they align product, pricing, operations, loyalty, and capital behind those choices. Trust must run through all of them. Value is not a price point, a demographic segment, a promotional event, or a red sign hanging over a rack. It is the customer’s verdict on whether the entire exchange is worth the money.

The customer always gets the final vote. Retailers that understand that can protect margin while strengthening loyalty. Those that do not may discover that they discounted the product, the brand and ultimately the company.

Here’s the biggest lesson of all from this field research: The time to build an authentic value story is when business is good, not as a knee-jerk reaction when the business is challenged. Couple that with the voting power of the consumer, who will define and assign your value if you don’t. That could be an irreversible death knell.

For more information and insight, download your complimentary copy of the Great Value Allocation special report for a full analysis of today’s value retail sector and changing consumer behavior.