The Question Every Premium Brand Should Be Asking in a Trading-Down Economy

At this point, we’ve all heard that consumers are “trading down.” According to McKinsey's new State of the Consumer 2026 report, more than three-quarters of consumers are now opting for less expensive alternatives amid economic uncertainty – even those with the household incomes to sustain their previous spending. So should premium brands panic?

If you read more closely, what’s really happening is that wealthy consumers are just adopting the exact same "resourceful" behaviors as everyone else. That might look like DIYing services they used to pay for. Seeking out budgeting tools. Buying secondhand. Not because they're broke, but because they want to feel resourceful. It’s an emotional response to a volatile environment, not a financial necessity. 

The real risk for premium brands right now isn't pricing. It's that most don't know what ‘justified splurge’ means to their specific customer.

It would be natural for premium brands to immediately defend their price points, but hold that thought: The premium customer isn't asking brands to be cheaper. They're asking brands to be smarter. 

Patagonia and Levi's figured this out early with trade-in and buyback programs that turned "used" into a brand asset instead of a leak in the revenue bucket. A $150 secondhand handbag isn't lost margin, it's a front door for a customer who isn't ready for the $600 version yet, but might be in three years. Durability, repairability, resale value may once have been added benefits, but for a lot of consumers – especially younger ones – they’re now requirements.

The real risk for premium brands right now isn't pricing. It's that most don't know what "justified splurge" means to their specific customer. McKinsey's data tells the topline behavior. It does not reveal the story a customer is telling themselves when they choose to DIY the small thing and blow the budget on the big thing. That story is different by category, by brand, and probably by customer. And it's the difference between a brand that builds loyalty and one that feels tone deaf.

So, premium brands, listen up: If you’re not asking your customers directly what "worth it" means to them right now, in this economy, with these options, you’re just guessing. And guessing is the real unaffordable luxury these days.