Tariffs, Sentiment & Spending: What the Data Says About Q2

[00:00:00] Richard Gaffin: Hey everyone, Richard here. On this week's episode, we'll be talking about what our dataset says about the impact of macroeconomic forces on ecommerce. Of course, that's timely because late last week, our industry got rocked with a substantial increase to cost of goods, so in order to serve our customers better, we're excited to announce our new tariff relief program.

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Welcome to The Ecommerce Playbook Podcast. I'm your host, Richard Gaffin, Director of Digital Product Strategy here at Common Thread Collective.

And I'm joined today by a special guest. We haven't had him on the pod, or at least I haven't been with him on a pod in a little while. It's Steve Rekuc, our Director of Data here at Common Thread Collective. Steve, what's going on, man?

[00:01:47] Steve Rekuc: Yeah, thanks Richard. Good to be back. I know I'm used to like being next to like Den and Jeremiah and Taylor on the pod, on the D-T-C-C-I yeah, happy to be back on with you man.

[00:01:58] Richard Gaffin: Yeah, dude. And so I should, I should mention, because everybody's gonna notice in the video, like your hair is looking glorious right now. Kiss by the kiss by the Utah sun. Is that what I'm seeing?

[00:02:07] Steve Rekuc: yeah, a little bit of that and a lot of native shampoo and conditioner.

[00:02:11] Richard Gaffin: Yeah, that's right. Check it out, folks. It's all natural. All right, so what we wanna talk about today is, is we kind of, oh yeah, okay. How's this? Okay. Check, check, check, check, check, check. Perfect. Cool. Alright, so what we wanted to talk, or what we wanted to bring into the kind of the main pod feed this week is just some discussion of macroeconomic data, or at least the specific types of data that we gather for our data products.

The D two C index. So we have a monthly of course, and a weekly newsletter for both. And I believe in the weekly newsletter. Last week we discussed a little bit. How sort of abysmal consumer sentiment has been recently. And so what I wanted to bring Steve on to talk about today is a little bit about exactly what the implications of that are for the ecommerce for the broader ecommerce industry, but then also, obviously the word on everybody's lips right now is tariffs. This is not necessarily gonna be a discussion that completely lays bare what we think is gonna happen because of those. I think that's a little obscured, almost everybody involved with these tariffs. But what we wanna talk about is how consumers are reacting in terms of their overall economic sentiment to those tariffs.

So Steve, why don't you paint us a picture of what the current state of consumer confidence is right now.

[00:03:31] Steve Rekuc: Yeah, so this is from data that we collect in collaboration with no Commerce. They do a post-purchase consumer survey. We're taking a look at this data and we've done this for two years now. Started in March of 2023. We turned this on right at the same time that Silicon Valley Bank was kind of going belly up.

[00:03:47] Richard Gaffin: It's all right.

[00:03:47] Steve Rekuc: And having their serious crisis. So, we turned on the data at that point in time, started collecting data from a number of different brands and get around. We started around 500 responses a week, and I think we're probably significantly over a thousand responses per week. And these are actual consumers that are responding to this post. post purchase on the survey with no commerce. So it's great data to have. It's actually people that are purchasing online, so it's a great slice of the demographic of, of people. And what we're looking at is in this data, we're looking at economic sentiment. What do you think about the economy in the future? What do you think about do you plan to purchase more or less in the next three months, your future purchase sentiment? And we're also looking at present purchase sentiment. Did you purchase more in this month, more or less in this month than normal? As well as there's one other couple other questions we ask as well.

Do you prefer having money in the bank? Or do you prefer? Do you enjoy spending your money? That's another key question that we'll bring up. So we, we've seen a lot of go on in Q1. Some record numbers both on the, particularly on the low level and a little bit on the high level. And I could walk through those from the beginning of Q1. If you're good with that.

[00:05:01] Richard Gaffin: Yeah, let's do it. Let's jump right in.

[00:05:03] Steve Rekuc: so starting out in the beginning of Q1, after having a pretty hot holiday season, we actually saw the record low number of people saying, I intend to spend more in the FU in the next three months. That is a record low future purchase sentiment that we saw kind of as a lead into Q1. Q one's beginning, we have a number of people saying, I'm looking to save. And I think that's kind of, out over the next three months that that came to pass After that.

[00:05:33] Richard Gaffin: Yeah. And so you were saying that real quick, that that was, so we saw record lows in both of those sort of metrics I guess. But that record Low has, or we've set, since that first one was set, we've set two new record lows, right. In terms of at least a couple of those those parts of the rubric. So maybe explain kind of what's been happening there over the course of the quarter.

[00:05:52] Steve Rekuc: definitely. So, yes, we also set two other record lows throughout the quarter. One of them was so future purchase sentiment, hidden all time low, the beginning of the quarter, first week. A couple weeks later, the week of January 27th, we sent a record low for people identifying, saying that they the feeling of saving money in the bank

[00:06:14] Richard Gaffin: Hm.

[00:06:15] Steve Rekuc: their money. and that's kind of an important question. We gauge to see how open people are to purchasing items frankly, or whether they're looking to pull back and save. And this hit a record low the week of January 27th, and it was like. On the net score, they're looking at like around 43% of peop of net people saying, I prefer saving to spending. that's pretty high. That's a lot of consumers saying that they'd much rather have money in the bank than actually spend money on, eCommerce.

[00:06:50] Richard Gaffin: Right, so, so talk to me then about the correlation between. The correlation you're seeing between sentiment and actual behavior. So one way to contextualize this is that a couple of years ago at least, there were, there was a couple moments when consumer sentiment was really, really in the gutter.

It was really, really doing poorly, but actual performance didn't seem to be hurt by it. In other words, people were spending, even though they felt bad about the state of the economy. So I think the question then should be is like, is this one of those cases or is there actual behavioral shifts that we're seeing that come alongside some of these shifts in sentiment?

[00:07:20] Steve Rekuc: Yeah, so I think previously we, we saw far more economic sentiment be negative.

[00:07:27] Richard Gaffin: Mm.

[00:07:27] Steve Rekuc: actually in Q1 we saw a really positive impact a positive net score of people saying that they thought the economy would be better in the

[00:07:35] Richard Gaffin: Mm-hmm.

[00:07:36] Steve Rekuc: So it's really the other metrics that like, so economic sentiment is one component of what we look at.

[00:07:42] Richard Gaffin: Mm-hmm.

[00:07:43] Steve Rekuc: in the past that had done poor previously and we, we kind of looked at that as like, oh man, we can't wait for that to be better in the future. But it's really a lot of the other metrics also matter, the future purchase sentiment. We saw that record low in spender versus Saver. And then now we've also seen the week of February 20th. The week of February 17th, we saw a record low of people saying they purchased more more this month rather than less.

[00:08:08] Richard Gaffin: Gotcha.

[00:08:08] Steve Rekuc: yeah, there's a number of different things, a number of components of that, that have played out this quarter. And we saw a rough quarter in terms of, total revenue and particularly on the new customer side. we were down I think less than a percent if you just look at total revenue for all of our brands. But hurt more on the new customer side. We were, where we were seeing minus four and a half sorry, 4.63%, year over year. So for Q1 25 versus 24, like it didn't play out well on the new customer side.

A lot of our brands were stronger on the returning customer side. Around 4.3% gain in revenue on the returning customer side. But that of comes with building a larger customer base and maturing as a brand

[00:08:57] Richard Gaffin: Mm-hmm. Right. That makes sense.

[00:08:59] Steve Rekuc: yeah.

[00:09:00] Richard Gaffin: So I, so I was gonna say, just to summarize, make sure I'm understanding correctly despite the fact that, at least at the be at the beginning of the year, economic sentiment was high, meaning that people were. If not bullish on the economy, they seem to be pleased about how they were doing specifically right.

But sentiment around future purchase was at an all time low and has sort of continued that way. Right? And that's kind of come in concert with a, a drop in performance, particularly on new customer acquisition. So am I summarizing that more or less correctly?

[00:09:30] Steve Rekuc: it. Yes,

[00:09:31] Richard Gaffin: Excellent.

[00:09:31] Steve Rekuc: thought they were great on the economy. But their sentiment relative to that was, well, the economy's gonna be great in the future. Let me hold onto my money and wait for that better economic time.

[00:09:41] Richard Gaffin: Gotcha. I see what you're saying. Okay, cool. So then I think like really the question that's on my mind that is probably on everybody's is, is about ramification. So given what, maybe given the sort of like correlation between the D two CC, I like our consumer confidence index that we've built and actual performance, where do you see the next quarter heading?

Given what's happening in this one.

[00:10:03] Steve Rekuc: I normally kind of try to take a little bit shorter stance and look like a

[00:10:07] Richard Gaffin: Sure.

[00:10:07] Steve Rekuc: a time. So what I had kind of projected in April. And published out was like A-D-T-C-C-I of like 95.7, I believe,

[00:10:16] Richard Gaffin: Okay.

[00:10:17] Steve Rekuc: that would correlate to a MER being about 95.7% of,

[00:10:21] Richard Gaffin: Yeah.

[00:10:22] Steve Rekuc: of normal

[00:10:23] Richard Gaffin: Quickly. Why, why don't you explain real quick what goes into that number? So if the D to CI, which is the direct to Consumer Confidence index if that number's at 95.7, what, what does that mean? What goes into that?

[00:10:33] Steve Rekuc: Sure. So I'm taking all these sta that we get from the survey that we do with no commerce,

[00:10:37] Richard Gaffin: Mm-hmm.

[00:10:38] Steve Rekuc: is the economic sentiment.

[00:10:40] Richard Gaffin: Right.

[00:10:41] Steve Rekuc: present purchase savers, spenders, taking stock market data taking our own data from that we have in stats all the different brands that

[00:10:49] Richard Gaffin: Right.

[00:10:50] Steve Rekuc: and correlating that to overall performance.

So how A MER has looked over the previous quarter or all the previous months since this. The survey began, so the

[00:11:00] Richard Gaffin: Right.

[00:11:01] Steve Rekuc: years, basically of a MER data then seeing if I can predict what a MER in the next month will be. And that essentially is the D-T-C-C-I.

[00:11:10] Richard Gaffin: Gotcha.

[00:11:10] Steve Rekuc: Yep.

[00:11:11] Richard Gaffin: So given that, yeah, so what do you think next month is gonna look like then?

[00:11:14] Steve Rekuc: so it does look around 95.7%. That means relative to previous years. Hold up. I'm gonna turn that. Sorry about the notification, Richard.

[00:11:24] Richard Gaffin: All good.

[00:11:25] Steve Rekuc: Okay, there we go. That means D-T-C-C-I of 95.7 means that in the future month in April, we expect it to come around 95% of normal. Now a lot of this happened prior to tariffs going into place, which didn't happen till April. And the stock market kind of crashing because of that.

[00:11:46] Richard Gaffin: Mm-hmm.

[00:11:47] Steve Rekuc: we're gonna be keeping a much closer eye to see what happens with the consumer confidence and that performance. In the future, think it's gonna be my prediction might be on the high side with that 95.7, which is still not a great score.

[00:12:03] Richard Gaffin: Yeah.

[00:12:04] Steve Rekuc: want to be above a hundred,

[00:12:06] Richard Gaffin: Right. So, so, so explain then how that works. So in terms of, so I'm just, I don't want this episode to necessarily be, Richard gets the numbers explained to him, but I think it is probably important to clarify here. So if it comes in at 95.7%, so you're saying that like that. That means there's going to be a shrinkage months over month, over month of 5%.

Like it's not going to. So if, if A MER was exactly the same month over month, that would be a hundred. If it was a little less, it'd be 95. It was a little more, it'd be 1 0 5. Or is there some other, like how exactly is that measuring the kind of fluctuation of, of A MER specifically?

[00:12:40] Steve Rekuc: Yeah, so it is looking relative to overall average over the last two years of A MER. So

[00:12:48] Richard Gaffin: I see.

[00:12:48] Steve Rekuc: if A MER hit average, it would be a hundred.

[00:12:52] Richard Gaffin: Right?

[00:12:52] Steve Rekuc: if we maintain the average A MER that we've seen

[00:12:56] Richard Gaffin: Yes. Okay.

[00:12:58] Steve Rekuc: we would be at a hundred. The last month was around 95. I think it was 95.8

[00:13:04] Richard Gaffin: Mm-hmm.

[00:13:05] Steve Rekuc: I reported at. so, we'll, probably original prediction was to remain around that same level. obviously we have tariffs now. And a significant decline in the stock market, which affects a lot of people's assets and has them probably pull back further. I'm going to be looking at data from No Commerce

[00:13:27] Richard Gaffin: Mm-hmm.

[00:13:29] Steve Rekuc: That would be Tuesday the eighth publishing that on Wednesday or so. We'll probably put that out in the D two C index newsletter that we normally publish and

[00:13:38] Richard Gaffin: Right,

[00:13:39] Steve Rekuc: any update because clearly like a massive event like tariffs and stock market implications of that are gonna affect people's confidence.

[00:13:47] Richard Gaffin: right. But long story short, then it's that what we're predicting is a, is a shrinkage in A MER over the following month. Presumably if nothing really changes, that could continue on for the next couple of months. So. So really like the overall message here is continue to tighten the belt 'cause things are gonna get harder or like what, how would you summarize that?

[00:14:06] Steve Rekuc: Yeah, I, I mean, I, it certainly what it looked like prior to tariffs being in place was that it was going to be just as challenging as it had been in Q1.

[00:14:16] Richard Gaffin: Mm-hmm.

[00:14:17] Steve Rekuc: Q1 was not great. It didn't look fantastic from any of the like, overall ecommerce metrics that I was looking at, and I don't think that's going, that wasn't going to improve. And tariffs now will probably not help that.

[00:14:32] Richard Gaffin: Gotcha. That makes sense. Okay, cool. So I mean, without I, I think that there's, there's definitely a tendency, especially when just looking at the data to sound the alarm bells, but is there any particular signs of hope that you're seeing? In within the D two C Index, within the Consumer Confidence Index, any of your data sets that show something to be hopeful about,

[00:14:53] Steve Rekuc: Yeah, so all those metrics, at least. I saw bottom out earlier in the year. they were like the future spending sentiment

[00:15:04] Richard Gaffin: right.

[00:15:04] Steve Rekuc: out the first week of the year saying, I will spend less in the, the first three months, the bottom out of, and has since risen. It's not as high as last year, but it's since improved. likewise. Same on the saver versus spender. That bottomed out, you know, I believe I said the week of, yeah, January 27th.

[00:15:24] Richard Gaffin: Mm-hmm.

[00:15:24] Steve Rekuc: that bottomed out that week and has since kind of steadily with a little bit of fluctuation has improved since. So we've seen those, if those are leading metrics for what people are feeling about how their spending will go in the future, we've seen the bottom happen for those metrics already.

[00:15:42] Richard Gaffin: Gotcha.

[00:15:43] Steve Rekuc: You know,

[00:15:43] Richard Gaffin: Yeah. All right. F fingers crossed.

[00:15:44] Steve Rekuc: Fingers

[00:15:45] Richard Gaffin: like at, at least what it's pointing towards is that there is potential for that, that level of consumer sentiment to come up over the next little while. Gotcha. That makes sense.

[00:15:53] Steve Rekuc: That

[00:15:54] Richard Gaffin: Cool.

[00:15:54] Steve Rekuc: sentiment has come up in those metrics,

[00:15:57] Richard Gaffin: I.

[00:15:57] Steve Rekuc: good. That's great to see that the future purchase, present purchase sentiment, as well as spender versus saver have all improved since their lows earlier in Q1.

[00:16:06] Richard Gaffin: Gotcha. That makes sense. Cool. Well, I was gonna say since, since we have you here, anything else in the data set doesn't necessarily have to be consumer related. Anything else interesting happen happening right now? It could be on Facebook, could be on Google.

[00:16:19] Steve Rekuc: Yeah,

[00:16:19] Richard Gaffin: that we should know about

[00:16:20] Steve Rekuc: I think we saw a significant flip in Facebook data,

[00:16:24] Richard Gaffin: right.

[00:16:25] Steve Rekuc: That was kind of impressive that where we saw much, we saw higher CPMs, but much higher click through rate. Then a lower conversion rate. And that was significant all throughout this quarter. It, it seemed like it had been pretty sustained throughout the quarter.

I'm going to dig back a little bit further and see where I could see that flip.

[00:16:46] Richard Gaffin: Mm-hmm.

[00:16:47] Steve Rekuc: of would anticipate that would've happened in December when they rolled out Andromeda.

[00:16:51] Richard Gaffin: Right.

[00:16:53] Steve Rekuc: but that's something I'm gonna need to dig to see if that those metrics changed in that December timeframe.

[00:16:59] Richard Gaffin: Gotcha. But by the way, there's, there's some signals of the dataset that Andromeda is indeed having some kind of effect on, on Facebook performance, right.

[00:17:06] Steve Rekuc: for for sure that, I mean, that had significant changes throughout the, the entire quarter. It was noticeable that and we saw it across multiple brands where the, we were seeing that higher CPMs, but higher. click-through rate and then lower conversion. Now the lower conversion might be tied to the consumer confidence.

[00:17:26] Richard Gaffin: Right.

[00:17:26] Steve Rekuc: essentially higher click-through rate and lower conversion would be kind of more window shopping where people are looking but not actually purchasing.

[00:17:33] Richard Gaffin: Gotcha. Interesting. Cool. Well, so I, I think unless there's anything else you wanna hit Steve or anything else popping out or that pops out at you from the data set I just wanted to quick, quickly say that obviously I. With kind of the rollout of these tariffs, the current sort of overall macroeconomic picture.

There's a lot of uncertainty right now, so. I will up top, you will probably have heard me kind of give a little spiel about our tariff relief program. But we are gonna be offering a little bit of, so for those who wanna become CTC clients, offering a little bit of relief there specific to things like cutting costs.

So we'll have more information about that. Obviously that would all have been up top SEL in the show notes. If you want to check out the D two CI, which is the direct to Consumer Confidence index, we will have a link there as well. That's play where you can keep track of what Steve is putting together as far as predicting performance in upcoming months.

If you'd like to check out the monthly or weekly D two C index, we will also have. Links there as well. With both of those, you can track both sort of, monthly fluctuations in data and observations, and then also weekly fluctuations in data drawn from our proprietary data set. So go ahead and check those out.

Steve does great work. Subscribe to the data newsletter if you haven't already. It comes out weekly or biweekly depending on what ha Steve has in terms of his observations, but that's a great way to get some of these insights as well. All right, folks. Well, I think that'll wrap it up for us for this week.

But until next time, take care. Thanks for joining us, Steve, and we will see y'all next week.

[00:18:59] Steve Rekuc: Thank you, Richard. Pleasure.