While pent-up demand is expected to fuel back-to-school (BTS) sales this year—with apparel and accessories the big winners for the selling season—there’s concern that spending on goods could start to ease come fall.
Still, BTS is likely to shape up as a season that not’s just better than last year, but one that even surpasses 2019. But hanging over the rather optimistic BTS selling season projections is the lack of uncertainty over how long pent-up demand can fuel spending. Some believe that it won’t be long before consumers begin to shift their attention back to services, giving hospitality and entertainment a chance to grab some market share from retailers.
But even if that were the case, it shouldn’t take away from BTS spending. That’s especially so since some consumers indicate that they plan to wrap up their BTS purchases by the end of July, as a precaution against lingering Covid-19 disruptions in the supply chain.
Customer Growth Partners projections
After a dismal 2020, apparel and accessories sales are expected to outpace other merchandise sectors, with 46 percent growth from year-ago levels. And department stores are projected to see their best BTS growth in years, with sales up 12 percent year-over-year, although that expected rate still lags the retail channel’s “total sales from earlier this century,” according to retail research firm Customer Growth Partners (CGP).
“After almost a year of hunkering down, consumers are back in the stores in numbers we haven’t seen since 2019—if then,” said Craig Johnson, CGP’s president. “With BTS shopping about to kick-off, consumers are flush with cash from a year of record savings, rising wages—and government stimulus—and are ready to unleash a full year of pent-up demand.”
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According to Johnson, retail hasn’t seen BTS growth this vigorous since perhaps the post-war period of the early 1950s. He expects this year’s BTS season could be the “high water” mark of recovery. That’s because he’s predicting consumers may soon begin their rotation back to services from goods, as well as begin to travel again, giving hospitality and entertainment a chance to recapture wallet share from retailers.
And while fall comparisons could see an easing of year-over-year growth as services spending recover, Johnson cautioned that labor shortages, supply chain bottlenecks and consumer resistance to rising prices also may pressure sales for 2021’s second half.
“But the greatest uncertainty may be a return of Covid-19, perhaps as a variant, which may dampen consumer spirits just as Holiday spending beckons,” Johnson said.
For this year’s BTS season, which runs from July to September, CGP is forecasting a 16 percent year-over-year increase in retail sales, sending volume to a record $780 billion. On a two-year basis, BTS spending is expected to grow 25 percent from 2019’s $624 billion pace. Sporting goods, toy and hobby retailers are also expected to do well, capturing the return to normal recreation patterns as households no longer have to hunker down at home. Home furnishings will see a 16 percent uptick in sales, but isn’t expected to see the same focus from consumers that they had for the category last year during lockdowns.
And while e-commerce is expected to rise by over 12 percent for BTS, growth is no longer expected to exceed all merchandise sectors. Still, online BTS sales will likely top $237 billion, putting total volume well above many merchandising categories.
“The past year has provided a unique window into the resilience of the American consumer, the resourcefulness of American retailers—and the underlying strength of the American economy at large. Retail growth may slow a bit as we lap 2020’s fourth quarter, but we will still see record Holiday spending, and with Covid mostly under control and the economy humming along, we should have a lot to be grateful for,” Johnson said.
The EY study
In the latest EY Future Consumer Index, one in five, or 19 percent, of U.S. consumers said that Covid-19 is not impacting their lives, while another 33 percent said the fear of the coronavirus will be completely gone within six months. Survey results were published last month.
Yet, even though those figures suggest that optimism abounds, respondents clearly weren’t ready to head out and shop to effectively create a consumer boom. That’s because there’s still an air of hesitation on the consumer front. Fifty-six percent said that the way they live has changed significantly and 50 percent noted that life will remain significantly changed even after Covid-19.
EY analysts, led by Americas Consumer Industry Markets Leader Kathy Gramling, dug deep into the study results and concluded that as consumers begin reorienting themselves to a life of normalcy, they’re also thinking about long-term priorities. Affordability and health are the top concerns of future consumers.
“Over the last several months, however, immediate concerns about finances and health and safety have started to balance out with other priorities. Issues like the environment, societal change and experience are no longer on the backburner,” analysts said. They also noted that the summer could bring “quite the rise in consumerism,” particularly given the economic backdrop that’s been injected with federal stimulus money and pent-up consumer demand—all the more so as they head back to postponed social events, summer vacations, weddings and dinners out.
And they noted that no one knows how long a consumer boom will last or how big it will be. Consumers may be ready to shop over the longer term. But without knowing for sure, a question up in the air is whether a roaring summer of spending could lead to a tapering off in the fall.
The EY analysts concluded that because retailers can’t treat all consumers the same, they will need to use the data they have to be much more intentional on how they build relationships with their customers. They should also be more intentional about how they look at their customer base holistically regarding how they shop, live, what they care about and what drives their purchasing decisions. Along with that is the consideration by retailers and brands about their pricing strategy, product mix and balancing between consumers’ price needs and expectations for service. For BTS, retailers will need to continue to balance between shoppers who prefer to buy online versus those who would rather head to the store for an in-person experience.
A Mastercard Spending Pulse projection has BTS U.S. retail sales growing 5.5 percent from July 15 through Sept. 6, excluding automotive and gas, when compared with 2020, and up 6.7 percent compared to 2019 sales for the same BTS period.
Deloitte’s 2021 survey
And a Deloitte study, which sees BTS sales possibly rising 16 percent, drills down the spending to an average of $612 per child, or a total of $32.5 billion, versus $529 per child and a total of $28.1 billion in 2020. Digital learning tools have replaced traditional school supplies, driving tech sales up 37 percent year-over year. And families are planning to wrap up their shopping by the end of July, mostly due to fears over lingering Covid-19 disruptions. In addition, 48 percent plan to spend most of their BTS budget at mass merchant retailers.
In comparison, a separate Deloitte study on back-to-college projects an 8 percent rise in spending to $1,459 per child, or a total of $26.7 billion this year, compared with the average spend of $1,345 per child and a total of $25.4 billion in 2020. Thirty-five percent expect to stick with online shopping, just as they did last year during the pandemic, with tech driving much of the increase in spend this year.
Zulily says kids have greater say
As for the fashion style choices of the Gen Z cohort, Zulily said Thursday that a survey of 1,000 kids nationwide indicates that children now have greater influence over their parents’ purchasing decisions.
“At Zulily, we’re constantly focused on making back-to-school shopping easier and more fun for mom—this year, we talked directly to the ones who are helping mom shop—her kids—and got to the root of what’s trending,” Kelly Staponski, Zulily’s director of merchandising for kids apparel, said. “Kids are looking to shed the sweats they lived in throughout the pandemic and express their personalities through outfits that invite creativity and spark feelings of empowerment and confidence at school.”
New supplies, shoes and backpacks are the top three essential needs for kids, said Sheila Nugent, Zulily’s director of merchandisings for kids, accessories and DIY. She noted that one important trend is personalization. In fact, 90 percent of kids see style as a way to boost their confidence at school, while 70 percent add personal touches—using glue guns, bedazzlers and scissors to add personal and expressive touches to their apparel. An another 64 percent between ages 9 and 18 added that they look to mom and dad for inspiration on how to incorporate “retro” styles in their daily school outfits. Nearly 47 percent in the same age range said the “2010s were the coolest decade,” according to Zulily, while 59 percent admitted to raiding their parents closet for items to wear.
M&S broadens sustainable reach with “hand-me-down”
While the kids’ assortment at Marks & Spencer (M&S) has incorporated sustainability thinking since 2006 with the use of organic Fairtrade cotton, the retailer this year has expanded its program and is even going one-step further by adding a key element of circular fashion.
New for BTS is a switch to organic cotton across all knitwear, jersey and sweats. The organic cotton is grown without the use of pesticides or synthetic fertilizers. All apparel items meet the retailer’s organic materials sourcing policy, having been certified to third-party standards. Also new are sustainably sourced materials on a number of fronts, ranging from viscose to trim—sewing thread, buttons and interlining—and more recycled polyester. The polo was selected as the hero item of the assortment range—M&S sells 2 million kids polos a year—featuring organic cotton, interlining, threads and buttons using recycled material.
Perhaps more important for families, the entire BTS assortment has been created with the idea of “hand-me-down” in mind—coats have space for three names on the label—so a purchase this year can be used by siblings or friends in the future.
“During the pandemic consumers have become even more conscious of the impact of clothing on the environment and over 50 percent of M&S customers surveyed say they have become more aware of sustainable clothing options during this time,” the retailer said, noting that the 2021 BTS assortment is both “more sustainable than ever” and “kinder to the planet.”