Although people will be spending less, they will be doing so in a smarter way, according to the NRF

Although people will be spending less, they will be doing so in a smarter way, according to the NRF

It looks set to be a mixed picture for apparel retailers this back-to-school season, as increased taxes and general economic worries continue to play on consumers' minds, but many will look to cut corners elsewhere and head to department stores to get the best deals this year. Katie Smith reports. 

According to an annual survey by the National Retail Federation (NRF) and Prosper Insights & Analytics, total spending on back-to-school is expected to reach US$26.7bn this season, down 11.9% from last year's forecast of $30.3bn.

Although people will be spending less, they will be doing so in a smarter way, says NRF president and CEO Matthew Shay. "The good news is that consumers are spending, but they are doing so with cost and practicality in mind. Having splurged on their growing children's needs last year, parents will ask their kids to reuse what they can for the upcoming school season."

"As they continue to grapple with the impact of increased payroll taxes, Americans will look to cut corners where they can, but will buy what their kids need. It's important to note, however, that spending levels are still well above where they were a few years ago."

Although the US labour market has improved, fuel prices have fallen and house prices have risen, 80.5% of respondents say the economy will change their spending in some way.

"Hoping to spread out their budgets but still reap the benefits of getting the products their children want, parents this back-to-school season will comparison shop online and around town at their child's favorite stores, potentially even more than once, as they seek to find bargains and products that offer the best value," Prosper consumer insights director Pam Goodfellow noted.

Winners and losers
New apparel and accessories will, however, take the lion's share of back-to-school shopping budgets. Some 95.3% of those with school-age children will spend an average of $230.85 on autumn sweaters, denim and other pieces of attire, while parents will spend $114.39 on shoes and $90.49 on supplies, the NRF and Prosper Insights & Analytics survey found.

NPD Group also expects apparel and footwear to be among the category winners, with estimated year-on-year growth of 11% and 9% respectively.

Its annual back-to-school study of consumers' purchasing intentions found that sales of apparel accessories and school bags each expect to see gains of 4% on last year, while sports equipment is forecast to rise 3% year-on-year.

"These categories are important to note for several reasons, one is for category growth but another is for reading between the lines and seeing that consumers are spending more on desirables rather than only necessities," said NPD chief industry analyst Marshal Cohen.

Department stores and online will be top of the agenda for places to shop this year, with an expected 4% rise in the number of people shopping there for back-to-school goods. Apparel speciality stores are forecast to see a 3% rise, while national chains and mass merchants expect to report a 4% and 8% decline in shopper numbers.

"Value, price, and products that are on sale are less important to the consumers than last year but this is positive news for department stores and apparel specialty retailers too, as more consumers plan to shop there compared to last year," added Cohen.

The NRF expects 67.1% of back-to-school shoppers, however, to head to their favourite discount store as they did last year, while 61.7% will go to department stores, up from 59.9% the previous year. And 51.5% will shop at a clothing store, up slightly from 52% last year. 

Online vs bricks-and-mortar stores 
Consumers will start their back-to-school shopping later this year, with 5% fewer people starting by 1 August and 5% more people starting by 1 September, the NPD Group revealed.

This will bring an expected 3% dollar increase to online back-to-school sales, compared to the prior year, with price and convenience listed as the main motivators. "The increase in spend online comes at the expense of national chains and mass merchants," noted Cohen.

But, according to the International Council of Shopping Centers (ICSC), 45% of people plan to spend the same amount as last year, while only 17% intend to spend less. 

The ICSC-Goldman Sachs consumer tracking survey found that the average household will spend $285 on back-to-school items this year, up 39% on the same period in 2012.

"Consumers typically view back-to-school merchandise as essential expenditure, which is likely a key reason that so many consumers plan to increase spending this year," said Michael Niemira, ICSC vice president of research and chief economist.

Pent-up demand 
Some 46% of wholesalers surveyed by Capital Business Credit (CBC), a non-bank lender that services the retail sector, said they are experiencing increases in back-to-school orders from retailers. 

Of the wholesalers experiencing growth, one third said orders are increasing by 3-5%, while a quarter said they are seeing increases of 6-8%, the quarterly Global Retail Manufacturers and Importers Survey showed.

More than half of manufacturers and importers are confident that the back-to-school/autumn retail season will be stronger than last year, compared to one third last year.

Some 46% of respondents believe 2013 will be 3-5% stronger than last year, while a quarter think the season could improve by as much as 10%.

"It paints a positive picture for the retail sector that not only are importers and manufacturers experiencing individual growth, but they believe the overall retail sector is also continuing to get stronger," said CBC executive chairman Andrew Tananbaum.