A change in fashion trends is likely to see back-to-school shoppers increase their spending this year

A change in fashion trends is likely to see back-to-school shoppers increase their spending this year

The second biggest shopping season of the year is drawing to a close, but it appears many people have yet to wrap up their back-to-school buying. With consumers continuing to remain cautious about their spending, promotions and bargains are set to drive sales for clothing and footwear retailers this year - with those offering on-trend product likely to fare best. 

Total back-to-school spending per US household is forecast to reach US$672 this year, according to a survey by the International Council of Shopping Centers (ICSC). Excluding electronics, spending on back-to-school items is seen at $325 - up from $285 in 2013.

Indeed, half of respondents expect to spend more than last year - up from 39% in 2013 - and around 20% of consumers note that a change in fashion trends will drive this increase, up from 10% a year ago.

In addition, one in four households rank apparel as the most significant purchase for girls and boys during the back-to-school shopping season, the ICSC says.

Growth for apparel retailers?
But Euromonitor analyst David McGoldrick believes that although clothing sales will likely be up for the back-to-school season, it won't be by a significant amount.

One reason for this, he tells just-style, is that consumers still don't have full confidence in the economy. "They're watching how things develop month-to-month [and] quarter-to-quarter." He adds that there is still a lot of uncertainty within the jobs market, with wages remaining stagnant.

According to Deloitte's back-to-school and back-to-college surveys, nearly three-quarters (73%) of consumers believe the economy is recovering, but continue to exercise some caution.

"While the uneven economic recovery is still impacting consumers' spending intentions, it may not be the factor it was in recent years," said Alison Paul, vice chairman and US retail & distribution practice leader at Deloitte. "There appear to be other forces at play that are diminishing the significance of back-to-school as a limited-time-only shopping event."

One of the reasons is the convenience of online shopping, she explains, allowing parents and students to shop any time, not just during the mid- to late-summer back-to-school period.

"Consumers are more precise about what they buy, and may no longer feel the need to stock up as they did in the days before the internet," she adds.

Meanwhile, analysts at Stifel expect back-to-school apparel sales to range from flat to a low single digits rise on last year. "In our opinion, the benefits of a record high stock market, an improving economy and better managed stores (conservative inventory buys with increased open to buy, which provide retailers with the ability to react to selling trends) is being partially offset by inconsistent traffic, a promotional retail environment and increased consumer spending on computers, electronics and school supplies," they note.

Adding to that, Euromonitor's McGoldrick points to the rise in comparison shopping, which is impacting sales. "Additionally, one thing that has been hurting overall sales is it's definitely a buyer's market. Consumers have so many different ways to comparison shop these days. And whether it's online or in stores, retailers have really had to resort to discounting to drive a lot of sales."

Promotions to win consumers
"With back-to-school, there's always a lot of promotions, but this year it's continuing with the trend of heavy promotions, and consumers have shown in last year's back-to-school season that they are willing to wait and be patient with their spending until they see deals that they really like," McGoldrick adds.

Matthew Shay, president and CEO of the National Retail Federation (NRF), concurs. "As the shopping season draws to a close, budget-conscious parents are likely hoping that end-of-summer sales and promotions will be just what they need to wrap up their school lists," he says.

According to the most recent NRF survey, 15.2% of back-to-school shoppers say 100% of their purchases were influenced by coupons, sales and promotions - the highest since 2011.

Online versus physical stores
This year, physical stores will be the preferred method to shop, with brick and mortar stores forecast to take a 90% share of all back-to-school shopping, according to ICSC forecasts. 

Although 73% of consumers will research online, it says, they will make their purchase in a physical store. In addition, the share of online as a back-to-school shopping venue will fall to 8.1% this year from 8.6% last year.

Deloitte's survey results support this view, showing nearly six in ten (57%) plan to conduct research online before buying in the physical store.

"Rather than thinking solely in terms of e-commerce, retailers need to consider how consumers' digital interactions - not exclusively purchases - influence what they do and don't buy in the brick-and-mortar store," Paul says.

"Retailers should look at their online and mobile channels as a greater opportunity to drive traffic and revenue at the physical store, rather than viewing it as merely a point of purchase, where it actually tends to deliver lower sales than the physical store as a whole."

Winners and losers
Off-price retailers such as The TJX Companies, whose brands include TK Maxx, are expected to fare well this back-to-school season, McGoldrick believes, because they "offer a lot of brand names but at lower prices".

He also anticipates fast fashion retailers including Forever 21 will perform well as "their prices are generally low but they have a wide variety [of product]".

According to the ICSC, discounters represent a 23.7% share of where consumers will shop this year. Also, traditional department stores and specialty apparel stores should see "increased activity" during the back-to-school season, with the latter seeing its share grow to 10% from 8.4%.

The NRF concurs, adding that most back-to-school shoppers will shop at discount (54%), department (47.7%) and clothing stores (35%), followed by online (24.8%).

And Stifel analysts believe product is key in a tough retail environment. "Those [apparel] retailers who have trend-right product will likely be market share winners in August and [the] third quarter, as it appears the consumer is willing to buy if the merchandise is attractive and the value is compelling." 

Waiting game
But it appears there is a delay in shopping for fashion this year, research firm the NPD Group believes. "Parents are prioritising by purchasing supplies first, then some basic wardrobe necessities, and lastly following up with fashion, putting summer aside and purchasing clothing and apparel for colder rather than warmer weather," Marshal Cohen, NPD chief industry analyst says. 

The reason consumers are delaying this significant aspect of their back-to-school shopping is two-fold, he explains.

Firstly, they want to find out what's 'cool in school' before making their purchases and, secondly, consumers don't want to buy early any more - they want to buy in season.

"Back-to-school will come, of course, just not in the way we're used to seeing it. Consumers, not stores, are driving the trends these days, which means September will be the busiest back-to-school month this year, contrary to what stores and retailers may think."