The trend: Confidence among higher-income consumers is rising, boosting their desire to spend on premium airline tickets, luxury goods, and everything in between.

• Delta executives noted a recovery in premium customers’ confidence—and expect to capitalize on it next year by adding a record number of premium seats.
• While just 32% of US luxury shoppers are optimistic about the economy, 59% are upbeat about their personal finances, per the July edition of the Saks Global Luxury Pulse.
• That proportion rises to 78% for shoppers with incomes of at least $200,000—clear evidence of a “two-tier” economy in which affluent consumers are ramping up spending as lower-income households pull back.

A tale of two economies: Wealthy consumers’ buying power is increasing, while everyone else’s stagnates.

• High-income households were the only cohort to see real wage growth in 2024, with earnings increasing 4.2%, while low- and middle-income consumers’ incomes stayed largely flat, per the US Census Bureau.
• Credit card data analysis from the Boston Fed shows that the wealthiest households have driven real aggregate spending since 2022. That’s likely to remain the case, as credit card debt among those consumers remains below pre-pandemic levels, giving them more room to spend.
• Middle-income consumers are also under serious strain; their confidence “fell off a cliff” in June, Morning Consult chief economist John Leer told The Wall Street Journal.
• A growing number of companies—including McDonald’s, Walmart, and Dollar General—have flagged increasing trade-down and other price-sensitive behaviors among middle-income shoppers.

Seizing the moment: As the gulf between high-income consumers and everyone else widens, retailers are understandably eager to follow the money.

• Airlines like Delta, United, and hotel companies have made premium consumers a focus, since those travelers are both willing and able to spend on pricier experiences.
• Levi Strauss’ efforts to premiumize its brands has helped cultivate a shopper base earning over $100,000, one that is less sensitive to price increases and more comfortable paying full price.
• A similar trend is playing out at Macy’s, where reduced exposure to lower-income consumers is helping the department store’s namesake banner recover.

Our take: Retailers are rushing to premiumize, targeting higher-income households with the means and willingness to spend. But these shoppers are discriminating: Companies looking to earn their spending must deliver products and experiences that meet their high standards—and prepare for the possibility of buyer’s remorse.