This article appeared in the Retail TouchPoints. Read it in full here.
As with many other retail sales “seasons,” formerly hard-and-fast dates about when back-to-school (BTS) selling starts — and perhaps more importantly, when it stops — have become more nebulous in recent years. BTS purchases certainly are starting earlier: according to the National Retail Federation (NRF) survey conducted by Prosper Insights & Analytics, more than half (55%) of consumers already had started buying school items in July.
Among the 86% of consumers that still had shopping to do, 45% said they were waiting for the best deals to complete their BTS purchases, and that search for bargains is another key headline this year. The NRF projects that families with children in elementary and high school will spend an average of $874.68 on clothing, shoes, school supplies and electronics this year, down slightly from the $890.07 they spent in 2023. However, that 2023 figure represented a record high, so perhaps a decline this year was inevitable. Total BTS spending is forecast to reach $38.8 billion, down from the equally record-setting $41.5 billion spent last year.
“With so many things happening over the last two years — the pandemic, political pressures, social justice protests, geopolitical and supply chain challenges — everyone stayed at a perfect moderate level of anxiety,” said Ericka McCoy, Chief Marketing Officer at analyst firm Resonate in an interview with Retail TouchPoints. “Now we’re finally starting to see people react with [spending] behavior. That’s putting pressure on brand loyalty, as people switch to lower-cost channels and different brands. Among consumers, while there are a significant number saying they will spend the same [as last year], there’s a big number saying they will be spending less.”
“Customers are changing where they shop, increasingly choosing discount stores and comparing prices online compared to previous seasons,” said Peter Ramer, Consumer Products Senior Analyst at RSM U.S. in an interview with Retail TouchPoints. “Buyers across income levels are choosing to trade down, purchasing less expensive store brands and online options. Additionally, shoppers are continuing to buy even after school has started to save on markdown items and stretch their budgets further. Retailers should plan for an extended back-to-school season.”
Consumers also are allocating more of their BTS budget to apparel and school supplies rather than pricey electronics, although belt-tightening is likely influencing decisions in multiple product categories. “Households feeling those economic pressures may be asking, ‘Can we get another year out of that backpack or lunchbox?’,” said Michael Clayton, Senior Professorial Lecturer at the American University’s Kogod School of Business in an interview with Retail TouchPoints. “If [consumers] see [a BTS item] as more of a ‘want’ than a ‘need,’ that would put more pressure on retailers.”
Some retailers are seeking to get around price sensitivity by amping up the convenience factor. “Top online retailers this year utilized data to drive sales and a more convenient shopping experience, by allowing customers to supply a school name and grade and then presenting that year’s school supply list and an ‘Add all to cart’ button,” said Ramer. Buying these pre-set “kits” online simplifies school shopping for those parents who are willing to spend more for this added level of convenience, noted Clayton.
Longer BTS Season Makes Markdown Cadence Critical
The extension of the BTS season to well after the first day of classes, particularly at the college and university level, comes in part from parents (and sometimes the students themselves) taking advantage of the convenience of fast, low-cost delivery. “Traditionally, your parents loaded up the car and dropped you off at the beginning of the [college] school year with everything you would need” throughout the year, said Clayton. In contrast, today’s students are finding that they can take some time to purchase non-learning items like furniture and other home/dorm goods.
McCoy noted that the rise of DTC retailers like Dormify and the wealth of dorm transformation videos on platforms like TikTok have not only changed the dorm room aesthetic but also extended the time period for furnishing campus living spaces. “Dormify, and the retailers trying to keep up with them like Kirkland’s, have completely transformed the way that college dorm rooms are viewed,” she said. “The ability to order items and have them shipped has transformed how people think about their dorm rooms. They’re buying couches, rugs, drapes, TVs — things you wouldn’t normally have bought for a dorm room previously.”
The “stretched” BTS season will have its biggest impact as retailers “decide how to move that unsold inventory at the end of the season,” said Clayton. “Because there’s no ‘official’ cutoff date with BTS as there are with holidays, some retailers are champing at the bit for the Halloween merchandise that will come in as soon as they’re done with BTS. It will come down to how they decide to do promotional pricing to liquidate some of that merchandise. Some want to get [BTS merchandise] out as quickly as possible; others will be trying to [clear the merchandise] with just 10% to 20% discounts.”
Does BTS Contraction Signal Holiday Season Softness?
If a significant percentage of consumers are choosing lower-cost options during BTS, a season with more “required” purchases — after all, they’re called school supplies, not school nice-to-haves — does that spell weakness for the all-important 2024 holiday season? Not necessarily, although retailers should carefully analyze BTS metrics to help determine optimal strategies for Q4.
“Ahead of the holiday season, retailers are increasing their inventory levels to buffer against the risk of having goods arrive too late,” said RSM’s Ramer. “Back-to-school shopping volume will be a key indicator informing customer demand later this year. And as innovative AI-enabled products such as laptops and other electronic devices increase, retailers should pay attention to which features are attracting the attention of buyers.”
Ramer also advised retailers to add buy now, pay later options if they haven’t already done so: “Retailers that upgrade their systems to provide cash-strapped customers with the ability to pay [over time] will increase their sales,” he said.
Overall, however, Ramer is cautiously optimistic about holiday 2024: “Even as economic uncertainty and decreased savings are cooling their purchasing appetite, consumers are still willing to spend, albeit with more discretion,” he said. “With Federal Reserve Chair Jerome Powell indicating interest rate cuts are ahead, this is a driver for larger purchases this upcoming holiday season.”
