Consumer Facts from Cotton Incorporated Lifestyle Monitor™

How did apparel retailers fare in the just-ended Back-To-School season? Although as of this writing the final quarterly grades have not yet been posted, the handwriting on the blackboard indicates that retailers were really put to the test.

The weak economy and higher raw materials costs have had an impact on everything from what they bought to when and where they bought it.

Consumers Shopping Closer To Need

Retailers started the push very early this year. To woo skittish consumers to the registers for BTS, the second largest retail push after Holiday, retailers began promoting it earlier than ever this year, in some cases even before the previous school year had ended.

This retail strategy, though, did not jibe with consumer behavior. While data from the Cotton Incorporated Lifestyle Monitor™ Survey reveal that 89% of parents planned to make back-to-school purchases before the first day of school, most consumers actually waited until the last minute; the National Retail Federation reported that more than 40% of shoppers said they planned to begin shopping three weeks to one month before school started, up from 33% last year.

Many shoppers, particularly those in the Northeast, wait until the cool weather arrives in October to bolster that wardrobe with jeans, long sleeves and sweaters.

Non-Discretionary Purchases Drive Shopping

“Consumers are being cautionary with their dollars,” said Kim Kitchings, Senior Director, Corporate Strategy & Program Metrics, Cotton Incorporated. “With cautionary spending comes enhanced expectations; when they do buy something, they expect it to last.”

Consumers may have warily held off on shopping, but for most, those BTS purchases were absolutely necessary. Almost three-fourths (74%) of consumers with children living in their households said they planned to purchase new children’s apparel this fall, according to Monitor data. Among those, more than half (54%) said their child’s clothing simply does not fit, down from 63% in 2010, while 13% said their child’s clothing is worn out. Another 13% cited the timely sales, compared to the 6% who said so last year, and only 11% bowed to their child’s wishes for new, trendy clothing, down from 16% in 2010.

Waning Confidence Meets Higher Prices

Most in the industry had predicted a relatively flat increase for back-to-school this year, and were not surprised with the preliminary results. Edgy consumers, suffering from declining levels of economic optimism, played a game of wait-and-see, forcing retailers into tight spots. Just a third (34%) said they are very or somewhat optimistic about the U.S. economy – a low not seen since 2008 – and less than half (47%) said they are very or somewhat optimistic about their own personal financial situation, according to Monitor data.

“Without a doubt, that trickles down into their personal financial situation, and makes consumers apprehensive about opening their wallets,” Kitchings says.

Monitor data support this; among those who planned to buy for the 2011/2012 school year, 69% said they were concerned that apparel prices would be higher this year than last, and 78% were concerned that rising gasoline and food prices would limit their BTS budgets this year.

Channel Surfing

Not surprisingly, economic concerns had an impact on where consumers were spending their hard-earned money. Among those planning to buy clothing for their children this fall, a whopping 80% said they would shop for most of that clothing at mass merchants, up from 62% in 2010. Other channels, like chain stores and off-price stores, saw increases as well. Fifty-six percent of consumers planned to shop at chain stores in 2011, up from 50% in 2010, while 31% said they would turn to off-price retailers this year, up from 23% last year.

“We’ve seen a shift in shopping channels, and that’s due to price points,” said Kitchings. “Off-price retailers have done a great job in expanding their inventory, offering a better assortment at good prices. Also, if you look at a company like Kohl’s, which offers a mix of products and brands, 93% of their stores are either free-standing or in strip malls. This offers convenience to busy parents who can easily get in and out, buy for their whole family at one store, and avoid a mall setting.”

That channel shift, though, has not carried over to e-commerce, which remains a secondary resource for these shoppers. “Many consumers making BTS purchases use the Internet for informational purposes,” Kitchings says. “And while some e-tailers have eliminated shipping charges, it’s not enough to sway this group, whose concerns about e-commerce range from clothing quality to shipping time and the security of using one’s credit or debit card online.”

Sticking With The Basics

With necessity still driving most purchases, parents planning for back-to-school were sticking with durable classics that will withstand the wear and tear of a school year. Nearly 80% said they are likely to purchase shirts/tops for their children this fall, followed by jeans (78%), socks (71%), pants (65%), outerwear (53%), sweaters (51%) and sleepwear (48%), according to Monitor data, and in most cases these numbers remain consistent year over year.

“Although denim hasn’t been as strong as last year, it’s still a cornerstone of young people’s wardrobes and one of the main items parents plan to buy their children for the fall; it’s iconic, it’s what the kids wear, and it’s durable,” said Kitchings. “It accounts for a larger share of purchases among 13-24 year olds compared to other age groups, especially during this particular time period.”

Retailers have responded to this uptick in demand by allotting more floor space to jeans (14.2% compared to 12.7% at other times during the year), offering a greater assortment and better prices. Retail Monitor data show that the average retail price for denim jeans was $35.63 in the third quarter, yet averaged $37.59 in other quarters. Part of this price difference is due to the fact that a greater share of jeans is priced on sale at this time (64.7% in the third quarter, compared to 53.4% all other times during the year), which in turn encourages consumers to respond with their wallets. Monitor data reveal that 47% of consumers ages 18-24 purchase denim jeans in the third quarter, compared to an average of 37% in other quarters.

For Consumers, Cotton Is King

Comfortable, durable pieces like denim and tees also tend to be cotton-rich, and despite a still shaky economy, consumers are willing to pay more for them. More than half (53%) of consumers with children in the household said they are willing to pay more for natural fibers like cotton, and that percentage holds steady among younger consumers ages 13-24 (51%) as well.

Kitchings said that when asked about rising prices at retail, consumers still responded with a desire for cotton.
“Our data show that consumers with kids in the home say they are willing to pay approximately 26% more for jeans and 31% more for cotton t-shirts. And consumers ages 13-24 say they’re willing to pay 23% more for jeans and 35% more for cotton t-shirts. Of course, there will be reverse economies of scale here: consumers may purchase two t-shirts instead of three.”

Ultimately, as Kitchings noted, consumers are creatures of habit. “They have certain expectations for their jeans and t-shirts, and expectations for laundering and care and how long those items will last. These expectations, of course, are heightened in today’s economy, which is why we see this return to quality and longevity – and fabrics like cotton that can last.”

Heightened consumer expectations, of course, present a challenge for brands and retailers, who have to pull out all the stops so shoppers will complete their purchases. As Kitchings points out, “Unless children have outgrown their clothes, it’s not a necessity – which makes it all the more important for retailers to have fashions that are on target and priced well. In an economy like this, there’s no room for error.”

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