Will Back-To-School Shopping Flop?

Back-to-school shopping is normally one of the most consistently positive times for U.S. retailers. Parents and educators descend upon stores en masse, snapping up folders, notebooks and whatever else is on the school’s back-to-school supply list.

But these aren’t normal times.

True, parents spent a record amount last year: $696.70 per K-12 student and $976.78 for college students, according to the National Retail Federation (NRF). But that was 2019 and this is 2020, the year the world was turned upside-down and the fate of the school year remains deeply uncertain.

Some students will go back to school in-person as normal, while others will attend virtual classes because their schools have decided not to reopen. And still others will receive a hybrid model that will offer a blend of physical classes and virtual learning.

All of that leads to an interesting question: What happens to back-to-school shopping when many kids aren’t so much as going “back” to school as logging back in from their homes? Will back-to-school shopping sizzle or fizzle in 2020 – and what does that mean for the U.S. economy in general?

It’s easy for non-parents and parents of grown-up children to overlook what back-to-school shopping means to the economy. For many U.S. adults, it’s the start of an annual spending explosion that begins with back-to-school purchases, runs through Halloween and Thanksgiving and finally draws to a close during the holidays.

We’d say that back-to-school purchases prime the pump for the rush of shopping to come in Q4, but that underplays how much business back-to-school commerce accounts for in and of itself. According to 2019 data from thredUP, 62 percent of parents report spending more on annual back-to-school shopping each year than they do on Black Friday.

Here are three different views of how this year’s back-to-school shopping season could go:

The NRF Expects a Record Year

The NRF is looking for 2020 to be a big year for back-to-school shopping despite the pandemic, although it acknowledges that the season is difficult to predict.

“By any measure, this is an unprecedented year with great uncertainty, including how students will get their education this fall, whether they are in kindergarten or college,” said NRF President and CEO Matthew Shay. “Most parents don’t know whether their children will be sitting in a classroom or in front of a computer in the dining room, or a combination of the two. But they do know the value of an education, and are navigating uncertainty and unknowns so that students are prepared.”

The NRF’s annual back-to-school consumer survey found that parents had only finished about 17 percent of their annual shopping as of early July, well behind most years. As for why they were holding off, 54 percent said it’s because they didn’t yet know what they’d need, as only 10 percent had received lists of required school supplies by early July.

However, most noted that they expected to get such a list by the end of July or August, planning to shop when they had more information – and many expect to do some serious spending.

The NRF, which did the study in conjunction with Prosper Insights & Analytics, found that college students and their families expect to spend a record average $1,059.20, up from last year’s $976.78. Meanwhile, parents with K-12 students at home say they plan to spend an average $789.49 per family – also a record, up from $696.70 a year ago.

All told, the NRF forecasts that combined spending for K-12 and college will reach $101.6 billion, exceeding last year’s $80.7 billion and topping the $100 billion mark for the first time.

The NRF found that consumers believe education from home will require a more equipment-intensive experience. Of those expecting students to be at home, 72 percent believe they will need to buy items like computers, home furnishings or other supplies to accommodate learning.

As for how consumers will shop for their back to school supplies, the NRF forecasts that will likely shift largely online, following the trend currently evident throughout retail.

“With consumers cautious about how much time they spend out in public, there is likely to be less going store-to-store to comparison-shop this year,” noted Prosper Insights’ Phil Rist.

Wedbush Analyst Foresees a Fizzle

However, not everyone shares the NRF’s optimism.

Wedbush Managing Director Michael Pachter recently told MarketWatch that uncertainty doesn’t breed spending. He believes parents who are unsure whether their kids will even be in a classroom will be less, not more, inclined to spend.

“I am not sure what will ultimately happen, but Los Angeles and San Diego schools are virtual-only for the fall, and I suspect that many blue-state districts (in high-population areas) will do the same,” Pachter said. “So, back-to-school should be a dud.”

“While I agree that more kids are going to need PCs to continue with remote learning, I think it is likely that the uptick in demand from those households that don’t have a PC will be offset by those households with one or more parents laid off or unemployed because of the pandemic,” he said. “And I think the latter households will try to let the kids use existing equipment rather than buying new equipment.”

Moreover, he noted that schools closed months ago and many parents have been working from home for almost six months at this point. So, Pachter believes that any expected school-related shopping has already happened.

The Bottom Line

All of that is a long way of saying that forecasting this year’s back-to-school shopping is tough. But because back-to-school season is in many ways the soft opening of the annual Q4 spending rush, if it falls flat, that might just portend some rough sledding ahead for retail.