Dear
Notice something different? 22seven Insights is now Reveal.
Our name might have changed but we still have access to the same exceptional data. And now, with the support of Next176, an Old Mutual company, we can invest in our team and seek additional data sources to deliver on our commitment of providing clients with independent, differentiated investment research and an inside view of consumer spending.
Why Reveal? The name is rooted in our ambition to uncover information that allows investment analysts to make informed decisions and allows business leaders to know more about their customers and their competitors.
The same team is still at the helm, with access to the same data, but now with the backing and support to grow. We’re excited about what the future holds and we’d love to have you along for the ride.
If you have any questions about what Reveal offers, or any suggestions you’d like to share with us, please get in touch.
Simon Anderssen
Welcome to our newsletter that provides commentary on major themes emerging from the Reveal dashboards. This month, we're having a general look at the market, contrasting our own spending data with reported spending growth from major retailers.
During January, the aggregate spending growth of the consumers we track remained lacklustre. Around the aggregate, however, there was some improvement in spending growth in Retail Pharmacy, Grocery and Eating Out.
Spending in the Home category – predominately General Merchandise, Furniture and Homeware – decreased again after a pick-up in growth towards the end of 2023. Spending growth in the Apparel category lags total market growth, suggesting that it is losing share of total consumer wallet.
USERS’ SPENDING GROWTH BY CATEGORY
We’re on the right track
Over the past few reporting periods, our consumer spending growth estimates for major retailers have shown encouraging correlations with the reported numbers from the companies themselves.
The next charts show reported sales growth alongside our estimated changes in user spending. Starting with listed apparel retailers, there are strong correlations for TFG and Truworths. MRP Apparel’s relationship with the data has deviated recently, coinciding with extreme underperformance in the prior period and alongside major acquisitions. (All numbers shown exclude acquisitions, where it’s possible to keep track.)
Similarly, our tracking of growth for the Shoprite group on a quarterly basis, and its major South African divisions on a semi-annual basis, demonstrates reassuring parity.
It’s clear from these charts that Reveal offers significant value when it comes to signalling changes in spending. Our data is real-time and available well in advance of official company reports. That said, we will continue to improve our methodologies, grow our sample and fine-tune the sophistication of our modelling to deliver reliable leading indicators to clients.
APPAREL RETAIL: REPORTED GROWTH VS REVEAL ESTIMATE
SHOPRITE GROUP: REPORTED GROWTH VS REVEAL ESTIMATE
Note: Time periods vary for each retailer due to availability of reported data.
* Excluding acquired Massmart stores from 2H23 and 1H24
Action in Apparel
TFG and MRP both indicated in their recent updates that their respective gross margins improved in the final quarter of 2023. Although gross margin is determined by multiple inputs, average transaction value (ATV) – the price that customers pay – is an important factor. The following chart shows the annual change in quarterly ATV for four major apparel retailers.
TFG shows sustained growth in this regard, but while absolute growth is an important metric, we suggest that relative performance within a period offers additional context as to the competitive challenges during the period in question. In other words, how a company’s rank changes over time is also an indicator of changes in its performance.
Note Truworths’ bullish ATV growth in 2022. This has waned and its relative rank each quarter has fallen to third.
TFG’s ATV growth has increased and it now leads the group. ATV for the brands within MRP Apparel has also increased significantly compared to its growth in 2022. Relative to the group, it now ranks second.
Ackermans’ ATV growth continues to be negative for the group of users we track and it now meaningfully lags the peer group.
ANNUAL CHANGE IN AVERAGE TRANSACTION VALUE: 4Q23
Giving it a bash
TFG and Truworths both reported ~45% growth in their South African online businesses. Coincidently, both online businesses also accounted for 4.2% of divisional sales at the end of 2023. The size of each division differs, however. We estimate that TFG’s online business, now consolidated under the Bash offering, is ~2.5x larger than Truworths’.
That’s impressive growth, but many of Truworths’ and TFG’s online competitors are unlisted and difficult to track by conventional means. That’s where Reveal’s user data comes in. According to the spending that we track, we estimate that Bash and Shein have grown the fastest of all apparel retailers over the past year. The data also shows that spending at established online competitors like Superbalist and Zando has not kept pace with peers. As we’ve outlined repeatedly in the past, Shein has grown rapidly and is now the largest online apparel merchant in our data.
ANNUAL GROWTH BY ONLINE RETAILER
Digging deeper, we looked at average transaction value across the online retailers. High transaction values are a feature of online shopping and are likely to crowd out in-store purchases.
Reveal’s data shows that Shein achieves the highest online transaction values, followed by Superbalist. Unlike the others, Mr Price doesn’t offer free delivery above a certain spending threshold. These thresholds support higher online transaction values and the absence of such a threshold likely explains Mr Price’s comparatively low ATV.
Bash and Superbalist do offer free delivery for orders above R500. Additionally, the Bash platform also channels TFG account payments and other financial services. The contribution of these payments may explain Bash’s relatively low ATV, compared to Superbalist.
AVERAGE TRANSACTION VALUE: ONLINE APPAREL PURCHASES
Pharmacy retail in rude health
As indicated in the first overall market chart, spending growth at pharmacy retailers has lately increased faster than growth in any other spending category. (We tackled this topic in a recent report, Do the drugs still work?)
Admittedly, our data is more likely representative of front shop and personal care spending (the items that customers pay for directly) than of total spending, which would including dispensary sales that are often paid for by medical aids and other insurers.
Clicks reported another robust result for the 20 weeks to mid-January 2024. Our data suggests that Clicks outperformed direct rival Dis-Chem in ‘customer pays direct’ categories over the last quarter of 2023, although Dis-Chem has since made a decent recovery.
CHANGES IN SPENDING GROWTH: CLICKS VS DIS-CHEM
More research
Reveal Dashboards
Our Dashboards offer investors and retailers a detailed, real-time view of the aggregated spending decisions of actual consumers. Reveal tracks spending across seven major categories such as Grocery, Apparel and Home. Every major category is further segmented into sub-categories, and a specific dashboard is available for each.
The Dashboards provide a market overview that includes changes in market share for each retailer, as well as an estimate of growth in user spending. Users are segmented into six income brackets that allow for detailed tracking. In addition, the dashboards include five years of historic information and other metrics, such as average transaction value and median monthly spend per user.
Disclaimer: This document is solely for information purposes. It does not purport to be comprehensive. Its content may rely on third party sources that have not been independently verified. Some of the information contained in this document may contain projections, opinions or other forward-looking statements about future events or future financial performance. These statements are only predictions and numerous important factors could cause actual events or results to differ materially from those contained in this document. None of Reveal, its affiliates, advisors, directors, officers and/or employees shall be responsible, and disclaim all liability, for any loss, damage (whether direct, indirect, special or consequential) and/or expense of any nature whatsoever, which may be suffered as a result of, or which may be attributable, directly or indirectly, to, the use of, or reliance upon any information contained in this document.
Reveal provides no representation or warranty, express or implied, regarding the accuracy, completeness or correctness of information contained in this document. Reveal shall have no liability for any information contained herein, or for any omissions or errors. Reveal does not assume any obligation to update any forward-looking statements. No information set out or referred to in this document shall form the basis of any contract. No information in this document is investment advice, an investment advertisement or an offer of securities.
This document is protected by copyright. It is the property of Reveal. It may contain information that is confidential and therefore must not be disseminated, reproduced or used in whole or in part without prior written approval from Reveal. Any use must acknowledge Reveal as the source. No part of this document may be transmitted into any jurisdiction which may constitute a violation of relevant local securities laws.
Copyright © 2024
60 Hout Street
Cape Town
South Africa
