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Deloitte: Department Store BTS Sales to Drop by 26% in 2017

For nearly one quarter of all U.S. households, it’s back to school time. And while clothing and accessories expenditures are expected to rise, department stores sales will plummet as consumers trade down.

Consumers are expected to spend $27 billion this year getting their children equipped for class, according to Deloitte. The consulting firm’s 2017 BTS survey polled 1,200 parents with children in kindergarten through the 12th grade.

Back to school is a narrow but lucrative timeframe with 71 percent of expenditures taking place in July and August. By the end of July, 60 percent of respondents will have started their BTS shopping. And by the end of August, 92 percent will have it all wrapped up.

The shopping window skews earlier in the South, where consumers also spend more. The national average per child is $501 but Southerners spend $554. Also, 60 percent of those who shop before August are likely to spend 16 percent higher ($532) than other parents.

The two main categories that caregivers focus on are still school supplies and clothing and accessories, but this year, the latter will get more dollars. Respondents reported they’ll spend $284 on clothes, which is a 10 percent increase over last year.

“With today’s technology-based education system there is less need for traditional school supplies, likely contributing to the shift toward more spending on clothing and accessories before children head back to school. Part of this shift may also come from the popularity of preconfigured school supply kits, which 30 percent of families plan to use,” said Rod Sides, vice chairman, Deloitte LLP and US retail, wholesale and distribution practice leader.

Clothes, school uniforms and shoes comprise the bulk of the expenditures in this category with fewer dollars allocated to gym clothes and footwear and accessories.

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Though consumers will spend more on this category, they’re also trading down on where they’re making these purchases. The survey found that 81 percent plan to shop at mass merchants for at least part of their purchases. That’s 24 percentage points higher than last year. Similarly, the number who will shop off-price will increase from 10 percent to 28 percent. Department stores will drop from 54 percent in 2016 to 28 percent this year. Specialty stores will see a fairly dramatic decrease in traffic this year as well, with only 8 percent planning to shop there, down from 25 percent.

[Read more about what’s happening in the off-price sector: Follow the Leader: Off-Price Gets Crowded]

In-store purchases are still favored by 57 percent, while 21 percent are committed to online shopping. The remaining 22 percent haven’t decided which channel they’ll choose, which Sides says could be an advantage for some.

“Retailers should aggressively pursue the ‘undecided’ consumer because they collectively represent nearly $5.4 billion this back-to-school shopping season,” Sides said. “This segment is up for grabs but likely to go to retailers that draw customers in early with promotions and digital experiences that make store visits even more attractive, like inventory visibility or buy online/pick up in store.”

No matter where they’re shopping, back to school consumers report being responsive to deals. For instance, of the 25 percent who say they’ll consult social media, their prime motivation for doing so is to spot a discount. Further, 58 percent of shoppers report their willingness to spend more if they had access to a sales tax holiday.