To me, there’s always been a huge difference between going to a store like Target versus Walmart.

Walmart is the store you go to when you need budget groceries or socks. Target is the store you go to when you need a cute lamp for your new apartment, or a creative gift for your best friend’s daughter’s birthday party.

In fact, I’ve never really thought of Target as a money-saving destination. To me, the appeal has always centered on a wide selection of cool inventory, and less so on affordability.

Just take a close look at some of the brands Target has chosen to partner with through the years. These include:

  • Ulta Beauty
  • Apple
  • Starbucks

None of these are “budget” retailers by any means — unless you consider a $7 latte a budget drink. 

But Target has, in recent months, been making changes in light of a big shift in consumer behavior. And other retailers should aim to follow suit.

Target sees shift in consumer behavior.

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Consumers are cutting back on discretionary spending

For many people, 2025 was a difficult year, financially speaking. A lot of people saw their paychecks get stretched to the max as prices remained stubbornly high.

Of course, on paper, inflation doesn’t look so bad. The most recent Consumer Price Index measured annual inflation at 2.7% in November. Compare that to the 9% inflation we saw in 2022, and you’d think consumers would be thriving.

Related: Costco quietly lowered prices on key items

But the thing to remember is that inflation is cumulative. November’s 2.7% increase in costs comes on top of months upon months of increases. And consumers have clearly had it.

In November 2025, 25% of consumers said they felt pessimistic about the economy, according to McKinsey data. That’s a notable jump from August 2025, when only 21% said the same.

McKinsey also found that consumers across the board saw their savings shrink in 2025. And concerns about living costs and job security rose during the fourth quarter of the year.

It’s no wonder, then, that so many consumers are rethinking their spending habits.

In September, economist Joanne Hsu, director of the University of Michigan’s Survey of Consumers, said, “Responses to multiple survey questions all show that the financial outlook for consumers has deteriorated.”

A good 44% of respondents said high prices are eroding their finances. And so consumers’ logical move in that scenario is to cut back on spending whenever possible.

Target gets proactive amid growing consumer trend

Given that 32% of Americans expect their finances to worsen in 2026, according to Bankrate, many people are making plans to shrink their spending in the new year. 

“Inflation fatigue is real,” said Mark Hamrick, Bankrate senior economic analyst. “A declining sense of economic optimism comes as the job market has cooled and inflation has remained persistent, with prices broadly still elevated.”

Related: Home Depot copies Walmart with decision consumers won’t like

It’s not surprising, then, that retailers are being forced to pivot to adapt to consumer behaviors. And Target seems to be spearheading that effort.

In November, Target announced plans to lower prices on 3,000 food, beverage, and essential items for the holiday season. But there’s a good chance those reductions will remain in place in 2026 to align with consumer sentiment and need. 

“Consumers are increasingly holding off on making more moves until they see what tariffs, tax policy and immigration restrictions have on the economy,” said Kathy Jones, managing director and chief fixed income strategist for the Schwab Center for Financial Research.

As such, it’s in Target’s best interest to stay ahead of the curve by keeping prices on essentials low.

Target reported net sales of $25.3 billion in Q3 2025, which was 1.5% lower than the same period in 2024, reflecting weaker demand across its entire merchandise portfolio. 

More Retail:

  • Costco sees major shift in member behavior
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  • Lululemon struggles to reverse concerning customer behavior
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Target’s merchandise sales, meanwhile, fell 1.9% year-over-year, even as other revenue streams like advertising grew. This drop suggests that consumers are cutting back on physical goods purchases, especially discretionary products.

All told, it’s pretty clear to Target that a big shift is happening in the context of consumer spending. The fact that Target proactively lowered prices on thousands of essential goods is a step in the right direction for the struggling retailer.

Although Target, in recent quarters, has been a glaring example of what not to do in the world of retail, given current trends, this is one situation where the big box giant’s competitors would be smart to follow its lead. 

Maurie Backman owns shares of Target.

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