It may seem like only yesterday that you heard kids singing, “No more pencils, no more books…” but here we are again deep into the 2022 Back-to-School season for retailers who supply all the stuff students need (and maybe don’t need) for their return to classes. And while apparel drives the BTS season, the home side of things is also a big business, especially for college kids heading back to dorms. Whether it’s classic items like laptops and mini fridges or somewhat more esoteric products like high-performance bedding and wall art, back-to-dorm is a serious business for many big national chains.
School is Big Business
Last year’s back-to-school shopping months – June to August – showed a 14.4 percent increase according to Census Bureau numbers, but these were also the months when overall shopping was quite robust as people began escaping from pandemic conditions.
This year’s back-to-school season poses a unique set of challenges – and opportunities. On the one hand, inflation may be inhibiting consumers from splurging on too much school supplies. But this is also the first year since 2019 with no remote learning on the horizon, which may prompt parents to invest more in backpacks, clothing, and other essentials for learning in the physical classroom.
Now following several years of partial or even complete study-at-home fall semesters, retailers are geared up for what appears to be not only back-to-school but back-to-normal for purchasing patterns. How this new demand balances out with overloaded inventory-induced markdowns remains the key question for this BTS season.
The National Retail Federation forecasts that spending for K-12 back-to-school this year will be about equal to last year but sees a 4 percent bump for the college market, although given soaring inflation, that could actually represent a decrease in unit volume. Clearly, there are more questions than answers as we end this summer.
More Demand…but More Inventory, Too
“We expect a mixed back-to-school season this year,” reports Telsey Advisory Group, the research, trading and investment banking services company. TAG says, “the benefit from a greater reopening following the pandemic (will be) partially offset by intensified markdowns in response to higher inventory levels and slowing demand trends.”
TAG clearly sees winners and losers in this year’s back-to-school mix. “Generally speaking, discounters and internet retailers should benefit from the ‘one-stop-shop’ strategy, with a broad assortment of products at value-oriented prices.”
That forecast seems to be already backed up by comments from the biggest of the big, Walmart, whose CEO Doug McMillon said in late July that the retailer was “encouraged by the start we’re seeing on school supplies in Walmart U.S.”
Walmart could end up being the biggest BTS winner this year. According to a new study from the online shopping platform RetailMeNot, three-quarters of respondents say they will shop for back-to-school merchandise at Walmart, outpacing the 60 percent who will shop Amazon and the next three choices, Target (47 percent), dollar stores (36 percent) and specialty clothing stores (35 percent).
Best Buy should be another outperformer, TAG says, as it will “benefit from greater in-person learning and shopping this year as students buy computers and academic-related tech.” It adds that purchases of TVs and dorm-related appliances, such as small refrigerators, should also benefit from the return to dorm life this fall.
Other winners, according to Telsey, should be specialty retailers “with limited exposure to the lower income consumer” and those offering apparel focused on occasions and social activities. It also cites Amazon as a retailer that will “gain share” given the July timing of its Prime Day event and its recent highlighting of back-to-school products on its home page.
Placer.ai, the research company that tracks store traffic (and a Robin Report Innovator), says physical retailers should continue to see gains in their business as consumers do more shopping in person. But it cautions that unlike a year ago, inflation and the absence of government stimuli should make for a very different scenario than a year ago. “Last year’s back-to-school season coincided with the wider post-vaccination brick-and-mortar reopening,” according to a recent report. That timing “drove exceptionally high foot traffic as consumers flocked to their favorite stores to spend their savings from the previous year. This year, the retail landscape looks quite different, with shoppers looking to stretch their budgets and avoid unnecessary expenses in the face of rising inflation.” Still, Placer adds, “students need books, school supplies, and dorm decor and kids need new clothes as they grow.”
Placer, like TAG, identifies the Walmart and Target discount duo as big winners this season, their combination of one-stop offerings and sharp pricing making them near mandatory stops on back-to-school shopping trips. “While these brands’ performances in 2022 may not reach the foot traffic heights of last year’s back-to-school season, Walmart and Target are both well-positioned to benefit from consumers looking to stock up on essentials without breaking the bank,” according to Placer.
But unlike TAG, Placer sees stores catering to lower income shoppers also potentially doing well for back-to-school. “Dollar and discount stores are also positioned to thrive this back-to-school season. As consumers look for ways to stretch their budgets, visits to discount and dollar stores are rising even when compared to the category’s overall impressive foot traffic numbers of 2021” It specifically mentions Dollar General, Family Dollar, Dollar Tree and Five Below.
Other specialty retailers could also benefit from a stronger season this year. Bed Bath & Beyond, which has been a perennial big player in back-to-school, rolled out a significant promotion earlier this summer featuring the celebrity Novogratz family, cutting across a variety of home categories. Given its recent troubles, the chain is no doubt counting on BTS to help drive sales.
Another retailer with a stake in BTS, The Container Store, is doing a tie-in with online retailer Dormify for ten in-store pop-ups, reinforcing its emphasis on the season.
Placer also mentions Staples as a school supplies retailer that has traditionally counted on this time of year for business even if students are using fewer of those pencils and books in this digital age. It wrote in late July that “the brand has already started offering back-to-school discounts to help parents avoid the last-minute rush of late August – another reason to be optimistic about the legacy brand’s performance this season.”
Early results would seem to indicate that the office supplies sector will show gains this year. According to the NPD Group, BTS sales at these retailers up 2 percent through the first three weeks of the season compared to last year.
And TAG sees sporting goods stores and those general merchandise retailers that offer BTS products as having good seasons, while Placer specifically calls out secondhand seller Goodwill as potentially “one of the surprise winners of back-to-school 2022,” saying its “combination of low prices and pre-owned goods is likely to continue to drive foot traffic growth.”
Placer anticipates the retailers who get it right will do just fine this season. “This year’s back-to-school season poses a unique set of challenges – and opportunities. On the one hand, inflation may be inhibiting consumers from splurging on too much school supplies. But this is also the first year since 2019 with no remote learning on the horizon, which may prompt parents to invest more in backpacks, clothing, and other essentials for learning in the physical classroom.”
As with just about everything in the world of retailing, “Brands that can cater to consumers’ current value orientation while offering an appropriate and diversified product mix are those most likely to thrive.” But if it was that easy, everyone would do it, right?