Back to School: A Yardstick for Key Holiday-Shopping Season

By College PlanningFOXBusiness

It’s the most wonderful time of the year…at least for parents of school-aged children who are gearing up to head back to the classroom this fall.

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Retail sales during the back-to-school period are second only to the all-important holiday shopping season from Black Friday through Christmas. This year, the National Retail Federation expects back-to-school sales for kindergarten through grade 12 and college students to reach a total of $68 billion. That breaks down to about $630.36 in spending from the average family with K-12 children on electronics, apparel, and other school-supply needs. That figure is slightly lower than the $669.28 parents shelled out last year during the same period.

The NRF notes, though, that the decrease isn’t necessarily due to less confidence, but rather less of a need to make big-ticket purchases on new computers, laptops, smart phones, etc. year after year.

Putting all of that into perspective, excluding back to school, the NRF forecasts a whopping $616.10 billion in total spending this year during the holiday shopping season.

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Aside from simply shelling out a substantial amount of dough on school supplies, the holiday shopping season’s precursor can tell economists a lot about the spending habits of American consumers. Pricewaterhouse Coopers retail and consumer sector leader, Steve Barr, said increasingly the lines are blurred between the two retail seasons.

“We really see back-to-school as the last test of retail strategy before we all head into the holiday season,” he said.

The good news for consumers is that Barr said it’s a buyer’s market, meaning there’s a lot of increased competition both for in-store and online retailers for consumer cash. As a result, products have already seen significant discounting, and as we inch closer to the end of the year, Barr forecasts deeper discounts to come.

“Pricing has gone promotional with the additional discounts like free shipping to induce the shopper,” he said. “Retailers are already pulling those out in the back-to-school season and I believe that through the economic downturn in 2008 through last holiday, we’ve conditioned the consumer to expect discounts. It’ll be challenging for retailers to do anything but go promotional.”

To that point, IHS director of consumer markets, Chris Christopher, pointed to a couple of other headwinds for retailers this season.

“Many students and parents will not splurge in the third quarter as they are waiting for the heavy holiday price discounting that has been creeping into late October,” he said. “And, there does not seem to be a ‘must have’ type of gadget coming out any time soon.”

It’s Not Just About How Much, It’s Also About How

With fewer and fewer consumers willing to plunk down top dollar for merchandise, and more and more conditioned to expect bigger deals, retailers have been increasingly forced to adapt to better ways of bagging the sale.

Barr said there are clear winners in this game: The players in the space who give a total retail experience and who can optimize online and in-store offerings and experiences and merge them into one. But with so many retail websites, it’s hard for consumers to make space in their minds and calendars to touch every site…so buyers tend to gravitate to the brands they trust the most.

“The online-only retailers realize the benefit of consumers being able to touch and feel the product. Some online-only shops let you try something on for fit, size, or color and will ship to you same-day or next day,” he said. “If you go to physical stores, what they have to do to stay relevant and compete with online is to come up with their own kind of personalized shopping experiences.”

Essentially, the battle for dollars boils down to a battle for relevancy.

“Think about really successful store-based retailers, especially those not competing in the value space. They are becoming a destination for an experience around cut, size, shape, and selection. That’s a real change that were seeing with retailers trying to compete [against online],” Barr explained.

The NRF said of those surveyed, for the back-to-school season, a little more than a third of shoppers plan to hunt for their purchases online. Half of those consumers anticipate taking advantage of the option to select and pay for their items online and pick up in-store; while 91% say they’ll use free shipping offers.

When calculating total retail sales, Barr warned that it may be time to think not of the season’s spend overall, but breaking it down into online versus brick-and-mortar sales. In other words, separate big names in the online space, according to the Internet Retailer 2015 Top 500 Guide (including those with a brick-and-mortar presence) like Walmart (NYSE:WMT), Amazon (NASDAQ:AMZN), and Apple (NASDAQ:AAPL) from the traditionally in-store players like JCPenney (NYSE:JCP) and Best Buy (NYSE:BBY).

“I think we’re all in a little bit of a trap to look to individual numbers or trends for the entire industry….I think we’re entering an era where that’s not as relevant because the companies with the innovative products that resonate, we expect a 10% to 20% increase in comparable revenue numbers, while those retailers competing on price with no innovative products and who don’t resonate with the consumer won’t be at the same levels, and could see a year over year decline,” he said.

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