In today’s economy, it can feel like everyone is either cutting back hard—or spending like nothing’s wrong. Both are true. On one side, most households are tightening their belts. On the other, a relatively small group of high earners is driving a huge share of all spending and eagerly paying extra for upgrades, “experiences,” and premium brands.
This split is reshaping everything from how we fly to where we shop and what kinds of products companies create. This is what economists and analysts are calling the “K‑shaped economy”—and it’s at the heart of the current wave of “premiumization”.
A Top 10% Economy
According to Moody’s Analytics, the top 10% of earners now account for nearly half of all consumer spending in the U.S.
Visa’s Business and Economic Insights group puts some numbers around who these people are: about 12.2 million U.S. households fall into this top 10%, defined roughly as those with annual income of at least $210,000, or net worth of at least $1.8 million.
For brands and retailers, that’s a powerful signal. Growth and profit are increasingly concentrated among a relatively small group of affluent consumers who can still spend freely, even as prices rise.
So while the broader story we hear is about inflation and struggle (which is very real), there’s another parallel story: a slice of the population that still feels comfortable trading up—booking the nicer seat, buying the better bottle, upgrading the subscription.
Meanwhile, 91% of Households Are Cutting Back
The other side of the story is dramatically different. A December EY-Parthenon US Consumer Sentiment Survey found that 91% of households are tightening their spending on discretionary categories. That means:
- Less money on dining out, entertainment, and travel upgrades
- More caution around clothing, beauty, tech, and other “wants”
- A reallocation of budgets to cover rising essentials: housing, food, utilities, healthcare
- This isn’t just a low-income phenomenon. Even many middle- and upper-middle-income households are feeling the squeeze as everyday costs climb faster than their paychecks.
That’s why you now see a striking data point: even consumers making over $100,000 a year are increasingly shopping at discount chains. When six-figure earners start trading down on everyday goods, you know cost pressure is widespread.
The K-Shaped Economy: Two Paths, One Market
This divergence is what analysts call a K-shaped economy. One “arm” of the K points up – high earners see strong asset values, stable employment, and room to spend. The other arm points down – middle- and lower-income households face rising costs, stagnant wages (in real terms), and shrinking discretionary budgets.
If the growth engine of consumer spending is increasingly concentrated in the top 10%, it makes sense for companies to build more products specifically for those consumers—higher-priced, higher-margin, and positioned as “worth paying more for.” This dynamic shows up as two opposite behaviors happening at once – “trading up” and “trading down”:
Trading Up: The Premiumization Trend
More affluent consumers are trading up in many categories:
- Travel: grabbing premium economy or business class instead of basic economy; choosing boutique hotels over budget chains.
- Food & Beverage: buying organic, single-origin, small-batch, specialty; choosing better restaurants even if less frequently.
- Beauty & Fashion: opting for luxury or “masstige” brands, limited editions, and “investment” pieces.
- Tech & Entertainment: paying for top-tier streaming plans, latest devices, premium in-app features.
This is the world where “premium economy” isn’t just an airline seat; it’s a mindset. Not the most extravagant option—but definitely not basic.
Trading Down: Value and Discount
At the same time, a much larger share of households is trading down:
- Moving from supermarkets to Dollar Tree, Aldi, Walmart
- Choosing private-label or store brands over name brands
- Reducing frequency of restaurant visits, salon trips, or impulse purchases
- Delaying or skipping big-ticket items like furniture, electronics, or vacations
What’s important is that the same person might trade up in one area and down in another. They may fly premium economy once a year for a special trip but buy groceries at a discount store every week to make the budget work.
How Brands Are Responding
The result of all this is a kind of “hourglass” shaped market:
- More premium, luxury, and “elevated” products at the top
- More value, discount, and bulk options at the bottom
- Less space in the undifferentiated middle
Brands are making strategic bets:
Double down on the affluent:
- Launch premium lines and “elevated” experiences
- Introduce higher-end packaging, ingredients, or services
- Emphasize quality, exclusivity, or status
Reinforce value at the lower end:
- Create budget sub-brands or “everyday value” lines
- Offer smaller sizes, lower price points, and promotions
- Highlight practicality, durability, and savings
What’s shrinking is the generic, mid-priced, “for everyone” product that doesn’t strongly signal either value or premium.
The “Premium Economy” Consumer Mindset
One interesting side effect is the emergence of a large “middle-up” consumer who behaves like a “premium economy” fan of everything:
- Not ultra-rich, but with some discretionary income
- Willing to pay extra in a few categories that matter most (travel comfort, coffee, skincare, tech, kids’ activities, etc.)
- Happy to sacrifice in other areas to afford those selective upgrades
This is the same logic you see in fandom culture – not a casual fan but solidly invested, willing to put in a bit more money and attention where it counts to them.
Economically, that’s what many consumers are doing now:
- Economy on essentials wherever possible,
- Premium economy on the one or two things that bring them the most joy, comfort, or status,
- Business/first class only for the truly wealthy.
What This Means Going Forward
For consumers, this landscape means:
- You’ll see more high-end options and “special editions” pitched as worth the splurge.
- You’ll also see more hard value propositions—more dollar stores, more private labels, more “save here, so you can spend there” messaging.
- The middle may feel weaker and less compelling: why buy the generic mid-priced brand when you can either go cheaper or treat yourself?
For businesses and creators, it suggests:
- You can’t just design for an “average consumer” anymore. You’re often speaking either to:
- a value-conscious consumer under pressure, or
- a premium-seeking consumer with room to spend.
- Clear positioning—value or premium—matters more than ever.
Closing Thoughts
We’re living through a moment where the same economy can feel completely different depending on where you sit. For some, it’s about survival, trade-offs, and cutting back on anything non-essential. For others, it’s about curated upgrades and “little luxuries” they feel they’ve earned or can comfortably afford.
Premiumization isn’t just a marketing buzzword; it’s a reflection of this split. As the top 10% drive a disproportionate share of spending, brands will keep rolling out “premium economy” experiences in every category—aimed at the consumers who can still say yes while the rest of the country will be busy stretching every dollar, hunting for value, and deciding very carefully where, if anywhere, they’re willing to upgrade.
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The top 10% of earners drive nearly half of all consumer spending. Is our economy too dependent on the wealthy? Yahoo Finance. December 2025. https://finance.yahoo.com/news/top-10-earners-drive-nearly-191500198.html
Beyond the million-dollar mark: 5 insights into the new affluence landscape. Visa. December 2025 https://corporate.visa.com/en/sites/visa-perspectives/trends-insights/new-affluence-landscape.html
EY-Parthenon US Consumer Sentiment Survey. EY. December 2025. https://www.ey.com/content/dam/ey-unified-site/ey-com/en-us/industries/retail/documents/ey-parthenon-us-consumer-sentiment-survey.pdf
Van Tyne, Sean. Understanding The Types of Fan Monetization. November 11, 2025. https://www.seanvantyne.com/2025/11/01/understanding-the-types-of-fan-monetization/
Van Tyne, Sean. Fan Engagement Monetization Experience. August 2, 2025. https://www.seanvantyne.com/2025/08/02/fan-engagement-monetization-experience/