Retailers Still Finding Footing for B-t-s

As stores resort to virtually every device in their promotional toolboxes to build buzz, what had been already modest expectations are becoming even gloomier.

Retailers can only hope the early stages of back-to-school aren’t a harbinger of holiday.

This story first appeared in the August 5, 2013 issue of WWD.  Subscribe Today.

As stores resort to virtually every device in their promotional toolboxes to build buzz for the b-t-s season, what had been already modest expectations are becoming even gloomier. Researchers note the strength of year-ago sales as just one of several challenges faced by stores looking to move healthy amounts of apparel, footwear, computers and tablets and more algorithmic school supplies.

Customer Growth Partners’ Craig Johnson compared consumer spending to “a car stuck between first and second gear” in projecting a seasonal increase of 3.4 percent for traditional b-t-s categories, below the 4.2 percent gain registered last year. On Friday, IHS Global Insight forecast a 3.2 percent gain, below the 3.6 percent advance to $40.9 billion logged by U.S. retailers during the 2012 season and also below the 4.1 percent gain expected for total retail sales during the third quarter.

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Chris Christopher Jr., director of consumer markets at IHS, cited improved consumer confidence and improvement in the equity and home markets as pluses for the season, with higher gas prices and a late start working against it.

“Many students and parents will not splurge in the third quarter since they will wait for the heavy holiday season discounting that has been occurring sooner and sooner,” he said. “In addition, e-commerce retail sales have been gaining share of total retail and especially on clothing, books, shoes and computers.”

He expects e-commerce to move from its current level of 5.5 percent of retail sales to 7.4 percent by the end of 2017.

A number of analysts and researchers believe that it’s the shift to e-commerce that has changed the timing of both b-t-s and its larger, later counterpart, the holiday season.

“A lot of people are doing their buying online with a variety of devices these days, and taking advantage of the 24/7/365 nature of it,” said Robert Passikoff, founder and president of Brand Keys. “Consumers now have a lot more options than they did just a few years ago, and more and more are taking advantage of them.”

Brand Keys’ annual survey of shoppers’ intentions for the season revealed not just less urgency but less intent to buy. In a study covering 10,000 households and begun just more than two weeks ago, on July 20, the research firm found that among households engaging in b-t-s buying, the annual budget for the year had fallen to $607, down 10.1 percent from the $675 budget for the 2012 season.

This is a slightly larger dip than the one projected by the National Retail Federation in its annual b-t-s projection, which called for a 7.8 percent drop in household b-t-s budgets to $634.78.

Although “intent-to-purchase” studies are in no sense a guarantee of the outcome to follow, they tend to provide a capsule of the mood of the general public at the time, and this year’s indications were hardly positive:

• Spending on apparel, while still the top purchase category, was expected to fall 29 percent from last year’s study to $301.

• Spending on footwear was down 23 percent to $110.

• Spending on tablets and smartphones was seen dropping nearly a third — 32 percent — to $110.

• Spending on supplies and books-study aids was projected to decline 60 percent and 56 percent, respectively, to $39 and $10.

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“Some of what we’re seeing reflects concerns of a slowing economic recovery, but the specific back-to-school figures also represent a shift in consumer buying habits,” Passikoff noted. “Retailers may be running back-to-school ads right now, but they’ve been discounting and couponing for the past seven months. Educated consumers have already stockpiled supplies for the first day of school.”

Discount stores remained the most popular destination for b-t-s shoppers, with the 97 percent of consumers intending to shop in them up four points from the year-ago figure. Those intending to shop online soared to 72 percent of the sample, a 34-point leap. Department stores were designated by 28 percent of respondents, a 44-point drop, and specialty retailers by 30 percent, down 10 points. Catalogues were designated by 35 percent of those surveyed, up three points.

“Some consumers could be buying from the ‘clicks’ portion of clicks-and-mortar and indicating they’re shopping online,” Passikoff noted. “Someone buying from macys.com might be checking off ‘online’ instead of ‘department store.’”

But there are also indications of increased thriftiness and less concern about making purchases specifically timed to the opening of school.

Asked to identify specific retailers from which they would buy, Amazon topped the list, appearing in 95 percent of shoppers’ responses, followed by Wal-Mart at 93 percent and Target at 90 percent. Macy’s, which, like the rest of the department store universe, failed to make the 2012 top 10, was fourth at 87 percent. Zappos was fifth at 85 percent; TJ Maxx and Kohl’s tied for sixth at 82 percent; Best Buy and Foot Locker tied for eighth at 79 percent, and Staples was 10th at 75 percent.

Last year, Wal-Mart was first, followed by Zappos, Amazon, a tie between J. Crew and Apple, and another tie between Target and TJ Maxx. Rounding out the top 10 in 2012 were Bed Bath & Beyond, Staples and another tie, between Radio Shack and Walgreens.

“There aren’t that many people who still ‘need’ a tablet or smartphone or laptop,” Passikoff added in reference to Apple’s failure to make the list after its strong showing last year — a situation reflected in Apple’s most recent financial results.

If retailers fail to convert the opening of schools into the large increases they’d like, it won’t be for lack of trying. Promotions among stores of all sizes have been persistent, both online and off, with summer clearance and fall incentives often overlapping.

But even with better job numbers and the recent return to more normal weather patterns, building on last year’s sizable gains has been challenging. Stifel Nicolaus will hold a conference call today to discuss “A Few Bright Spots in an Otherwise Drab Outlook for BTS.”