Retailers Brace for Back to School

National Retail Federation Projects 8% Drop in Spending

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NEW YORK (AdAge.com) -- A year ago, retailers were optimistically rolling out elaborate, upbeat back-to-school campaigns, even as rumblings in the financial markets warned tough times were coming. This year, they have no such illusions.

The National Retail Federation projects back-to-school spending will decline nearly 8% to $548.72 per family from $594.24 a year ago. Back-to-college spending per family is expected to increase 3% from a year ago, though with fewer students attending college, according to the NRF, overall spending will decrease. In total, the season is expected to generate $47.5 billion, down from $51.3 billion a year ago.

"The good news about back-to-school is that many retailers saw this coming," said Ellen Davis, VP at the NRF. "Last year at this time, retailers were not terribly comfortable acknowledging the economy in advertising. This year they are. They're saying we know what you're going through and we want to help you stretch your dollar."

Less discretionary spending
Back-to-school season is considered the second-most-important sales period of the year behind the holidays. But it is less discretionary, because parents must purchase school supplies and replace clothes that are worn out or too small. For that reason, a poor fall could indicate the beginning of a difficult second half.

"From our perspective back-to-school is an indicator as to how the rest of the year is going to go," said Ruby Anik, senior-VP brand marketing at JCPenney. "We're hopeful back to school will be good for us, but obviously the economy is affecting the way people spend their dollars and save."

Bob Thacker, senior VP-marketing at OfficeMax, said this season will be more serious than in years past. While the country was in recession a year ago, many consumers were largely oblivious and spent freely through August and September. Back-to-school spending per family increased 5% a year ago. "We have the advantage of learning from last year," Mr. Thacker said. "I wouldn't say we factored in an 8% [drop], but we adjusted our expectations to make sure we weren't over-promising and under-delivering."

Value-focused messages
Across the board, consumers will be bombarded with sales and price-focused messages. JCPenney, for example, incorporated the phrase "Smart looks for less" into a seasonal logo that appears on all its advertising. Ms. Anik also said specific prices will be highlighted, because the retailer has seen a marked impact on sales when it has gone that route. "Everything is about strong price reassurance," she said.

Likewise, Target is encouraging parents to make back-to-school shopping "one of the first math lessons of the year" by creating a "kid-friendly" budget and teaching smart spending with a shopping trip to the retailer.

Half of consumers in an NRF survey conducted by BigResearch said they will spend less this season. Forty percent of families said they are using coupons more, and 56% said they are shopping for sales more often. More than 40% said they are buying more store brands or generic brands.

That newfound frugality is leading consumers to get an early jump on the season, with Google reporting that back-to-school searches have begun rising earlier and are rising more quickly than they did in 2007 or 2008. As of July 14, searches were up more than 10%, according to a Google spokeswoman. Variations of searches for school-supply lists are up between 20% and 30%, while school-clothes searches are up nearly 20% year over year.

Early jump on holidays
With consumers focused on shopping early to get the best deals, some retailers are thinking ahead to the holidays. Sears and Kmart have rolled out "Christmas Lane" and are touting trees, collectibles and ornaments online and at hundreds of stores. Both retailers typically wait until just after Halloween to introduce holiday merchandise.

"Many [consumers] want to decrease their reliance on credit, so they are looking ahead to make sure they're not in a position where they're overextended," Ms. Davis said. "But retailers will need to [strike a] balance and be sensitive to the customer that doesn't want to see Christmas merchandise right now."

Retailers, she added, are already planning for a holiday where consumers are "practically expecting everything to be given away for free."



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