It's mid-July, it must be time to think about back-to-school purchases. Many retailers have been planning for this productive selling season, second only to the holiday selling season, since October 2016, though shoppers aren't earnestly in the back-to-school frame of mind until right about now (July 15).
A handful of retail consultants, industry analysts and associations publish annual back-to-school (BTS) forecasts that generally rely on consumer surveys as well as qualitative insights and interpretations of current trends. This year the National Retail Federation ("NRF") forecast is for a whopping 10%+ gain in combined back-to-school ($29.5 billion) and back-to-college spending ($54.1 billion) benefitting apparel, footwear and school supplies categories. The forecast is based on Prosper Insight's survey of 7000+ consumers taken in late June/early July. The total spend is projected at $83.6 billion and is the second highest projection in the past 10 years.
Deloitte surveyed 1200 consumers during the week of May 31 to June 6 for its 10th annual Back -to-School Survey to generate its $27 billion spend, in line with the NRF's $29.5 billion. On an average spend per BTS household, the NRF sees a 2.1% increase to $688, and Deloitte, a 2.7% increase to $501 per BTS household.
Back-to-college is the larger segment of the season's spend, driven by the newly "homeless" students purchasing sheets, bedding, lamps, etc, necessary for dorm and apartment living as well as food purchases and gift cards. Electronics or computer related purchases represent an estimated $12.8 billion of 2017 back-to-college spending, versus $8.8 billion of 2017 back-to-school spending. Electronics, shoes and food are driving the 11.5% year over year gain in BTC spending.
Both Deloitte and the NRF see more shoppers starting earlier in the summer to begin their BTS shopping, which bodes well for retailers and brands. Ecommerce is expected to see the greatest gains as more apparel sales move to the online channel. Mass merchants such as Walmart and Target are expected to see seasonal gains and to the point, Brian Cornell, CEO at Target, just lifted Q2 earnings guidance, citing a modest increase in Q2 same store sales versus the previous guidance of negative same store sales comparisons.
The mall, populated with department and specialty apparel stores, remain the weak link in the retail picture. According to the Deloitte, 28% of those surveyed plan to shop in a traditional department store this BTS season, down 26% from 2016, and 8% plan to shop in a specialty clothing store, down 17%. It’s worth looking at Amazon's comments on its recent PRIME day shopping event (July 11), which set records, surpassing Black Friday and Cyber Monday and growing sales 60% year over year. The #1 product was Echo Dot, an Amazon device, and the company attracted more new Prime members than any other day in its history. Cowen and Company Amazon analyst, John Blackledge, estimates Amazon generated $1 billion in revenue on PRIME day and that US household PRIME membership penetration is at 48%. BTC, BTS and the upcoming holidays are going to be Amazoning!