The Supply Side: Families prepare to spend more on back-to-school

by Kim Souza ([email protected]) 505 views 

Inflation is taking a toll on family budgets just as the back-to-school shopping season gets underway. The National Retail Federation reports that 38% of families admit having to cut back in other areas to cover the costs of back-to-school needs.

The retail trade group estimates consumers will spend $37 billion on back-to-school items this year. Families with children in K-12 grades plan to dole out an average of $864 this year on school items. Back-to-school spending suffered amid the pandemic as families changed to virtual and hybrid education models. NRF said back-to-school spending would rise sharply from the pre-pandemic year of 2019 as consumers are expected to spend $168 more on average than in 2019, for a total increase of $11 billion.

“Families consider back-to-school and college items as an essential category, and they are taking whatever steps they can, including cutting back on discretionary spending, shopping sales and buying store- or off-brand items to purchase what they need for the upcoming school year,” NRF CEO Matthew Shay said. “The back-to-school season is among the most significant shopping events for consumers and retailers alike, second only to the winter holiday season.”

The total back-to-college spending is expected to reach a record $74 billion, up from last year’s $71 billion. NRF said more college students and their families plan to shop this year compared to the previous year and anticipate spending an average of $1,199 on college or university items, consistent with last year’s record $1,200.

Since 2019, total expected spending on back-to-college has grown by $19 billion, and consumers are spending $223 more on average than before the pandemic. Nearly half of this increase comes from spending on electronics and dorm or apartment furnishings.

Shay said like in recent holiday seasons, shoppers are starting early to find the best deals and help spread out the costs. In early July, 56% of respondents had started shopping for school and college supplies. The survey found that 68% of respondents said they had seen higher prices on school items. The top areas where consumers noticed higher prices were clothing, accessories, and school supplies.

NRF said 85% of families said they were at least halfway finished with their shopping. The top reasons consumers have not checked items off their list are because they do not know what is needed yet and are waiting for the best deals.

The report said 62% of respondents planned to shop Amazon Prime Day for deals, and another 31% said they would look for online sales at other retailers, while 20% are looking to shop in physical stores.

“We have seen real shifts in how people are shopping and spending on back-to-class items since before the pandemic. As a result, retailers are also shifting by bringing in inventory earlier and extending back-to-class offerings,” said Prosper Insights Executive Vice President of Strategy Phil Rist.

Some retail analysts expect the back-to-school season to be somewhat promotional after Target announced in early July that it planned to offer additional discounts for students and teachers in a prep event that gives educators a 15% discount on school supplies and other products through Sept. 3. The deal is also available through the Target Circle loyalty program that all teachers including homeschool teachers may use, those working at daycare centers and early childhood learning centers, university or college professors, and vocational or trade personnel with valid identification.

“We know the back-to-school season signals an important milestone for millions of families across the country – and we’re here to help by introducing even more ways for guests to save and find everything they need all in one convenient location,” says Jill Sando, the chief merchandising officer at Target. “From supplies and stylish apparel to snacks and the latest electronics, guests can count on Target to make the most of their budgets, with thousands of items under $10.”

Analysts said Target’s promotion comes as the retailer is trying to reduce excess inventory from the previous quarter. Wall Street also expects Walmart and other discounters to woo shoppers with special deals, all while trying to protect their margins.

Another report from Mastercard predicts back-to-school sales between mid-July and Labor Day will grow by 7.5% compared to 2021 and 18.3% compared to 2019. The report said in-store shopping should rise 8.2% compared to last year.

“Back-to-school is the second biggest season for retailers and is often looked at as an early indicator of retail momentum ahead of the traditional holiday season,” Steve Sadove, senior adviser for Mastercard. “While growth is anticipated, retailers will need to find innovative ways to entice shoppers as discretionary spending potentially stretches thin as a result of increasing prices.”

Deloitte’s back-to-school survey found that families will spend more even with a pessimistic economic outlook. Deloitte expects back-to-school spending of $34 billion this year, or about $661 per student from grades K-12. The opening average is up 8% from last year.

The survey found that 36% of families are concerned about making upcoming school-related payments. That’s compounded further by expectations that the economy will weaken in the next six months for 54% of surveyed K-12 parents, up from 28% in 2021. Another 57% said they are concerned about the rising costs of back-to-school items, and 30% said their financial situation is worse this year compared to a year ago.

Deloitte also found that shoppers remain concerned about product availability as many retailers still navigate supply chain challenges. Deloitte also warns that higher costs and lack of inventory could put brand loyalty at risk, as 77% of surveyed shoppers say they will trade brands if prices are too high or if their item is out-of-stock.

“Even as economic and inflationary pressures sit top of mind, parents seem resilient and determined to ensure their children get the school supplies needed to succeed this coming year. Retailers that remain conscious of this determination, while being mindful to address shoppers’ ongoing economic concerns, could earn trust and position themselves strongly,” said Nick Handrinos, U.S. leader of retail and consumer products at Deloitte.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.