Consumers Continue to Spend with Department Store Brands

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When Commerce Signals, a TransUnion company that provides credit and debit card insights for retail, restaurants, and entertainment, discovered that department store brands TJ Maxx, Kohls, Nordstrom, and Bergdorf Goodman took market share from the likes of Macy’s, Neiman Marcus, and Saks, Nick Mangiapane was not surprised.

“That’s exactly the kind of question that Commerce Signals Insights tools are intended to generate,” said Mangiapane, CMO of Commerce Signals, a TransUnion company. “We uncover insights on named competitors down to the zip code level so that marketers and insights pros know where to dig in and figure out why they are winning or losing.”

According to the company’s latest inflation report, Consumer Spending Remains Strong as Headwinds Build, consumers continue to make discretionary purchases, and consumer spending overall has grown, despite inflation and supply-chain pressures. The report is intended to help marketers and advertisers understand the current consumer spending behavior and trends as they think about their own business and investment plans for the rest of the year.

“While we haven’t done a deep dive on these retailers,” Mangiapane said, referring to the aforementioned brands, “our Spend Analytics Suite can be used to understand online and in-store sales volume and trends, buyer, and transaction trends, average basket size, return trends, and market share for different consumer groups and geographies.”

He said online purchases at Saks total about $50 more than the average in-store purchase for the retailer. While the brand was able to grow its total online sales, in-store sales declined over the past three months.

For Mangiapane, the findings that stood out most from the report were that consumer discretionary spending is trending up in 2023 after trending down for most of 2022 against the backdrop of widespread concern about a looming recession. Consumers are also spending a lot more on travel in particular, he said.

Travel spending saw the highest growth rates to start 2023, with dollar spending increasing 34.5%. Despite higher prices in air travel in particular, the number of transactions increased by 21.3%, which illustrates that consumers are traveling more than they were a year ago – another surprise in a shaky economy.

At grocery, consumer spending rose 5.2% year to date, less than would be expected considering that food prices have risen more than 10%.

“While food is certainly not the only thing in the grocery store, it would seem that consumers continue to trade down to reduce the impact of higher prices,” he said.

Solid spending growth was seen in the recreation (up 30.5%) and restaurant (16.5%) industries compared to last year, the report showed, and non-discretionary spending also saw increases: Professional services (up 15.8%); education (15%); and healthcare (12.5%).

Commerce Signals began sharing insights on consumer spending trends in 2020 when many of its customers were asking for help in making sense of a world economy upended by Covid-19. This report is the second to analyze consumer spending in light of high inflation. The company’s July 2022 report titled, Inflation’s Impact on Consumer Spending, found:

• Consumers were trading down where they could in order to offset the inflated prices.
• While total spending was up in the first half of 2022, discretionary spending growth was slowing.
• The strong jobs market and high consumer savings rates during the pandemic have aided consumers in spending above inflation.

Retailers can use the findings in this report to fill in a knowledge gap in customer identity and where they shop for those brands. Most retailers know their loyalty members and their online buyers, but that leaves a gap of 60-70% of shoppers for many brick-and-mortar retailers as to where those customers shop in terms of competitors.

Share of voice remains a powerful tool for brands. Ads that are relevant and compelling will drive consumer purchase, and understanding the consumer share of the wallet will give brands a major competitive edge.

Smart advertising spending by consumer-focused businesses concerned about a possible recession could earn bigger marketer share gains this year as consumer spending trends upward.

Commerce Signals sources permission and anonymized card spending data from banks and processors. Our data set covers up to 60% of U.S. consumer card transactions and is representative of the U.S. population. This report uses data from our Spend Analytics Suite, which aggregates our spending data and extrapolates for the card spending we don’t see using proprietary methods. We ensure accuracy by checking it against public and private data sources.

Kathleen Sampey