Tight inventories resulting from ongoing supply chain constraints could mean shortages for back-to-school (BTS), as well as the upcoming holiday season.
Retailers have noted that while BTS inventory is in stock, levels “could be a little tighter” due to supply chain issues, Katherine Cullen, NRF’s senior director for industry and consumer insights, said Wednesday. “We are, on our part, encouraging consumers to shop early and not wait until the last minute in case things do take longer,” she added.
Families that have K-12-aged children are expected to spend on average of $849 on electronics, accessories, apparel, school supplies and shoes. The total projected spend for the season is expected to reach $37.1 billion, or $3 billion more than last year. For students heading back-to-college, the average spend is projected at $1,200, or $140 more than last year. The total spend expected for the college-age cohort is projected to rise to $71.0 billion, up from $67.7 billion last year. Both total spend projections are up from 2019’s pre-pandemic levels, Cullen said.
In comparison, WalletHub’s BTS survey found one in four parents stating that they will spend more on BTS shopping this year versus what they spent last year. In addition, 57 percent of parents believe schools should fully reopen for in-person learning and 54 percent said they didn’t get their money’s worth on their child’s education during the pandemic. WalletHub also noted that 16 states at different times during July and August are holding sales tax holidays, offering parents savings of up to 7 percent on popular BTS items.
While some consumers have already started their BTS shopping, there have been indications that items such as backpacks and shoes could be in short supply if shoppers wait until the last minute to buy.
But supply chain issues aren’t just a cause for concern for the BTS season. NRF chief economist Jack Kleinhenz said retailers have already put their orders in for holiday in an effort to circumvent logistics constraints. “So they’re hoping that their purchases, their inventory, will get there shortly and in time,” he said.
The chief economist recalled the supply chain issues retailers faced last year in getting packages in time for the holiday selling season. In addition, logistics firms are trying to make adjustments to get a handle on bottlenecks and delays going forward, Kleinhenz said
He added that some suppliers could soon be adding surcharges to cover added costs, maybe as early as Nov. 1, which “means that retailers are going to probably encourage spending to get started early, like it did last year in October.” If those supplier surcharges start to roll in, there’s a likelihood the costs will get passed on to consumers.
Consumers are already paying higher prices—what’s been referred to as inflation—for goods. That’s a function of supply and demand, the chief economist said, explaining that right now “there’s been an excess demand for certain goods and services, and that bids up the price of these goods and services.” Kleinhenz also indicated the backlog of imports coming from Asia, in particular because of “certain transportation limits,” which in turn delays goods getting into the market in time.
While Kleinhenz expects the logistics issues to resolve at some point, it could still take several months before that happens. When supply catches up with demand, prices should come down, he said.
Right now, the chief economist believes the biggest threat to global growth is an uneven rollout of vaccines and the emergence of additional Covid variants. About 57 percent of Americans have received at least one shot and 49 percent are fully vaccinated.
“Vaccinations are still a critical path for further economic recovery and further reopening of the economy,” he said, adding that so far there’s no evidence that the Delta variant is impacting consumer behavior.
It seems that “households remain flush with cash” and consumers are out shopping, visiting restaurants and taking vacations. All that activity should result in strong retail sales for June.
So far, retail sales are up 16.4 percent year-over-year for the first six months of 2021.
“I believe we remain in alignment with the revised 2021 sales forecast, which we released a little bit over a month and a half ago,” Kleinhenz said. NRF raised its retail sales guidance to up 10.5 percent to 13.5 percent from an initial projected growth rate of 6.5 percent to 8.2 percent.