Consumers Are Spending Smarter: Inflation, Tariffs & The Media Impact

As of March 2025, there has been non-stop conversation around tariffs, including up to 25% on all goods from Canada and Mexico, as well as a 10% tariff on all Chinese imports. Coupled with looming inflation, these discussions have sparked a shift in consumer spending habits that are directly impacting media efficiency. As brands navigate a high-cost economic environment, one clear trend emerges: consumers are making fewer purchases, but they are spending more per purchase in order to maximize value. 

Retailers Caution Softer Sales, But Consumers Still Show Up

Walmart CEO Doug McMillon recently highlighted a slowdown in sales growth, citing more cautious consumer spending amid economic uncertainty. Similarly, Target CEO Brian Cornell has warned of softer sales, noting that impending tariffs could further strain household budgets by driving up prices on essential goods like groceries (AP News). This aligns with the data we’re seeing across retail, grocery and eCommerce verticals. Our data showed a decline in Return on Ad Spend (ROAS) at the beginning of the year, but those same clients demonstrated increased cart size and larger Average Order Value (AOV).

This suggests that while consumers are still making purchases, they are more selective—spending more per transaction but shopping less frequently. This is a common behavior during economic uncertainty, where households focus on getting the biggest bang for their buck.

Consumers Are Returning to In-Store Shopping

A key trend supporting this shift in purchase behavior is the gradual increase of in-store shopping. As seen in the below chart, the percentage of offline purchases has been steadily climbing since the start of the year.

Several factors are driving this trend:

1. Avoiding Shipping Costs & Delays – With rising e-commerce costs and logistical challenges, consumers are opting to buy in-store to avoid added expenses and delays.
2. Seeking Better Deals In-Store – Many retailers are offering exclusive in-store promotions to drive foot traffic, giving consumers more incentive to visit physical locations.
3. Hands-On Shopping Experience – As shoppers become more selective, they prefer to evaluate products in person before making a purchase, particularly for higher-value items.

The Media Efficiency Challenge

The challenge for brands in this environment is twofold:

1. Higher CPAs Due to Lower Purchase Frequency – As purchase rates decline, acquisition costs rise, making performance marketing more expensive.
2. Shifting Value Perception – Consumers are favoring quality and necessity over impulse buys. Brands must emphasize long-term value in their messaging and effectively communicate the need for their product.

How Brands Can Adapt and Capitalize

During uncertain times, brands that maintain their advertising presence while competitors pull back can see significant long-term benefits. Staying top of mind ensures stronger brand recall when the economy rebounds, leading to increased consumer preference and market share. Historical data shows that the brands maintaining or boosting their advertising efforts during economic uncertainty often emerge stronger, with increased sales and market share, compared to competitors who cut back on advertising. (Forbes)

1. Drive Engagement & In-Store Sales – Kargo’s proprietary overlay technology empowers brands to seamlessly integrate key product information—such as pricing, discounts, and benefits—directly into their catalog ads. By incorporating real-time local inventory data, brands can highlight product availability at nearby stores, enabling shoppers to make informed decisions instantly. 

This frictionless experience not only drives higher engagement and conversions but also supports BOPIUS (Buy Online, Pick Up In Store), bridging the gap between digital advertising and in-store sales for a truly omni-channel approach.

2. Lean into Average Order Value – Bundle Ads allow brands to bundle and promote complementary products, encouraging consumers to add more to their cart.

3. Enhance Product Storytelling –  Kargo’s Product-Level Video feature enables brands to add engaging video content to catalog ads, helping capture attention and educate potential buyers on features, benefits, and product use cases - driving consideration earlier in the consumer journey and boosting conversion rates.

4. Reinvent the Weekly Ad Experience – As consumers hunt for better deals, brands need smarter ways to promote discounts and in-store offers. Digital circulars bring the traditional print circular online. This allows brands to showcase localized promotions on social media and ensure that high-intent shoppers see relevant deals which in turn drives foot traffic and online conversions.

While economic challenges persist, brands that stay agile and stay top of mind will come out ahead. With leading retailers signaling shifts in consumer spending and ROAS under pressure, now is the time to refine your strategy. By leveraging the tips outlined above, you’ll navigate this time of economic uncertainty successfully and be better positioned for long-term growth.