Amazon and Starbucks Share How Cautious Customers Are With Their Spending

Executives at Amazon have said that U.S. consumers are becoming increasingly frugal with their spending.

Before an earnings call on Tuesday, Amazon’s chief financial officer, Brian Olsavsky, said to journalists, “Customers in the U.S. are being very thoughtful about their spend. They look for deals, they trade down and look for lower ASP (average sale price) products.”

Olsavsky explained that customers were purchasing “a lot more consumables and everyday essentials,” which are relatively cheaper.

Also on Tuesday, Starbucks CEO Laxman Narasimhan mirrored the same reflections during the company’s earnings call. He said, “We continue to feel the impact of a more cautious consumer, particularly with our more occasional customer, and a deteriorating economic outlook has weighed on customer traffic and [impacted sales] broadly across the industry.”

Narasimhan highlighted that Starbucks’ performance for the first quarter of this year fell short of expectations, with a 3% decline in sales in the U.S. compared to the previous year.

Both Olsavsky and Narasimhan’s remarks shed light on the challenges faced not only by U.S. consumers but also by companies trying to cater to them. This is especially prevalent as shoppers aim to maximize the value of their spending as a result of the ongoing rise in inflation rates, making every dollar count more than ever before.

In a report published on March 11, Bank of America economists wrote, “From being a point of strength during 2023, it appears that lower- and middle-income households’ spending growth has been softening.” 

McDonald’s CFO Ian Borden informed investors last July that customers were trying to cut back spend by “trading down” to its value-menu items and “buying a little less.”

At the time, Borden said, “A challenging macro environment including rising interest rates and elevated costs continues to create volatile consumer confidence levels and put pressure on consumer spending.”