What should retailers in Canada be thinking about in 2026?

Retail Outlook for 2026: A Deep Dive into Consumer Trends

Key Concepts:

• K-Shaped Recovery: Divergence in economic fortunes, with high-income consumers continuing to spend (albeit cautiously) while low- and middle-income consumers face increasing financial strain.
• GLP-1 Halo Effect: The influence of weight-loss drugs (like Ozempic) on consumer behavior, particularly regarding food choices and wellness spending.
• Value Shift: Consumers prioritizing quality and longevity over simply seeking the lowest price.
• Resale Market Growth: Increasing consumer interest in buying and selling pre-owned goods, driven by both cost savings and quality concerns.
• Food as Fashion: The elevation of food and grocery shopping into a status symbol and experiential purchase.

I. Economic Realities & Consumer Segmentation

The retail landscape in 2026 is predicted to be shaped by a significant shift in economic realities and cultural trends. 2025 was characterized by a “shaky” consumer, particularly impacting middle- and low-income households. This trend is expected to intensify in 2026. Jessica Ramirez highlights a distinct split in consumer behavior.

Credit card debt is rising, and while consumers did shop during the Christmas season, inflation complicates the interpretation of those numbers. High-income consumers are still spending, but are exhibiting increased caution. Retailers successfully managed inventories in 2025, but continued vigilance is crucial. Consumers, across all income levels, are becoming “laser focused” on their purchases.

II. High-End Consumer Behavior (Cautious Optimism)

Despite market excitement surrounding Artificial Intelligence (AI), high-end consumers are questioning the potential for a “bubble.” Investment is currently focused on tangible assets like jewellery and luxury goods, which are perceived as safe havens. However, even this demographic is demonstrating some “trade down” behavior, notably in grocery shopping, with increased patronage of stores like Walmart and Costco.

While high-income consumers accounted for 50% of retail sales in the previous year, a degree of caution persists. This is evidenced by their willingness to seek value even within premium categories.

III. Low-Income Consumer Strain (Essentials & Debt)

Consumers earning $75,000 or less are facing significant financial pressure. A recent survey revealed that 75% have either depleted their savings or are actively drawing from them. “Buy Now, Pay Later” schemes are increasingly popular, contributing to rising debt levels.

Spending is overwhelmingly focused on essentials, with consumers prioritizing how long groceries will last (e.g., considering whether a package of hamburger helper will provide one, two, or three meals). This demonstrates a shift in mindset towards maximizing value and stretching limited resources.

IV. Strategic Implications for Brands

Brands need to understand what consumers are willing to purchase, not just if they are willing to purchase. Even among middle- and low-income consumers, there’s a willingness to spend on items perceived as valuable, particularly in categories like sportswear and wellness. However, quantity is often reduced.

The concept of “value” is evolving. Consumers are no longer solely focused on finding the cheapest option; they prioritize quality and longevity. This is reflected in a growing interest in resale markets, both in the luxury sector and across the board, driven by a desire for quality and a questioning of price justification.

V. Emerging Trends for 2026

• Food as Fashion: Driven by the “GLP-1 halo effect” (the influence of weight-loss drugs like Ozempic) and a broader focus on wellness, food is becoming a status symbol. High-end grocery stores and specialty food offerings are gaining traction, with consumers viewing shopping locations as a form of self-expression. Grocery stores are adding “merch” and small delis to enhance the shopping experience. Younger generations are particularly engaged with this trend.
• Longevity & Wellness: Consumers are increasingly focused on products that enhance their well-being, including supplements, nutritious food, and high-quality activewear.
• Resale Market Expansion: The resale market is growing, fueled by both economic necessity and a desire for quality and sustainability.

VI. Key Quotes

• “Value today doesn’t necessarily mean that they’re looking for a bargain. That’s something can be cheaply made. They are looking for something that’s going to be long.” – Jessica Ramirez, on the evolving definition of value.
• “There’s a cachet that comes with it [high-end food].” – Jessica Ramirez, describing the “Food as Fashion” trend.

VII. Data & Statistics

• 50%: Percentage of retail sales accounted for by high-income consumers in the previous year.
• 75%: Percentage of consumers earning $75,000 or less who have either depleted their savings or are drawing from them.
• Increased Usage: Significant rise in the use of “Buy Now, Pay Later” schemes.

Conclusion:

The retail outlook for 2026 is characterized by a bifurcated consumer base. While high-income consumers remain a key driver of spending, they are exhibiting increased caution. Low- and middle-income consumers are facing significant financial strain and are prioritizing essential purchases. Brands must adapt by focusing on value (quality and longevity), understanding evolving consumer preferences (like the “Food as Fashion” trend), and embracing the growing resale market. A nuanced understanding of these shifting dynamics will be crucial for success in the coming year.