With summer more than halfway over, we're deep into the season…the back-to-school season that is. While it's just a blip on the retail radar compared to the holiday shopping days to come, it's an important precursor for how retailers are going to market, operate, promote and deliver during Thanksgiving, Black Friday, Christmas and the end of the year.
Trends this year point to a shift in where BTS spending will be directed— a new retailer is taking over the top spot from Walmart and the BTS shopping season is expected to extend past August. But perhaps the biggest challenge for retailers will be in catering to a new demographic as Generation Z comes of age and goes back to school.
The National Retail Federation reports that back-to-school spending has grown 42 percent in the past 10 years, and this year a total of $24.9 billion will be spent during the typically short selling season. In total, consumers are expected to spend $68 billion, including expenses for college students.
"As seen over the last 13 years, spending on 'back to school' has consistently fluctuated based on children's needs each year, and it's unlikely most families would need to restock and replenish apparel, electronics and supplies every year," said NRF President and CEO Matthew Shay. "Parents this summer will inventory their children's school supplies and decide what is needed and what can be reused, which just makes good budgeting sense for families with growing children.
According to a survey from ShopperTrak, 29 percent of households with kids ages 6 to 17 plan to spend more this year for back-to-school, compared with 24 percent who said the same thing one year ago.
But what seems to be shifting more than ever during this BTS season is who is calling the shots. It's the students, or Generation Z, who have a big influence over what is bought and how it is purchased. According to the NRF, 9.7 percent of parents admit their child influences 100 percent of what they buy, up from 7.6 percent on year ago.
So, what do kids want this year?
The breakdown for purchases, as expected, puts clothing and school supplies at the top of the list, with 80 percent of shoppers buying the former and 70 percent buying the latter. Other popular purchases include 41 percent buying textbooks, 20 percent buying laptops or tablets, and 15 percent buying smartphones.
As far as how much will be spent on specific categories, students will spend an average of $270 on clothing, $120 on shoes, $80 on supplies, $160 on computers and electronic devices, and $22 on books, according to the 21st annual survey from Brand Keys.
Looking at specific brands, 41 percent of children are asking for Nike products this back-to-school season, according to online deal site FatWallet. Other hot brands include Apple, 31 percent; Under Armour, 22 percent; American Eagle, 19 percent; Forever 21, 16 percent; Samsung, 15 percent; and Adidas, 12 percent.
"I believe this back-to-school season we will see more teens and tweens seeking options that allow them to design, create and customize back-to-school items, from clothes to pencils to lunchboxes. They don't care where they come from—the big retailers and little online startups have equal opportunity to gain Gen Z's business. Startups may even have the advantage as they are viewed as unique and more exclusive," said Marcie Merriman, executive director, growth strategy and retail innovation, EY.
In addition, Michele Dupré, vice president, retail, hospitality and distribution vertical practices at Verizon Enterprise Solutions, notes the growing popularity in purchasing gift cards as part of BTS shopping, especially when it comes to buying graduation gifts for students going off to college. She believes this trend will also extend into the upcoming holiday season as more and more shoppers choose gift cards to give as presents.
Online purchases are a must
More and more shoppers, in general and certainly for BTS shopping, are gravitating increasingly toward online shopping; therefore, retailers are following suit and expanding their online promotions.
"You're going to see that continue to increase especially as the big holiday season approaches," Dupré said. "As more and more retailers become dependent on an omnichannel strategy, this is the foundation, the litmus test, for how prepared they are for the big holiday season."
Consumers who use digital convert at a 20 percent higher rate, according to ShopperTrak, and those using social media during the process are four times more likely to spend. The same sentiment rings true for BTS shopping. Digital use and online spending will make up a large portion of back-to-school purchases this year, as FatWallet reports 53 percent of adults will by back-to-school items online and 7 percent via mobile.
|View full ShopperTrak infographic here.|
The Brand Keys' annual survey looked at the top 10 e-tail brands. Nike.com (No. 7) moved up the list this year while Overstock.com (No. 10) moved down. And missing this year from the top 10 list—eBay. Not surprisingly, Amazon took the top spot and other popular e-tail brands include Target.com (No. 3), Kohls.com (No. 4), Macys.com (No. 5) and Zappos.com (No. 6).
Walmart (No. 2) just announced a big push to boost BTS e-commerce sales by offering 30 percent more price reductions via its mobile app and additional discounts on the top 10 items that are most searched for online.
Digital will remain a large part of the research process for BTS shopping. According to Deloitte's annual "Back-to-School" and "Back-to-College" surveys, in-store purchases of electronics and apparel are largely influenced by devices used during shopping trips.
Almost half, 49 percent of every dollar spent on apparel in a physical store was digitally influenced, and 62 cents of every dollar in the electronics category. BTS shopping will be no different as eight in 10 smartphone owners who took the Deloitte survey plan to use their devices in the shopping process, a 6 percent increase over last year.
PCs and tablets also play an important role as 44 percent of respondents will access a retailer's website; 42 percent will look up product information; and 29 percent plan to use their phones to make a final purchase.
The popularity of online cannot be denied. According to the fifth annual Back to School study by PM Digital, two-thirds of online shoppers said they would be begin shopping at least 3 weeks ahead of going to brick-and-mortar stores.
Dupré also pointed out a trend that has carried over from last year's big holiday season—the drive to buy online and pick up in-store, or at universities in the case of college students. For example, parents want the flexibility to buy dorm room supplies for college-aged students and have the items delivered directly to the child's school. Dupré notes that Bed, Bath and Beyond was on the cutting edge of this strategy in attracting college-aged BTS shoppers and continues to dominate in this realm.
Where will parents and kids shop?
Discount and value department stores are still the most popular shopping destination for BTS, at 86 percent. The second most popular spot, 44 percent, is online retailers. And 55 percent of parents shopping for kids in grade school and high school will research online before making an in-store purchase.
The biggest shift is to specialty retail stores, up 21 percent from 2014, and department stores, up 20 percent in popularity from last year, according to Brand Keys.
Target took over the No. 1 spot, replacing Walmart, which slipped into second place, for most popular retail brand in the Brand Keys survey. "It would appear that their [Target's] return to a 'cheap chic' positioning is working," said Robert Passikoff, Brand Keys founder and president.
New to the list included Walgreens (No. 4, tied with CVS) and Sears (No. 9). Other names in the top 10 retail list included Macy's (No. 3), Best Buy (No. 5), TJ Maxx (No. 6), Staples (No. 7), Foot Locker (No. 8) and Apple (No. 10).
Hurry up and wait
It seems most BTS shoppers are in no hurry to fill their baskets by August. According to Deloitte, nearly 38 percent of parents shopping for kids in kindergarten through grade 12 said BTS shopping season is less important because they replenish school supplies throughout the year. In fact, 31 percent plan to complete their BTS shopping after the start of the year, up 5 percent from 2014.
"Consumers are sending a message to retailers that says the back-to-school shopping season just isn't that important anymore—and that could dramatically disrupt an industry that traditionally relies on this defined period for a significant portion of annual sales," said Alison Paul, Deloitte LLP, vice chairman, retail and distribution sector leader.
"The question for retailers is how to capture the sales that may not fall exclusively in July or August, but increasingly spread throughout the year. If consumers are content with the items they already have, the two-for-one promotion may no longer get them to the register. Instead, retailers will have to provide something more meaningful or exclusive that fits their customers' needs when they are ready to buy."
Nearly 50 percent of the consumers in the Brand Keys survey indicated they had already bought supplies for the first day of school before August, up 15 percent from last year. But another 30 percent indicated they would wait for the summer sales, and 20 percent are waiting until the last minute.
"Retailers have spent more than a decade teaching consumers they can get things cheaper or for better value if they wait a little longer or look a little harder, and consumers have been fast learners," Passikoff said.
'Tis the season for fraud
The back-to-school selling season is actually relatively short and spikes for only about a few weeks. With that said, it means that retailers need to take very specific fraud prevention measures, according to Bill Zielke, chief marketing officer at Forter, a fraud prevention company.
"Firstly, fraudsters have more incentive to target the retailers who are providing back-to-school products because they're the goods that everyone is after—which means they're easy to resell quickly," Zielke said.
Products stolen and resold can range from paper to laptops, and even gift vouchers for books. "A fast turnaround is a significant advantage for a thief, because it realizes his profit quickly and means the deal is done long before any suspicions or problems can arise. For this reason, back-to-school, sadly, can be a good opportunity for a fraudster."
Secondly, retailers who are still working with manual reviews to detect fraud are under enormous pressure during the surge in orders, which increases a retailer's chance of making a mistake. "Whether it's a fraudulent order approved or a genuine one rejected, it's bad for business. And that's without even taking into account the fact that, in a real-time world, legitimate customers might be put off by the fact of having to wait for confirmation until their transaction has been reviewed," Zielke said.
Retailer concerns over security are heightened this year as brick-and-mortar vendors are working to get ready for EMV adoption in October and online merchants prepare for the increase in online fraud that is predicted as a result. "That means their [retailers'] fraud prevention has to be even faster and sharper than usual to combat the onslaught," added Zielke.
All this needs to be balanced with the customers' needs, which are increasingly higher. They want transactions to be smooth, personalized and fast. Zielke noted that fraud prevention methods that break the checkout flow make it more likely for a consumer to give up on a purchase.
"Finding the right balance between the need for accurate fraud prevention and the importance of ensuring an optimal customer experience is a delicate business, and something retailers are having to devote time to considering," Zielke said.
So what's the best defense? Information. Retailers need to be informed in-depth on the latest trends in fraud.
"Retailers also need to move to real-time fraud prevention. E-commerce merchants typically invest considerable time and effort into ensuring that their pages load fast and that their checkout process is clear, but they rarely give the same attention to the impact fraud prevention might have on that checkout flow," Zielke said.
"This is no longer a luxury retailers can afford; consumers expect swift service, and time-consuming fraud prevention methods make that impossible. Automation is essential in modern e-commerce—and that includes in fraud prevention."
Tips for getting the most out of the season
So what can retailers do to ready themselves for this short but busy season? First off, ShopperTrak recommends looking back at historical data, benchmarks and trends. This way, retailers can make sure to be fully staffed during days and hours when visits are expected to peak. Also, pay close attention to local school start dates to meet local market demand.
Retailers also need to prepare staff to ensure the associates are informed about campaigns and promotions to help turn growers into buyers.
Finally, omnichannel is an important buzzword to remember as retailers need to tailor the experience to suit shoppers looking both online and off-line. This means engaging mobile visitors to ensure in-store and online inventory match.
"Value, of course, isn't just about pricing, it's about brand, brand differentiation and brand engagement," Passikoff said. "Retail brands that can emotionally engage consumers are seen as surrogates for added-value, and those will be the brands that benefit most. Consumers not only believe that, they behave that way in the marketplace."
|View full ShopperTrak infographic here.|
In addition, retailers need to offer up creative tools that let children customize or be in control of the BTS shopping process, according to Merriman.
"They'll need to accommodate Gen Z's impatient tendencies by providing an easy and seamless creation and buying process, that gets products into their hands quickly and free of delivery charge. Mom and dad will also have less involvement—not getting the back-to-school items for them—as this becomes a creative process Gen Z wants to own," she said.
Merriman does warn that this generation was brought up on technology, is highly informed and ready to take charge of their own future. Therefore, they tend to be less loyal to retailers.
But the positive is that small startups have as much an opportunity to get Generation Z shoppers as big-box retailers and giant e-commerce shops do. "We will be challenged to find new ways to authentically connect with this generation in order to win them over," Merriman said.