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Shop Talk is our monthly newsletter that provides commentary on major themes emerging from Insights' monthly dashboards. This month, we turn our attention to the Apparel category…

Spending trends from the Apparel category: Clothing, Sports & Outdoor and Footwear

By

Simon Anderssen

The apparel market encompasses a wide range of products and caters to various customer preferences. While some retailers specialize in specific product categories, others offer a diverse range of clothing options for all demographics. For example, Markham focuses exclusively on menswear, whereas Mr Price operates as an own-label department store, offering formal and casual apparel for women, men, and children. Additionally, related categories such as footwear, accessories, beauty, and homeware are also prevalent in the market. And in today's landscape, nearly every ‘clothing’ store will also sell you a smartphone.To enhance the dataset of actual consumer transactions, Insights has refined the categorization of spending within the Apparel category. We have introduced three sub-categories for spending: Clothing, Sports & Outdoor, and Footwear. This allows for a more detailed analysis of spending patterns across the 165 individual retailers that comprise the Apparel category.The chart below displays the composition of the Apparel category. The majority of spending is attributed to the Clothing sub-category, which includes major retailers and department stores such as Mr Price, Edgars, Ackermans, Markhams, and others.

For analytical purposes, we have grouped retailers like Sportsmans' Warehouse and Decathlon, along with standalone stores of major sports brands like Nike and Adidas, into the Sports & Outdoor sub-category. This grouping proves valuable in our analysis, and the chart demonstrates that the contribution from the Sports & Outdoor sub-category increases with higher incomes.

Finally, the Footwear sub-category, while relatively small in size, distinguishes retailers primarily focused on selling shoes, such as sportscene, Tekkie Town, and Crocs, from other categories within the apparel market. Spending at specialist Footwear retailers consistently represents a notable share of total apparel spending across different income brackets.

Sales growth is the most important driver of corporate value* and Insights’ estimate of users’ clothing spending offers clients an early indicator of near-term category growth. Moreover, this estimation helps identify retailers that are either outperforming or underperforming.

Over the past five years, the 22seven growth index has exhibited a strong correlation (around 77%) with the monthly growth in StatsSA's Textile, Clothing, and Footwear Retail Sales Index. This correlation underscores the increasing reliability of the 22seven growth index as a valuable metric.

Based on Insights' initial estimate for June, apparel spending is expected to experience a modest decline, indicating a continuation of the consumer challenges highlighted in previous Shop Talks.

In the context of a weakened market, the following chart highlights the retailers that have gained or lost the most market share among 22seven users over three and twelve months.

Among 22seven users, Shein remains the fastest-growing apparel retailer. We recently published a comprehensive analysis of how 22seven users make their first purchase from za.shein.com, including the retailers they engage with during the lead-up and those they reject. Further details can be found in our publication.

PnP Clothing has demonstrated a strong performance over the past year, with significant gains achieved in the last quarter. Similarly, we emphasize that Ackermans has experienced the largest increase in market share in the last quarter, aligning its overall performance with the market over the past year.

Although Superbalist has observed a decline in market share over the last twelve months, its performance in the near term has remained above-market. Conversely, Mr Price continues to lose market share among 22seven users.

* Mauboussin & Callahan: The Base Rate Book, Credit Suisse, pg 4

Investment analysts are likely well-acquainted with the DuPont analysis, a powerful tool that dissects return on equity (ROE) into three vital components: profit margin, asset turnover, and financial leverage.

Typically, applying such an approach to analyzing market share proves challenging.

However, equipped with transaction data from 22seven users, Insights seeks to emulate this approach to deconstruct the driving forces behind changes in market share. This decomposition process focuses on three key elements:

1.     Customers: Examining whether there is an increase or decrease in the number of customers transacting.

2.     Frequency: Assessing whether customers are shopping more or less often compared to previous periods.

3.     Average Transaction Value: Analyzing whether customers are spending more or less per transaction.

The accompanying chart illustrates each of these factors for a selection of major apparel retailers, specifically for 22seven users earning between R15,000 and R25,000 per month. The purpose is to decompose the change in market share between the first quarter (1Q23) and the second quarter (2Q23).

Through this analysis, it becomes evident that attracting customers is the most significant driver of market share growth. All retailers that gained market share in 2Q23 were successful in attracting more customers compared to 1Q23. Conversely, retailers that experienced a decline in market share attracted fewer shoppers.

While Frequency and Average Transaction Value occasionally contribute incremental improvements in market share, a consistent trend is not clearly discernible from the data.

Our data suggests that the weak state of the consumer market has worked in favour of PnP Clothing and Ackermans over the past quarter, as they have managed to maintain or grow their market share despite the challenging conditions.

Recent media articles indicating that TFG's newly launched online marketplace, bash, has outperformed its established competitor Superbalist in terms of online traffic serve as encouraging signs for TFG shareholders. However, since bash is consolidating traffic from other TFG brands, like sportscene.com and Markham.co.za, establishing the extent of net traffic growth is more difficult than these reports suggest. And traffic doesn’t always translate into sales.

Investigating this issue further, Insights’ identified significant growth in bash transactions during June. Notably, bash ranked either first or second, based on the value of spend, among the 17 TFG brands that Insights monitors across seven income brackets.Differentiating between existing TFG online domains and bash.com, Insights estimates a net 10% increase in transactions between May and June. As the chart demonstrates, bash.com transaction volumes increased c3.4x between May and June, but mostly reflect redirected payments from existing domains.

For context, 22seven users recorded a comparable number of transactions on za.Shein.com in June 2023 as they did on bash.com, however the value spent on Shein was 75% higher.If you haven't already, read this report on Shein. We think you'll learn something new.

That’s it for this month. There are many more insights available from our spending dashboards. Please set up a time to discuss these in more detail to ensure you get the most from this unique data set. 

If you want to know more about data-driven consumer trends in South Africa, sign up for Nugget, our bi-weekly newsletter. You can also follow Insights on LinkedIn and Twitter.

The 22seven Insights spending dashboards offer investors and retailers a detailed, real-time view of the aggregated spending decisions of more than 50,000 actual consumers across South Africa. 

Insights tracks spending across seven major categories such as Food, Apparel, and Home. Every major category is further segmented into sub-categories, and a specific dashboard is available for each one. We have updated and expanded the dashboards and we’ll continue to do so over the next few months. 

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. 

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