“No more pencils, no more books.
No more teacher’s dirty looks.”
– Alice Cooper
This song favored by students is belted out every year at the end of the school year. However, in these strange times, this song may have relevance at the beginning of this school year.
The Back to School season is critically important to the Retail/Consumer sector for two reasons. First, while it lags the Holiday season by a wide margin, Back to School is the second largest spending season of the year, and it has a large lead over the third, fourth and fifth placed spending seasons, which are Mother’s Day, Valentine’s Day and Easter. According to the National Retail Federation (“NRF”), total spending for these seasons in the last year amounted to $730 billion, $81 billion, $27 billion, $27 billion, and $17 billion, respectively. The second reason Back to School results are important is they are seen as a harbinger of things to come for the Holiday season. Companies carefully analyze Back to School performance as they refine Holiday merchandise assortments, pricing strategies and inventory levels.
Traditionally, the Back to School season is driven by spending on supplies related to children returning to school and colleges. However, a great many school districts and colleges throughout the country are still deciding how and when to reopen their classrooms. One might think that this would spell doom for retailers, but the COVID pandemic is expected to significantly boost sales because remote learning is not cheap.
The NRF released its annual Back to School spending survey last week. It concludes that total spending will set a record and easily so. Total spending is expected to reach $102 billion compared to the previous record of $85 billion.
“By any measure, this is an unprecedented year with great uncertainty, including how students will get their education this Fall,” the NRF expressed. “Most parents don’t know whether their children will be sitting in a classroom or in front of a computer in the dining room or a combination of the two, but they do know the value of an education.” In the survey, 55% of consumers said they expect students to take “at least some” classes at home this Fall.
Parents of students in kindergarten through high school expect to spend $790 per family compared to last year’s purchases of $697. Total spending on students in this age range is projected to amount to $34 billion, a marked increase from $26 billion last year and the record of $30 billion in 2012.
The college crowd has larger spending habits. This segment is expected to spend an average of $1,060 per family, bettering last year’s expenses of $977. Total spending on college students is expected to be $68 billion, a substantial increase from $54 billion last year and the record of $55 billion in 2018.
The Back to School season will reflect a shift in consumer spending patterns toward digital purchases such as laptops, tablets, smartphones and headphones to facilitate online classes. A recent Deloitte survey concluded that tech spending will increase 28% this year over last year. Other increasingly popular items are expected to be home furnishings such as study desks and chairs. Lastly, a relatively unnoted category previously will now be a focal point: personal health. Hand sanitizer, wipes, masks, paper towels and disposable cutlery are items rarely found in these shopping carts until this year.
The timing of Back to School shopping has been consistent over the years with the kick-off date in recent seasons marked by Amazon’s Prime Day in July. However, parents have deferred purchases this year as they await school opening updates. Even Amazon has postponed its Prime Day until September. As a result, consumers at this point have only finished 17% of intended purchases when in prior years the bulk would have been completed.
Lastly, but predictably, online retailers are forecasted to benefit the most as all other shopping destinations are expected to see declines including department stores, clothing stores and even discount stores.
With all of the serious economic challenges created by the pandemic, the overall NRF forecast may seem bullish, but recent consumer spending is supportive. June retail sales reflected the first year-over-year gain of 2020. Moreover, the NRF is right about one thing – the value of an education.
Postscript – Interesting factoids:
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