If you’re a parent of a student, or a student yourself, you certainly know what time of year it is: time for back-to-school shopping. Retailers certainly know it, but some of them might not know of, or not be prepared to deal with, the multitude of changing elements in play that affect the ever-growing opportunity.
As Sarah Quinlan, Senior Vice President of Market Insights at MasterCard, recently discussed with MPD CEO Karen Webster, back-to-school shopping is evolving from what once was a single annual event to a much more nuanced consumer experience — whose timeline, just for one example, is always in flux. For retailers to best serve the category, they need to study up on the advanced curriculum.
KW: It’s always a pleasure to get your insights on the things that are driving consumer spending, and this is the time of the year when we talk about back-to-school. Some analysts say that’s a $70 billion opportunity this year.
In your perspective, what is the market looking like for back-to-school 2015?
SQ: I think it’s evolving, in a couple of ways.
The most important factor to understand is that the consumer is very experiential in their spending — and that’s the way they want to be, even in back-to-school shopping. Because there are required items to purchase for back-to-school, it doesn’t necessarily always fall into that experiential method in which consumers seek to spend.
What a large portion of back-to-school shoppers have done, then — they did it last year, and they’re doing it again this year — is actually delayed engaging in the required spending portion. In 2014, the biggest day for back-to-school shopping was Aug. 29, while spending on electronics in that regard actually moved all the way to Sept. 19: People had already started school before they figured out what kind of tablets, et cetera, that they wanted.
I think we’re going to continue to see this delayed spending. As much as we’re seeing back-to-school advertisements in print, on TV, via email and everywhere else, that is not necessarily driving traffic just yet. People are still enjoying their summer vacations, hanging out with their friends, going to concerts, and so on. Back-to-school is not actually top of mind for a lot of shoppers right now.
KW: I can’t blame them. Who wants to say goodbye to the summer and hello to the school year? Save for the parents of school-age kids, in some cases.
Are electronics driving the back-to-school category this year, as they have in the past?
SQ: Clearly, they are. We’re watching the consumer make larger and larger durable goods purchases, and a good part of that is electronics sales — although they did lag a bit in July, again likely because of the trend towards waiting until school has actually commenced. So we can expect another increase of sales in the category as that time approaches.
Another thing that’s interesting is that weather has an influence on the timing of back-to-school shopping. People will actually wait and delay some of the purchasing of apparel, for example, until they really feel that the temperature has settled into what it will remain for a while. With each passing year, it does tend to stay warmer for longer as we get into September and October.
That speaks to the importance to the post-recession consumer of getting value for their money. The consumer is thinking, “My child is still growing. I’m not going to buy their school parka for winter right now, when it’s warm; I’m going to wait until that season is closer and my child has grown a little bit; that way, they’ll get more use out of it."
KW: Are there two waves of back-to-school spending: the college wave and the primary school wave? I’m wondering if there’s a different cadence for shopping based on the level of education and grade.
SQ: The back-to-school wave for younger students is a little bit different because that type of shopping is largely done online. We’re seeing a gradual continuation in online spending for that age group; often the mother does it at around 10 o’clock. Young children tend to be able to fit into sizes and clothes that are more generic, so that’s something that’s easier to shop for online, compared to shopping for teenagers and young adults, for whom clothes are more personal and it’s not a situation of every size being equal.
The college-aged student is much more involved in their back-to-school purchasing than younger students, so that tends to occur right when they’re heading back to school, typically at the end of August.
KW: You and I had previously talked about the trend of consumers shopping at small businesses for the experience and the product selection. Is that holding up, even in the back-to-school category?
SQ: Very much so, and I’ll give you an example: Total retail sales in the U.S. in the month of July, excluding gasoline purchases, rose 5.1 percent over last year. For small businesses with $50 million or less in annual sales, the rate in July increased 7.4 percent. Clearly, the consumer is continuing to increase their spending at small businesses.
That trend is especially evident in apparel shopping. Across retail, that category only rose 1.1 percent between July 2014 and July 2015, whereas for small businesses, the increase was more than 3 percent.
KW: That’s pretty stunning; hooray for small business.
What are families spending on back-to-school? Is there an average spend?
SQ: There’s not, anymore. An average is difficult to determine because the traditional concept of the nuclear family is in flux; there are so many different types of families.
It’s not a situation where families are setting a fixed dollar amount across the board to spend on back-to-school shopping. Instead, the consumer is continually spending as needed when it comes to goods, which include back-to-school supplies, such as apparel and electronics.
I can tell you that we’re seeing an increase every month in that method of spending, so consumers will spend more on back-to-school shopping this year than they did last year, for sure.
KW: Mobile is influencing every other aspect of shopping and spending. Is it having an impact on back-to-school, as well?
SQ: Absolutely. As we know, 74 percent of purchases — even those that end up being made in-store — are first searched for online.
Mobile plays a big part in consumers discovering products and making their eventual purchase decisions. That’s a critical element for retailers to incorporate in curating their back-to-school experience, allowing the parent to be involved in it from the very beginning.
The consumer wants to spend where and when they want to spend; they want to determine those same aspects in the delivery of purchases. They’re in control. As we see more and more mobile opportunities to affect the ecosystem — from discovery of goods, to the payment cycle, to delivery — the technology will only continue to increase in importance.
KW: We know that the consumer experience plays an increasingly important role in their spending decisions, but merchants really want to get consumers into their physical stores.
Are merchants using back-to-school as an occasion to create an experience in the physical environment — which they can they use to sell other things?
SQ: I think that they are, but I would argue that the opportunity is not yet being maximized. Merchants could better appreciate the fact that back-to-school correlates with, for example, the start of the college football season, and think about how to drive purchases related to that aspect as part of the overall experience. Going back to some of the sporting experiences in general that people participate in over the summer, there’s a way for merchants to carry that over into back-to-school season.
Merchants are trying to build back-to-school into a larger consumer experience, to some degree, but a lot of them remain very focused on selling merchandise only directly related to the singular event. They could be approaching it with a much wider net, thinking about the changing flavors of autumn and the additional consumer behaviors that come with it, and building that into the experience.