Consumer Confidence vs Rising Oil Prices

[00:00:00] Steve: we've actually seen like around 14 and a half percent increase in total revenue the last 28 days year over year. And that's come a little bit stronger on the new customer side. That's more like 15 and 15.6% up year over year. Of course, we spent more into that. The brands that we've seen has spent kind of close to 18% year over year in the last 28 days.

[00:00:21] But what that means though is the AMER that we're seeing, the Efficiency in acquiring those new customers has only decreased by about 2%. So it's fantastic to see an 18% increase in spend and only decline 2% in AMER.

[00:00:39] Richard: Hey folks, welcome to the Ecommerce Playbook podcast. I'm your host, Richard Gaffan, director of digital product strategy here at Common Thread Collective. And I'm joined by Steve Recook, who is our director of data science here at Common Thread Collective. I, I'm gonna have to get that right because we're gonna start doing this every single month.

[00:00:54] But Steve is joining us today to talk about our D2C index and some of the data that has come out of that and just kind of review what the world of ecom data looks like right now. So, first off, Steve, how you doing, man?

[00:01:07] Steve: I'm good. Yeah. Great kind of kayaking season and ski season are, like, trading off right now. I was able to paddle on Saturday and then took the last day of lift access in Colorado at A-Basin

[00:01:18] Richard: Oh, wow. So kayaking and skiing in, in the course of two days. Pretty

[00:01:22] Steve: In the same weekend. It, it's great. I love being able to do both this time of year.

[00:01:26] Richard: Is there like a, a subgroup of people who like kayak then like throw the kayak on their back, hike up and, and ski in like one day?

[00:01:33] Steve: We, we've definitely,

[00:01:35] Richard: And if anyone could do it, it'd be you.

[00:01:36] Steve: definitely done that and I've have a lot of friends that'll use mountain bikes as shuttle for kayak. That, that we leave the mountain bike at the bottom and then when they're done kayaking, bike back up, grab their car, and then pick up their kayak.

[00:01:49] Richard: Yeah. Well, okay, so this will be my segue. Like, speaking of going up and down peaks, let's talk about the data. So I think like one thing that's come up in our weekly D2C index newsletter is overall improvements in revenue year over year with obviously some drop in median MER. But particularly what we're talking about here in-- it's May 20th when we're recording this, it'll prob- probably be the 21st when it comes out.

[00:02:12] But regardless what we're talking about here is we're in sort of the midst of the mid, mid-year gifting period, right? So we had Mother's Day we have Memorial Day and Father's Day coming up. Memorial Day, less of a gifting situation, but definitely a, a, a very prevalent discounting peak. So what we wanna talk a little bit about is just based on what you're seeing in the data given Mother's Day performance, maybe we can start just talking about Mother's Day performance.

[00:02:38] But given that performance, what does that sort of portend or whatever for Father's Day and-- or Memorial Day and Father's Day coming up? So let's start with talking a little bit about kind of what Mother's Day looked like this year and some of the trends you're seeing there.

[00:02:51] Steve: Yeah. So we've actually seen like around 14 and a half percent increase in total revenue the last 28 days year over year. And that's come a little bit stronger on the new customer side. That's more like 15 and 15.6% up year over year. Of course, we spent more into that. The brands that we've seen has spent kind of close to 18% year over year in the last 28 days.

[00:03:14] But what that means though is the AMER that we're seeing, the Efficiency in acquiring those new customers has only decreased by about 2%. So it's fantastic to see an 18% increase in spend and only decline 2% in AMER. That, that shows signi- significantly more spending power or the ability to efficiently acquire those new customers.

[00:03:39] Richard: Yeah. Do you have any sort of theories on why that might be? Because we have seen that trend kind of carry for the last little while here, that we're spending more and revenue is up, but MER is only is f- not flat, but kind of flat. So talk a little bit about why, why you think that's happening right now.

[00:03:57] Steve: I mean, I think there's a lot of different things. I, I would love to think it's CTC's ability itself to be able to more efficiently spend and acquire those new customers. I think we're getting a little bit more dialed on a lot of the different things that we do for customers. The, the incrementality helps make sure that we're spending efficiently into each of the different channels.

[00:04:17] The AMER modeling makes sure that we're not overspending for particular brands. And we've also kind of diversified into different channels as well. You know, we're looking at like TikTok shops. We have more brands signing on to Apple Oven more trying out YouTube. So there's a lot of different layers that you can add on to make sure that the, the next dollar that you're spending is actually efficient in acquiring those new customers.

[00:04:42] Richard: Yeah. So, so I mean, at least part of it is the data set that, of course, at, at CTC we've put certain things into place for the way that we kind of run our run our b- business for our clients. But so do you detect there being any sort of overall trend here?

[00:04:58] Steve: I think there, there does tend to be-- it does look good, particularly since the beginning of May. In April, we were kind of a little bit behind in AMER. We were down kind of 9% at the, the last few like the little chunk of April the beginning of the 28-day dataset, the first few dares-- days there.

[00:05:14] We were down kind of 9% in AMER. So we've kind of improved since the beginning of May, and I think it might be that some of these holidays are also very conducive, conducive to some of our brands. We have brands that are very outdoorsy that may have more swimwear or or really do well in Memorial Day and the summertime.

[00:05:32] Richard: Yeah. Okay. So then let's talk a little bit about, given this particular data set and sort of the trends that we're seeing given Mother's Day performance, as I was kind of alluding to before, what do we sort of expect to see on Father's Day and on Memorial Day?

[00:05:49] Steve: I do kind of think we're gonna stay ahead in terms of spending power. That's kind of looks solid. We still see some good particular things in the DTCCI consumer confidence survey that we're doing. So consumers do look fairly confident about spending into, in the future, and they do feel they enjoy the value of spending their money rather than saving it right now.

[00:06:11] We're seeing a little bit stronger trend in that direction compared to last year. So I think we're going to see a continued improvement in performance over last year, at least for the next, like, 28 days or so.

[00:06:22] Richard: Yeah. And, and that's an important thing to call out too because that's a data point that stands outside of just sort of like the performance of our specific data set, which is that the general consumer confidence seems like it's stronger year over year. Which is a-- which sort of kind of foreshadows a better performance or more efficient performance.

[00:06:41] So, part of, part of what it sounds like the, the kind of takeaway from this is that m- you should spend into Father's Day, Memorial Day. Not that our advice would necessarily be different, but at the very least it's saying like we're-- don't be fearful of it because it's looking like it's gonna be a little bit more efficient.

[00:06:57] Steve: Right. It does look like it's gonna be a little bit more efficient. We've also seen discounts kind of a little bit lower this year compared to last year. So there might not be as strong of a need to discount for those. I mean, you do pro- likely need to discount for m- particularly for Memorial Day.

[00:07:12] Looks like we see a lot of discounts going on at that time. Especially if you're a summer brand that, that takes advantage of that.

[00:07:19] Richard: Yeah. Right, right, right. Discounting is going to be necessary but, like, one thing that you sort of wrote in this, this week's newsletter is that we just-- we overall we've seen less discounts this, discounts this year than last. And as the editor of the D2C Index Newslet-Letter, of course, like one thing that I recall from last year is that the story week over week tended to be about discounting.

[00:07:39] That discounts were up, that w- nobody had-- we had been discounting more than we ever had before. But this year it seems like it's f- maybe not fundamentally different, but at the very least that sort of I don't know if epidemic is the right word, but that like expansion of discounting has pulled back a little bit at least year over year.

[00:07:56] Does that strike you as true or like what's, what's the story there?

[00:07:59] Steve: Yeah. I think this began probably around this time last year where tariffs started kicking in and brands were faced with increased cost of goods. So we started seeing discounting kind of drop off, and that's kind of perpetuated a little bit more as consumers are faced with well, brands are faced with potentially higher cost of goods coming in.

[00:08:20] So I think we're probably going to see that continued trend of lower discounts so that brands don't get as squeezed on the margins because they don't necessarily have as many points of margin to give up

[00:08:32] Richard: Yeah. Okay. So let's I mean, that, that kind of like covers what we talk about in the newsletter. But let's, let's go a little broader here and, and talk maybe a little bit about some other trends that you see or other things that like in, in the world of data, what things are kind of have been interesting to you recently?

[00:08:47] Steve: Yeah. Well, I've gotten into one of the skills we were working out in Claude, which we use, is how to discount or how to determine if Anam-- Amazon is cannibalizing your D to-- or your dot com revenue. And I kinda worked out a statistical method for doing that using the products that you market on Amazon.

[00:09:08] So typically not a brand, a brand typically doesn't put their full catalog of products on Amazon. You're, you're selecting particular products. So using those products that we select, you can kind of do a statistical test year over year to see when a brand goes on Amazon, if they've actually... If that has added net revenue to your bottom line or if it's just cannibalizing D2C.

[00:09:29] Or more so, like how much is it adding and then how much is it cannibalizing? Because you, you, you expect a little bit of consumers to say, "Oh, you're available on Amazon. I'll purchase you there."

[00:09:39] Richard: Yeah. We talked a little bit Luke, Austin, and myself talked last week a little bit about what we call the sort of demand cascade, which is sort of broad strokes, the idea that TikTok shops is a place that drives demand but not necessarily capture. And then... Hold on. My dog's going off. Okay. TikTok shops drives demand and not necessarily capture, and then the e-commerce store is sort of balanced, and then Amazon drives capture but not necessarily demand.

[00:10:04] And then there's a sort of a similar tiering for the platforms a- as well. But what this sounds like it's get- gets into is adding a layer of complexity to that thought work that we've already done, which is to say that like, okay, yeah, generally speaking, there's probably more demand capture on TikTok shops than there is on-- or sorry, rather more demand generation on TikTok shops than there is on Amazon, of course.

[00:10:26] But what's the actual effect on the other layers of that cascade? So, s- to what you... Before we hit record here, you were talking about like for TikTok shops, like doing this similar work for TikTok shops. What we would try to determine is, is there a cannibalization happening or is there, like you were saying with Amazon, a halo effect of some kind, which would then sort of drive forward that story of it being a sort of demand generation platform, right?

[00:10:50] Like, is there some attribution that you can give to TikTok shops that actually plays into revenue in the e-commerce store? So maybe ta-talk a little bit more about kind of how we're thinking about it relative to TikTok shops.

[00:11:02] Steve: Yeah, absolutely. So I think the same statistical method would apply to TikTok Shops because you're isolating specific products. You have to be product-specific when you're when you're advertising on TikTok Shops or utilizing that. So you'd be able to see the increase in revenue that you have for those particular products.

[00:11:18] So the products that you're advertising on TikTok Shops should make up a greater percentage of your revenue total. So you can run a statistical test, and if they've not increased by that amount, then you could actually see potentially the cannibalization of regular dot-com revenue that's not coming from TikTok Shops.

[00:11:37] Richard: So, and this is something, by the way, that we're going to be talking about in these-- We're gonna be talking with Steve monthly about D2C Index data and just data in general, and I think that this is one of the things we're gonna talk about. So when, once Steve has run that test, we will share the results with you and give you a sense of, like, how, how we're thinking about, I mean, in a sense, the incrementality of those channels and how they relate to one another.

[00:11:57] So, so I think, Steve, then let's, let's finally here talk a little bit about we sort of talked generally about things that you're kind of interested in and then about the specific newsletter, but let's talk a little bit about any macro trends that you're seeing. Anything big picture, not necessarily, like, specific to our dataset and the D2C Index, but what are, what are some big sort of economic, macroeconomic trends that we should be on the lookout for?

[00:12:21] Steve: Right. I think from, Hmm. Obviously, there's a lot with the, the price of oil that's going to affect the cost of delivery and the cost of goods coming into the United States. So, if those prices increase, then we could see that perpetuate into kind of a little bit more challenging situation where we're getting an increase in, in cost of goods, and consumers are also seeing their normal monthly expenditures go up for their normal, like, goods, their, their food and their gas increasing.

[00:12:51] So if that happens, that, that can kind of negatively impact consumers and their ability to purchase new

[00:12:57] Richard: Yeah. Yeah, a-and it's interesting to compare that, too. And I wonder what you think about, like, the fact that our D2CCI data shows that consumer confidence is up, relatively speaking, year over year, despite the fact that there's this sort of very clear macroeconomic problem that's happening, which is, you know, the price of oil going up, the strait being closed, whatever the case may be, right?

[00:13:17] So is there a point at which you expect, and this is pure speculation probably, but a point, point at which you're expecting the con-consumer confidence to take a hit from the sort of macroeconomic trend?

[00:13:33] Steve: Right. That would probably happen when it starts permanently affecting people's bank accounts. So you can kind of sustain a few different month-- a few months of increased spending and probably not suffer as much from that. But if that persists for a particularly long period of time, then that's going to be more challenging for consumers to find a way to make that work.

[00:13:56] And we're going through a particular-- a, a season where people have Mother's Day, graduation, Memorial Day, and Father's Day. And then we do have Prime Days coming up in ear- in late June and 4th of July. So we have a lot of different holidays kind of coming up, marketing moments that can kind of keep things rolling for a while.

[00:14:16] But if these increased cost of goods and increased cost that the consumers have to bear outside of what they would purchase on D2C, then that might be an issue that kind of rears its head in a couple months, really.

[00:14:29] Richard: Yeah. So, I mean, then maybe the summary of the story here is that we're looking at, we're looking at an improved Memorial Day, Father's Day, graduation season year over year. But the hit that we're sort of expecting, the kind of... Not dive, let's say. Let's, let's be optimistic. Let's say it's not a dive, but let's say a decrease in consumer confidence and therefore a decrease in performance is probably coming down the pike in a couple of months when those sort of ripple effects start to hit people's bank accounts.

[00:14:57] So something to keep in mind. Yeah, I think we'll-- we can leave it there. Any other thoughts you wanna share, Steve?

[00:15:02] Steve: Yeah. A-and that's also assuming that the situation per- persists.

[00:15:06] Richard: Right. Right. Of course.

[00:15:07] Steve: I, I think a lot of people and a lot of consumers might be hopeful that things look better. The stock market certainly is not horrendous at this particular time. And that kind of can be a decent reflection of consumers' confidence.

[00:15:20] Richard: Yeah. Cool. All right. Well, we'll leave it there. Folks, if you're interested in more of this you can go to comscore.com and click Subscriptions, and you'll be able to find the D2C index there. You can subscribe to that. We have both a weekly and a monthly version which contain all of Steve's insight into our data set and kind of what we think is happening in the world of e-commerce.

[00:15:38] So I think that'll do it for us. Thanks for joining us, Steve, and everybody else. We'll see you next time. Take care.