Market Perspective

Back to School: Why It Matters More This Year to Retailers

August 2, 2021
The C2FO Team
Full shopping cart for back to school

For the US retail industry, back-to-school season has become an annual economic shot in the arm and 2021 stands to be a banner year.

Amid uncertainties as another school year begins, retailers have reasons to be optimistic. 

Here’s why: back to school also means a return to in-person learning for much of the country in 2021.

Due to the pandemic, the 2020-2021 school year was one of disruption and displacement for families of both K-12 and college students, as well as teachers and administrators. Traditional Monday-through-Friday learning was turned on its ear with on-again, off-again in-person teaching and virtual learning. 

But as a new school year approaches, many are excited by the pending return to traditional schooling. According to a June 2021 survey of the National Retail Federation and conducted by Prosper Insights and Analytics, 64% of back-to-school (BTS) and college shoppers expect 2021-2022 learning to be in-person. 

For school participants, it’ll be a refreshing change. Teachers can focus on in-person instruction. Students can reduce their e-learning time. Parents will get a break from hybrid roles as providers and tutors. For nearly all, the return to schools will be a time to reset and reinforce how learning best occurs. 

And retailers will enjoy a welcome dose of families’ start-of-school spending, just as in the pre-COVID era. Key indicators include:

  • BTS shopping started early — 26% of surveyed families began in June, often without having received supply lists.

  • New online sales events led by Amazon, Target and Walmart were held in June, in part to capture early BTS spend.

  • Retail inventory levels are improving in time to match the increased demand for staple items like supplies, electronics, clothing and shoes, despite supply chain woes and rising prices, as recently reported by CBS News.

More spending on school supplies

According to a recent National Retail Federation survey, K-12 households said they’d spend nearly $849 on BTS products this year, up more than 7% from $790 in 2020. 

For households with college students, there’s an expected 13% increase, to $1,200 in per capita spending in 2021. 

Overall, 2021’s combined K-12 and college student spending is expected to exceed $100 billion for the first time ($37 billion K-12 and $71 billion for college). It’s part of a larger trend of US consumers getting out and spending more money after spending months at home during the pandemic, said Amanda Mathes, a managing director for C2FO who specializes in the retail industry.

“Parents, fatigued by the many hats they had to wear during the pandemic, are embracing, with gusto, an opportunity for their children to return to some degree of normalcy in the classroom.  Increased parental spending, for BTS, is a reflection of that enthusiasm,” she said. 

A traditional late-summer spending surge 

Nothing quite sets the tone for the start of the school year like acquiring or restocking on school supplies. Selecting a fresh box of crayons or markers is a favorite memory of many students. Amid the uncertainties of 2020-2021 though, many students missed out when families got by with leftover or hand-me-down supplies, and that may again occur. 

Like other calendar milestones, BTS is celebrated by US households with a spending surge. 

At $790 per household in 2020, BTS spending trailed only the November-through-December holiday shopping average of $998. According to the National Retail Federation, overall 2020 holiday spending totaled $789.4 billion. Other notable seasonal and occasional spending includes:

  • Mother’s Day, 2021: $28.1 billion

  • Valentine’s Day, 2021: $21.8 billion

  • Father’s Day, 2021: $20.1 billion 

  • Super Bowl, 2021: $13.9 billion

  • Halloween, 2020: $8.05 billion

  • Fourth of July, 2019: $6.7 billion

Back to school is a recurring sales opportunity

In 2019, according to Educationdata.org, 56.6 million students were enrolled in K-12 public and private schools, with less than 2% in pre-K. Additionally, students with a typical 13-year pre-college learning cycle have “evergreen” consumer attributes. They outgrow clothing. Styles change. Supplies can break or deplete, then need replacing or replenishing. Computers, tablets and other electronics often become outdated or obsolete.

With a large population to serve, retailers often prepare months in advance. That contrasts with the June-August buying season, but is consistent with the sales cycles of other calendar-driven buying occasions. Particularly for clothing, styles must be designed, manufactured, delivered and stocked — requiring infusions of working capital and extra attention by sellers to their cash conversion cycles — long before consumers purchase.

According to C2FO’s Mathes, retailers are eagerly adjusting to their new normal. 

“Having the right product at the right place and time has always been critical to the success of any retailer,” she said. “While a simple concept, it’s certainly a complicated algorithm for most, especially as retailers lean into the havoc COVID inflicted on global supply chains.”  

Back to school represents both risk and opportunity for retailers as they aim to stock up to capitalize on demand. They must also ensure agility in their supply chains, avoiding a potential inventory glut as the country deals with a recent uptick in COVID cases.

Still, BTS this year represents more of a “need” than a “want” for many school kids and their families. 

“Children worldwide have contended with a disruption to learning over the past 22 months,” Mathes said. “During this time, they have literally grown out of their clothing, shoes and some have ‘matured out’ of other items like lunch boxes and backpacks.”

With a trend to spend, back to school sales are growing

Back-to-school spending for 2021 is estimated to be $37.1 billion, an increase of about $1.5 billion per year since 2011, when estimated spending was $22.8 billion. Contributing to the growth is the adaptation of computers and tablets by more — and younger — students. Consider that the US Census reported 55.5 million K-12 students in 2011, nearly the same as in 2021. Those numbers suggest a 62% increase in spending per student since 2011. 

And not only is more money being spent, the spending is starting sooner, with 26% of shoppers beginning in June 2021 compared to 21% in 2020 and 17% in 2017. In many cases, retailers have fueled the growth by making online shopping easier or by offering freebies like a printer or earbuds when a laptop is purchased. 

Where the money’s going

As the school year approaches, shoppers are spending online, at department stores, office supply outlets, discounters, clothing stores and electronics retailers. Between 27% to 48% of shoppers report that they would patronize any of these sellers. As might be expected, online-focused retailers took a growing share from bricks-and-mortar players in 2020 and that trend should continue in 2021. 

By product category, electronics (35%), clothing (30%) and shoes (19%) comprise about 84% of expected spend. Packages of traditional supplies can often be found for $50 or less and are sometimes bought as part of a school program or fundraiser. 

Separately, spending for extracurricular activities can be significant, though it’s not often tracked or documented.   

Consider the cost of participating in band or orchestra, for example. If not owned, instruments are usually rented monthly at $35 (clarinet) to $65 (alto saxophone). Separately, the cost of lessons can vary and is ongoing. In the US, hundreds of independently owned retailers of musical instruments and lessons serve thousands of school districts each year. 

From a BTS perspective, many families will spend hundreds of dollars at the start of the school year to cover fees, uniforms and incidentals that make for an inclusive student experience. Similar can be said for sports like football, tennis or cross country, where in addition to uniforms, fees and equipment, a $30 - $50 physical exam is often required.

2021 offers unique funding opportunities  

Families that saved a percentage of their government stimulus checks instead of spending on expenses or paying down debt can now use some of that windfall to pay for the inevitable start-of-school expenses. 

The bigger and more timely gift here for families with school-age children is the Child Tax Credit program, part of the American Rescue Plan that passed in 2021. Payments began landing on July 15 in the bank accounts of 35 million families with 60 million children aged 17 or under, according to a CNBC report. For qualifying families, monthly $300 payments per child under age six — and $250 per child age 6-17 — will occur through December 2021 and may be extended. 

In conclusion

Although the coronavirus and variants have not been solved, much has been learned about how to manage the effects of the virus. For much of the country, in-person learning throughout the 2021-22 school year seems realistic, despite the recent uptick in COVID cases due to the Delta variant. 

Along with students, families and educators, retailers especially can feel a sense of hope and renewal as the new school year approaches.

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