Retailers Soar on Back-To-School

Preliminary back-to-school results are in, and consumers have been busy. Total spending on back-to-school items is expected to reach $75.8 billion this year, a 10 percent gain from 2015, according to The National Retail Federation. Sales are expected to grow 9.6 percent in the K-12 segment alone, and spending on college supplies is expected to average $907, up 12 percent from 2015.

If the predictions pan out, retailers have a lot to gain. Surpassed only by the holiday season, back-to-school shopping for clothing, shoes, supplies and electronics spans most of the third quarter and is a key driver for retail sales.

Many stores have expressed excitement about this time of year: “We are encouraged by the start of the back-to-school season,” Macy’s CFO Karen Hoguet said in an earnings call with analysts on August 11. “We are seeing strength in all categories, but are most excited by the strong trend in denim.” Macy’s, which recently announced that its shuttering about 100 brick-and-mortar stores, is just one retailer that could benefit from the back-to-school bump in sales.

So, amidst the swarm of back-to-school activity, what else is trending for this season?
  • Hot Ticket Items – Along with the trend in denim, students this year are searching for sneakers, athletic wear, versatile laptops and USB drives. Demand for those hot-ticket items is helping to promote fast growth in back-to-school spending: Back-to-school sales rose 2 percent in July, compared with 1 percent growth for the same period in 2015 and 2014 and a 0.2 percent rise in July 2013, according to payments technology company First Data.
  • Discounting – Shoppers may be less worried about the state of the economy, but they remain budget-conscious and conditioned to finding deals across the board. NRF’s survey found that the majority of consumers (53 percent) are heading to discount stores for back-to-school items – the most of any other retail category. However, data from digital savings site RetailMeNot show that retail discounts are not as steep as they were last year.
  • Mobile Promotions – An increasing share of parents are of the tech-savvy millennial generation, so improving mobile capabilities can help retailers push ahead of the pack. For example, J.C. Penney has made strides with its mobile app, which has a “snap 2 shop” feature that allows customers to take a photo of an item while in-store, or scan the item to bring it up for purchase on the app. The department store also recently made a “buy online, pick up same day in-store” option available through the mobile app. Additionally, Staples rolled out an in-app tool that lets customers upload a photo of their back-to-school shopping list, which in turn uses artificial intelligence (AI) and crowdsourced data to reply with a personalized list of items within 24-48 hours. The shoppers can then purchase those items online.
Like the winter holidays, many parents shopping for back-to-school may wait until the end of the season to discover additional discounts and deals offered by retailers. So we may see additional positive performance in the retail sector throughout September.

And, for insights into the holiday shopping season, stay tuned for our 2016 BDO Retail Compass Survey of CMOs, and check out last year’s results here.

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