The Supply Side: Retailers, suppliers hope for strong back-to-school season

The start of the new school year is still a few weeks away. But with half of summer break already gone, retailers from Apple to Walmart have been busy announcing back-to-school promotions they hope will draw in early shoppers.

Research from Deloitte found consumers who begin their shopping early will spend 20% more than those who wait, which is why retailers were actively pushing back-to-school in early July, weeks before school begins again.

The National Retail Federation (NRF) estimates retailers will rake in more than $82.8 billion from sales relating to K-12 and college. While that’s a big number, it’s slightly lower than the $83.6 billion spent a year ago.

Families with children in primary and secondary school are expected to spend an average of $684.79 on back-to-school items, for a total of $27.5 billion. That’s down 6% from a year ago. The household spend for kids in college is expected to average $942.17, for a total of $55.3 billion, which is a record according to the NRF.

COMPETITIVE PUSH
Consumers are starting to shop earlier this year as retailers have already set up signage, stocked stores and introduced assistance for families who want to order online. Walmart recently announced a suite of new online tools for parents and students that allow families to access school supply lists easily online via the mobile app. Once the list is accessed, shoppers can quickly locate the items in the store by aisle or make the purchase online. It’s the second year Walmart has had a dedicated online destination called “School Supplies Lists” for parents to access. New this year at Walmart is a function that allows consumers to purchase directly from the list.

“Walmart has always been known for our low prices, but giving parents time back is also valuable currency when they’re deciding where to shop for all their back-to-school needs,” said Walmart Vice President Scott Bayles, dubbed by the retailer the “Dean of Back-to-Class.”

“With more convenient ways to shop than ever before, thousands of in-store events and some really cool, new items at unbelievable prices, Walmart has everything customers need to start the school year off with confidence, style and ease.”

Target has a similar feature for its customers this year that allows online shoppers to access the school supply list by ZIP code, then purchase the complete list in one transaction. Office Depot, Staples and Barnes & Noble are also ramping up efforts to sell more back-to-school items this year with promotions underway.

Analysts expect the season to be highly competitive on pricing and say that will likely eat into margins for suppliers. Electronics suppliers like Apple, Dell or Samsung are aware of the challenges as consumers are no longer annually replacing or upgrading their mobile phone, laptops or tablets.

Mark Mathews, vice president of research at NRF, said part of the reason back-to-school spending may be down this year relates to proliferation of electronics among families today.

“Items like laptops, tablets and smartphones are now an everyday part of household life and aren’t necessarily a purchase parents save for the start of the school year, resulting in the slight decrease in spending for this category,” Mathews said.

The average spend on electronics this year per K-12 household is $187, less than the $376 expected to be spent on clothing and shoes, according to the NRF survey. School supplies, such as notebooks, pencils, backpacks and lunchboxes, are expected to total $122 per household.

BACK TO COLLEGE
The back-to-college spend on electronics is expected to average $229, which is more than the $153 planned spend on apparel or $102 on shoes. Because the overall spend of back-to-college households is greater, retailers like Walmart have been eager to win a greater share.

Walmart recently rolled out a new website for home goods that allows customers to shop online by style, then simply “buy the room” if they find the look they want. Walmart said it’s also featuring nine curated collections that include the 20 most sought-after items by college students.

Target is also a popular destination for shoppers looking to spruce up their college dorm. The retailer has a dedicated website that features dorm decorating ideas and a 15% price discount on many items in the collection. Target also advocates ordering online and picking up at the nearest Target store to their college campus.

“College shoppers are prioritizing and increasing their spending budgets in essential categories including clothing, furnishings and shoes,” Mathews said. “However, categories such as personal care items, gift cards and food saw a dip this year. Although consumers will still spend on these categories, they may plan to make purchases as needed throughout the school year rather than stocking up for the entire semester.”

BRICK & MORTAR STRONGHOLD
The NRF survey found many consumers will search for the best deals by shopping multiple stores to complete their purchases. A separate survey by Deloitte LLP found similar spending plans per household with the majority of purchases being made in brick-and-mortar stores and just 23% online. Deloitte said there’s about $5.5 billion up for grabs between online and brick-and-mortar stores from those respondents who have yet to decide where to make their purchases.

“The amount people plan to spend and tendency to shop in physical stores for back-to-school are consistent with last year, but retailers need to act fast for that $5.5 billion wild card,” said Rod Sides, vice chairman of Deloitte. “In just one year, previously undecided dollars have shifted dramatically by product category. For example, in 2017, 30% of people said they hadn’t decided if they would purchase computers online or in-store, and that number shrunk to 20% this year, most of it going online. In electronics, undecided spending dropped 10 percentage points, moving primarily into the stores.”

Back-to-school shopping is expected to peak during late July and early August. Deloitte said while mass retailers like Walmart and Target are expected to be shopped heavily this season, it reported off-price retailers have moved up the ranks to the fourth most-shopped formats. Deloitte said this comes at the expense of department stores and electronics retailers.
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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.