Goodwill Foot Traffic Is Up. Here’s What That Means for Back-to-School Shopping.
Back-to-school shoppers will spend $31.2 billion on K-12 products this year, according to Deloitte. The National Retail Federation (NRF) puts that number at $41.5 billion. Regardless of how retail’s second-biggest shopping season shakes out, the common theme this year seems to be that people want deals, deals and more deals and their bargain-hungry habits could spill over into the year-end holiday.
In a webinar last week, NRF chief economist Jack Kleinhenz unpacked the outlook for back-to-school spending. “The consumer has been very resilient, but they will continue to be tested,” he said. “Higher interest rates and tighter conditions with credit will impair their spending, [but] if they have jobs they will spend.”
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Prices seem positioned to rise after the Federal Reserve last week raised interest rates by 25 basis points to 5.5 percent, the highest since 2001, as it aims to tame inflation.
And just like shoppers, retailers are also aiming for value when planning assortments.
“Retailers are going to be deal seeking,” said Ben Wynkoop, global industry strategist for Blue Yonder, the supply chain management company that counts L.L.Bean among its apparel retail clients.” They’re not going to be afraid to buy if they can deliver value to the customer.”
So far, back to school “seems more quiet this year than in previous years,” he added.
“I think we’re going to see fewer items on sale, but the items that are on sale are going to make a price impact with consumers because that’s where retailers are looking at how to draw them into the store,” Wynkoop continued. He sees retailers offering tighter holiday assortments with “fewer items” but a greater variety of price points “providing greater value to the consumer because that’s going to be the draw.”
According to Wynkoop, retailers might have an “average” holiday season ahead. Discounts could mirror last year’s or run even deeper, he added.
“The hard part for retailers right now is they’re trying to keep the retail prices down, while still getting cost increases from supply chain disruptions and manufacturers taking prices up,” he said, pointing out that retailers are trying to keep prices “reasonable” to avoid alienating their customers.
“Almost every retailer I’ve talked to is preparing for a challenging [holiday that’s] neutral at best,” Wynkoop said. “If they don’t drop too much from where they were at previous year [levels, then 2023 will] be an okay year.”
Matt Pavich, senior director of strategy and innovation at Revionics, the pricing software company Aptos acquired three years ago, sees “a lot of opportunities” for retail success during back-to-school.
“As consumers are still dealing with contracted budgets due to inflation, there are going to be a lot of opportunities for retailers to win with great pricing and private label offerings,” he said. “It is likely that some consumers will shift channels into dollar/discount stores to get more bang for their buck during this [back-to-school] season.”
Pavich believes promotions will be key during August and September as retailers balance shrinking margins against winning new customers with attractive prices. “A strong BTS season can indicate positive momentum for retailers heading into the holidays and denote the general health of retail. For an individual retailer, however, the two events can have very different results and require different strategies for success,” he said said.
Nikki Baird, an Aptos retail analyst, said back-to-school shopping “is a reflection of how consumers feel coming out of summer and how much they [spent on] vacations.”
Placer.ai data shows an increase in traffic leading into the back-to-school season. Visits to fashion chains have been on the upswing in recent weeks, with increases in foot traffic beginning the week of May 15 to off-pricers and apparel specialty chains, and children’s apparel stores starting June 5. Children’s, off-price and specialty hit a high of up 21 percent, 16.5 percent and 10 percent, respectively, for the week of June 19. Visits have dipped but are still up 12 percent for children’s apparel, 13 percent for off-price and 5 percent for apparel retailers for the week of July 10. The increase in foot traffic doesn’t correlate with purchases but suggests people are hoping to score a bargain.
In fact, Inna Kuznetsova, CEO of supply chain planning and optimization firm ToolsGroup, believes retailers preparing for back-to-school will likely see most of apparel spending later in the season, closer to when they “begin to think ahead to fall.”
Placer.ai said data indicates that back-to-school is “giving thrift store leader Goodwill an even bigger boost,” noting that the company’s year-over-year weekly visits were up by double digits in June and early July. “Goodwill’s performance along with the strength of the off-price segment suggests that—although consumers may be ready for a wardrobe refresh—budgets remain tight and spending decisions are not being made lightly,” Placer.ai wrote in a blog post. Target, Walmart, Costco Wholesale, BJ’s Wholesale Club and Sam’s Club are also seeing footfall rise, it added.
Old Navy is playing into consumers’ value-focused mindset. The Gap Inc. brand offered shoppers a one-year guarantee on uniform purchases made by Sept. 30 for the new school season. It will provide a full refund if products don’t stand up to the “wear and tear of a school year,” it said, of the uniforms priced at $15 for the back-to-school season.
Target kicked off back-to-school on July 6 with deals for students and teachers at under $1 and most at under $15. “Our back-to-school and back-to-college assortment features a broad range of essentials that are priced right for all families. From on-trend Cat & Jack outfits and fun and functional Room Essentials dorm décor, to supplies of all kinds from Mondo Llama and top national brands, Target has everything to help students from pre-K to college start the school year in affordable style,” said Jill Sando, Target’s discounter’s executive vice president and chief merchandising officer.
Dollar General is offering a 30 percent discount on school supplies and housewares for verified teachers through Sept. 15, and customers who have a store digital coupon can get an additional $2 off qualifying purchases of $10 or more during certain weeks in July through September. And Lands’ End dangled a 50 percent discount on purchases of backpacks, lunchboxes and children’s apparel made on July 17.
Deloitte’s back-to-school study indicates consumers will buy fewer items and look for discounts to get better value for their dollar. Spending for K-12 students is expected to fall by 10 percent to $597 per student, for the first back-to-school spending decline since 2014. The overall market spend is expected to decline to $31.2 billion from $34.4 billion last year. Spending on apparel and technology is projected to fall 14 and 13 percent, respectively, while shopping for essential school supplies is expected to rise 20 percent.
“As inflation continues to impact American families, Deloitte also found that shoppers are planning to find ways to economize throughout the back-to-school shopping season,” it said.
Eighty percent cited mass merchants as their preferred go-to retailers. And six in 10 parents said they’re willing to splurge on purchases such as apparel, accessories and technology for better quality. Another 77 percent plan to pay with cash or debit cards, up from 72 percent last year.
The Merchants Payments Coalition said last week that the “swipe” fees banks charge merchants to process each credit card transaction—the average is 2.24 percent, but could go as high as 4 percent—will drive up the price of school and college supplies by more than $3 billion this year at an average per-family cost of $20 and $30.
NRF is projecting that spending for K-12 will reach $41.5 billion this year, up 12.5 percent from $36.9 billion last year. For back-to-college, it expects spending to rise by $20 billion, or up 27 percent, to reach $94 billion versus last year’s $74 billion, according to the study it conducted in partnership with Prosper Insights & Analytics.
Last week’s NRF webinar noted that consumers started their shopping early with purchases at major spending events like Prime Day. Seventy-seven percent of respondents said they noticed higher ticket prices for apparel and accessories, while 59 percent said shoe prices were up. Thirty-nine percent said they were buying store brand private labels, 25 percent said they were spending less, and 21 percent said they were making do with last year’s items.
Retail advisory firm JLL’s study indicates that parents plan to spend 15.7 percent more this year, although 55.2 percent said the higher spend is just a response to inflation. Of those surveyed, 69.5 percent said they will look for sales and deals this year to save money.
Apparel remains a key spending category, along with accessories such as backpacks. Parent plan to do most of their shopping Walmart, Target and Amazon, although the share of parents citing Walmart and Amazon has “decreased somewhat from 2022,” per the JLL study. Other retailers cited include Old Navy, which picked up the fourth spot at 8.4 percent, followed by Kohl’s at 8.3 percent. Macy’s missed the top five, coming in a 4.5 percent behind Staples at 5.2 percent.
