Shopping for back-to-school essentials, such as clothes, shoes and electronics, will be a bigger struggle for families this year who are trying to manage their household budgets with less disposable incomes because of inflation. Back-to-school spending by parents with children in grades K-12 is expected to decrease 10 percent this year over last year to $597 per student, according to a new forecast from Deloitte on Wednesday. The last time Deloitte expected a decline in back-to-school spending was in 2014. Although U.S. consumer spending has remained strong, even as inflation has taken a bite out of discretionary purchases, the economy is starting to show cracks.
Total Retail’s Take: An uncertain economic landscape along with persistent inflation is causing consumers to pull back on discretionary spending, which will have a significant impact on the second biggest event on the retail calendar, back to school. Among parents spending less, according to the Deloitte report, 51 percent attributed the pullback to reduced disposable income (up from 45 percent in 2022), while 75 percent of those spending more said it was because of increased prices (up from 60 percent in 2022). One key finding from the Deloitte study is that consumers aren’t willing to sacrifice spending on more traditional back-to-school items (e.g., school supplies). In fact, spending on this category is forecast to rise 20 percent YoY. It’s the ancillary categories, specifically apparel (forecast to decline 14 percent YoY) and technology (13 percent YoY drop), that are forecast to see the pullback in spending.
To compete in this environment, expect retailers to become even more promotional, using deep discounts and other deals to lure in customers who are closely watching their budgets. This would seem to favor dollar stores and other discount chains, which already operate with tighter margins. It will be interesting to see how the back-to-school season shakes out, including what insights retailers can glean as they prepare for the Q4 holiday shopping season.
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