Something unexpected is happening in the aisles of America's dollar stores. Alongside the budget-conscious shoppers who have always been their core customers, Dollar General and Dollar Tree are increasingly seeing a new demographic: households earning $100,000 or more annually. The phenomenon, documented by multiple retail analysts and confirmed by company earnings calls, signals a fundamental shift in American consumer behavior that shows no signs of reversing.

The trend has a name: the "trade down." And according to the latest data, it's accelerating into 2026 as inflation fatigue, rising costs, and economic uncertainty push consumers across all income brackets to seek value wherever they can find it.

The Data Behind the Shift

McKinsey's ConsumerWise survey provides stark numbers: 43% of American consumers now rank inflation as their top financial concern, while 29% cite tariffs as a major factor shaping their spending decisions. Perhaps more telling, over 60% of Americans say they have already changed or plan to change their buying habits in response to higher costs.

Dollar General's recent earnings call confirmed what the surveys suggest. CEO Todd Vasos noted that the company is seeing increased traffic from households earning above $100,000 annually—a demographic that historically avoided dollar stores entirely. Dollar Tree has reported similar trends, with management explicitly citing "new customer acquisition across income levels" as a growth driver.

"What's striking is that income alone is no longer a reliable predictor of spending behavior. Even higher-income consumers are becoming more selective, shifting spend toward brands that offer a clear value proposition."

— Michael Gunther, Director of Consumer Insights at Consumer Edge

Why Higher Earners Are Trading Down

The trade-down trend isn't simply about income constraints—it reflects a broader psychological shift in how Americans think about spending:

Cumulative Price Fatigue

While inflation has moderated from its 2022 peak, prices haven't declined. Grocery costs remain roughly 25% higher than three years ago. For many consumers, including those with comfortable incomes, the cumulative impact of years of price increases has created persistent sticker shock and a heightened focus on value.

Normalized Frugality

The pandemic and subsequent inflation spike normalized behaviors that were previously associated with lower incomes. Coupon-clipping, store-brand purchasing, and discount shopping lost their stigma. For many households, habits formed during financial stress have persisted even as circumstances improved.

Wealth Uncertainty

Even households with strong incomes face uncertainty. Stock market volatility, job market concerns, and rising costs for healthcare and education create anxiety that translates into more cautious spending. A six-figure income feels less secure when housing costs consume 40% of take-home pay.

Retail Media Exposure

Social media has democratized deal-hunting culture. TikTok and Instagram influencers regularly feature dollar store finds and discount shopping hauls, removing any remaining stigma from budget-conscious shopping choices.

The Winners and Losers

The trade-down trend creates clear winners and losers in the retail landscape:

Winners

  • Dollar General (DG): The company has been aggressively expanding its product assortment, including consumables and fresh food, to capture higher-income shoppers seeking value.
  • Dollar Tree (DLTR): Despite operational challenges, the company benefits from increased traffic as consumers seek the lowest possible prices.
  • Walmart (WMT): America's largest retailer continues gaining grocery market share from traditional supermarkets as consumers prioritize Walmart's everyday low prices.
  • Costco (COST): The warehouse club model appeals to higher-income households seeking bulk value, and membership renewals remain strong.
  • Aldi and Lidl: European discount grocers continue expanding U.S. footprints as their no-frills model resonates with value-seeking consumers.

Losers

  • Traditional grocery: Kroger, Albertsons, and regional chains face pressure as consumers migrate to discounters and warehouse clubs.
  • Department stores: Macy's, Nordstrom, and Kohl's continue struggling as consumers resist full-price apparel purchases.
  • Specialty retail: Single-category retailers face challenges as consumers consolidate trips to value-focused destinations.

What This Means for Consumer Spending in 2026

According to Moody's Ratings, real consumer spending growth is expected to slow to approximately 1.5% in 2026—positive but notably weaker than recent years. The trade-down trend is a key factor in this moderation: consumers aren't stopping spending, but they're spending more selectively and seeking more value per dollar.

Liz Everett Krisberg, head of Bank of America Institute, summarizes the situation: "The word of the year, and what sets us up for 2026, should be 'resilient,' because that's how the consumer has performed." Spending continues, but the mix is shifting toward value.

Investment Implications

For investors, the trade-down trend suggests several considerations:

Value Retail Exposure

Dollar General and Dollar Tree both trade at reasonable valuations relative to growth prospects. Walmart, despite its size, continues executing effectively and may benefit from both grocery share gains and its growing advertising business.

Consumer Staples Selectivity

Within consumer staples, favor companies with strong private-label businesses or value positioning. Companies dependent on premium pricing may face margin pressure.

Credit Quality Monitoring

The trade-down trend may be an early indicator of credit stress among lower and middle-income households. Watch consumer credit metrics and retail credit performance for warning signs.

Will the Trend Reverse?

The key question is whether the trade-down is temporary—a response to specific economic conditions—or structural. Evidence suggests the latter:

  • Younger consumers who came of financial age during the pandemic and inflation spike have normalized value-seeking behavior.
  • Improved dollar store merchandise quality makes the trade-down less of a sacrifice.
  • Digital price comparison has made full-price purchasing feel increasingly irrational.

Even if economic conditions improve meaningfully, the cultural shift toward value consciousness appears durable. For retailers positioned to capture this demand, the opportunity is significant. For those dependent on consumers paying premium prices, the challenge is structural and unlikely to resolve quickly.

In America's K-shaped economy, value retailers find themselves in the unusual position of serving both halves of the K—the budget-constrained lower income consumers who always needed them, and the newly frugal higher earners who are discovering them. It's a potent combination that's reshaping retail in ways that will persist long after inflation fades from the headlines.