In today’s fast-paced retail market, transaction data often reveals trends before official financial reports are released. When shoppers become more cautious, they don’t usually stop buying all at once. Instead, they make small changes, like skipping a pair of sneakers, waiting to buy jeans or searching for better deals.
Michael Gunther, senior vice president of research and market intelligence at Consumer Edge, said the company is able to drill down into U.S. consumer credit and debit card data. “It covers anything that a credit or debit card can touch,” he told Sourcing Journal, adding that it gives his team “a full view of the consumer economy, whether it’s restaurants, apparel or TV subscriptions.”
The firm’s client base spans financial institutions like hedge funds, private equity and venture capital firms to corporate clients who work with us to figure out what’s going on with their competitors “on a near real-time basis.” The data also tells a story not only about an individual company but also about what’s going on in a broader context.
For example, Gunther said his team recently analyzed the direct-to-consumer sales for Levi Strauss & Co. and found the denim brand’s U.S. direct-to-consumer performance “deteriorated relative to the apparel industry through July and August before improving sharply in September,” he said.
“The brand is still underperforming the industry year over year, but the gap narrowed considerably last month,” Gunther said. “The weakness through August was also broad, with [the brand] losing share within family apparel and accessories across every income and age group, rather than being driven by a single consumer cohort.”
On an earnings call with analysts on Oct. 7, Michelle D. Gass, CEO, president and director of Levi Strauss & Co., said overall business results were strong, but the company’s direct sales missed expectations. Gass said it was mainly due to a weaker back-to-school season in the U.S. and a slump in women’s bottoms. Gass said the company acted fast to fix this by putting more inventory behind popular trends such as low-rise jeans, stepping up marketing to boost customer traffic and improving store and digital checkout rates.
And the fixes worked, with U.S. direct sales turning around and women’s sales picking up in September. Together with growth in Europe, Gass said the company remains confident that its direct-to-consumer sales and women’s business will finish the year strong.
Gunther said the brand’s September improvement is particularly notable against a backdrop where consumers remain selective with discretionary spending. “That selectivity could become even more important if higher diesel costs flow through to household essentials like groceries and clothing, adding to inflation concerns and putting additional pressure on discretionary budgets heading into holiday,” he explained. “Higher-income households continue to drive strength in a number of categories, but that resilience has not translated evenly to apparel, with areas like footwear and athletic apparel remaining relatively soft. The question heading into holiday is whether [Levi Strauss & Co.] can build on September’s rebound and capture more of that available discretionary wallet.”
Gunther said when looking at the data, it’s important to know how sales channels are defined. In transaction data, sales through third-party partners like department stores or national retailers show up under the retailer’s name, not Levi Strauss & Co.
Gunther said the data only covers U.S. cardholders and stressed the need to separate direct sales from wholesale partners. For example, if someone buys Levi Strauss & Co. jeans at Macy’s, the credit card statement will show Macy’s. Consumer Edge’s direct-to-consumer data only includes purchases where the statement lists Levi Strauss & Co., such as from their own website or store.
From a higher level, the data is revealing shifts in consumer preferences. Gunther said consumers are becoming more selective. Even though overall spending has stayed strong despite higher interest rates and living costs, demand for non-essential items is less steady, he said. The data also shows that products tied to lifestyle activities or things people need right away are still selling well, but non-essential goods are facing more challenges. For example, footwear and athletic apparel sales have slowed as shoppers put off buying trendy items.
Outside of apparel, bigger economic factors like changing diesel prices and input costs are affecting everyday essentials such as groceries, Gunther said. As basic household expenses go up, people have less money left for buying clothes they don’t need right away.
At the same time, consumers in all income groups are looking for better value. Even households earning $150,000 or more are shopping more often at discount stores, dollar stores and resale sites, Gunther noted, adding that this shows that everyone is trying to make their money stretch further.
As retailers get ready for the important holiday season, Gunther said brands with “middle-of-the-road” products that don’t stand out or offer clear value may be ignored by shoppers. In both retail and food service, standing out has become the main factor that separates winners from those struggling.
Comparing apparel trends to patterns seen across other consumer sectors, Gunther said that current spending trends have created a distinct barbell effect where “the middle that hasn’t communicated a real reason to go and spend” is getting squeezed. He said as shoppers become far more selective, “there’s a need to stand out with something more gripping, whether it’s compelling value or a really interesting product, rather than just blending in.”
In apparel, this means that strong brands and unique products are key for holiday success. For Levi Strauss & Co., keeping up the momentum from September will depend on attracting careful and value-focused shoppers who are still watching their spending.
Looking toward the end of the year, Gunther points out that while some areas are doing well, much of the holiday season will depend on bigger economic factors. He says that results during the busiest shopping months “may depend on what happens to fuel prices, inflationary pressure on essentials, and overall asset markets that support high-income confidence.”
As the holiday shopping season unfolds, real-time transaction data will keep showing how shoppers feel, tracking every change as people balance their basic needs with extra purchases.