It was a holiday season of the haves and the have nots. 

Inflation-weary consumers were projected to splurge this year on holiday gifts, food and decorations—fueled by online purchases, according to industry estimates. But the gains were increasingly driven by higher-income households, those making more than $100,000 a year. Lower-income Americans were squeezed by higher prices for groceries, child care and other monthly expenses.

Not every retailer has navigated the turbulence well. The Container Store and Party City chains both filed for bankruptcy protection in the days before Christmas. Meanwhile, the founding family of Nordstrom clinched a deal to take the struggling department store private.  

“We started to notice this trend where there was a real bifurcation in the market between the $50,000-and-below consumer in the U.S. market and the $100,000-and-above consumer,” said Chris Peterson, chief executive of Newell Brands, which makes Sharpie pens, Graco strollers and Oster kitchen appliances.

For example, the company is anticipating stronger demand for its high-end blenders—those costing $100 or more—and dwindling demand for its entry-level blenders that fetch $20 or less, Peterson said. The company is ditching efforts to improve its cheapest blenders and is instead focusing on enhancing its top-of-the-line items for those looking to splurge.

“As we head into next year, 100% of our innovation will be at the medium and higher price point,” he said. “We’re not innovating at all against the lower price points anymore.”

Overall, consumers spent 3.8% more from Nov. 1 through Dec. 24 than they did in the same period last year, according to Mastercard SpendingPulse, which excludes auto sales. The tally doesn’t include the week after Christmas, which is a key shopping period.

The gains were boosted by restaurant spending, which increased 6.3% in the period compared with last year. Online retail sales rose 6.7% year-over-year, while in-store sales increased 2.9%.

“This holiday season, we saw consumers motivated by deals and retailers respond with promotions to meet the demand,” said Steve Sadove, senior adviser for Mastercard and former CEO of Saks.

Williams-Sonoma, the upscale kitchen and furniture retailer, posted strong quarterly sales and said in late November it was having success moving away from promotional fluctuations. Meanwhile, discounters Dollar Tree and Dollar General said in early December that they were suffering from belt-tightening among their core consumers. 

“It’s really hard to know exactly what’s going on with the consumer, but our opinion is that [they are] probably a little bit better off than everybody thinks, especially our consumer,” Laura Jean Alber, CEO of Williams-Sonoma, told analysts. The company, which also owns Pottery Barn and West Elm, raised its full-year goals to reflect optimism about the final quarter. 

Consumer sentiment has been climbing in recent months, but the gains have been uneven, according to the University of Michigan’s monthly survey.

“Those in lower-income and some in middle-income brackets just don’t feel like they are thriving,” said Joanne W. Hsu, director of the Michigan survey and its chief economist. “Even though, in other parts of the survey, there are signs of strength.”

Hsu said people in the higher-income tier have always reported more positive sentiment, but the three tiers converged at the height of inflation and supply-chain woes in 2022. Since then, sentiment among higher-income consumers has improved much faster than it has improved for those in the lower-income tier.

The median income across all U.S. households was around $81,000 in 2023, according to a recent Census Data report. It was about $55,000 for people 65 or older. Around 40% of American households earned at least $100,000 in 2023. 

“Our low-end customer is definitely pressured,” said Michael C. Creedon Jr., Dollar Tree’s chief executive in an earnings call. “We see that she is clearly focused on consumables.”

Creedon said that last year people pulled back on big purchases, such as TVs, and earlier this year they stopped eating out and started cooking at home more often. This holiday season, they are saving by cutting back on the size of holiday parties. “They don’t invite as many people as they did,” he said.

Sellers of many discretionary items lowered their prices this holiday season compared with last year to draw price-sensitive shoppers. Apparel maker L.L. Bean said it recognized that consumers had struggled with inflation and worked with suppliers to reduce the costs of its classic flannel shirts. They were priced at $49.95, down from $59.95.

Real Flame, a seller of indoor and outdoor fireplaces, lowered prices after some supply-chain costs from the pandemic subsided and consumers pulled back on buying discretionary items, said Aric Melzl, president of the small company based in Union Grove, Wis.

Consumers “clearly said I need lower prices to be comfortable opening up my wallet,” said Melzl, prompting the company to pass along some of its cost savings. The company’s modern-style Hollis Electric Fireplace is now around $600, down from around $1,000 in 2021.

Another small appliance company, Made by Gather, redesigned a two-slice toaster to improve the functionality and look at a lower price, said Shawn Austin, president of the New York company, which also makes appliances for other brands. 

The Bella toaster now costs $19.99, down from $24.99. It has a slimmer shape that fits into tight countertop areas and comes in trendy colors like plum. The new design also uses less material and is cheaper to ship. 

Such sales and discounts matter, even for families with more generous budgets. 

Shopper Erik Soell splurged more than he intended while visiting stores on a recent Saturday with his daughter—spending hundreds of dollars on gifts in two hours. The family has six children and various deals—for example, on a new iPhone 16—made purchase decisions easier, said Soell, who lives near St. Louis.

“I have a hard time paying full retail price, and have no issue walking away if something is too expensive,” Soell said. That being said, “Santa is going to be very good to our household this year.”

In the beauty category, Coty, which owns drugstore brand CoverGirl and offers products such as Gucci and Burberry fragrances, forecast duller sales for the cheaper offerings but bright sales for the expensive ones. 

“For categories catering to the masses, we are seeing a lot of cutbacks across nonessentials—when you’re struggling to make ends meet, you consume a little less,” said Filippo Falorni, who covers the consumer sector for Citi. “The prestige side is doing better.”