Back-To-School Spenders May Be More Frugal This Year
August 21, 2013 1:30 p.m.
Milo Copic, SDSU Marketing Expert
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CAVANAUGH: Backpacks, shoes, lunch boxes, clothing, school supplies. The stores are full of back to school stuff. And if it seems you've been seeing that stuff advertised for weeks now, you are correct. Back to school has become the second biggest shopping season of the year, and it's exhibiting what merchandisers call "creep", when a buying season starts earlier and earlier each year. Milo Copic is a professor in the school of business administration at San Diego State university. Welcome to the show.
COPIC: Glad to be back.
CAVANAUGH: We never used to see many back to school ads any earlier than mid-August. Now they seem to be starting in June. What's going on?
COPIC: Well, marketers are trying to capture that dollar. So the season is stretched a little bit from that mid-August timeframe to about mid-July. Much beyond that, it's difficult to capture consumers because most schools are ending in mid-June, and their mindset is not ready. It's really important from a retailer perspective to get that consumer when their mindset is prepared for that holiday, whether it's the Christmas holidays or back to school.
CAVANAUGH: Why do marketers extend the season? Do we know? Is there evidence to show that the longer a shopping season is the more people will spend?
COPIC: What it does is it creates an event. It creates a reason to shop, as opposed to it's just the summer, and we'll shop or buy something as needed. I'm giving you a reason. So back in the early '80s, a lot of consumer marketers, the big selling for potato chips is between May and labor day in September. And they had real problems filling the plants and having three, two ships a day in other parts of the year. So they invented holidays around Halloween, Super Bowl parties, the NCAA championships. That was never a huge event until marketers made the final-4 the event. And it gave you a reason to shop.
CAVANAUGH: So people don't start shopping for back to school items in the middle of July, but they may just get it in their heads, hey, I should go shopping; is that right?
COPIC: Exactly. It's a reason to go to the store, and to be looking for those ideas because you know you're going to need them, rather than wait until the pickings are slim.
CAVANAUGH: Gotcha. So how much is the average family expected to spend this season?
COPIC: It's interesting. The average family is expected to spend about $635. Which is somewhat below the Christmas holiday, but it's the second largest shopping period of the season. And it's really important that this year, the expected spending is below last year, whereas we had the recession and Christmas spending dropped precipitously, and it's been issued back up. Back to school spending has been growing even in despite of the recession.
CAVANAUGH: What might be some of the reasons sales are down this year?
COPIC: In California in particular, we had kind of a double whammy. There's the payroll tax holiday that all of a sudden, everyone is paying 2% more on their top line income. And the quarter% tax sales increase in November. So people have less to spend on items. No.†2, the gas prices have remained steadily high. So lower to middle income families are particularly harder hit because they're making resource choices. And lastly, with unemployment being still stubbornly over 7%, with 28 states just recently -- actually, the unemployment rate went down, but 28 states' unemployment rates went up. So people are still cautious.
CAVANAUGH: I've seen lots of TV ads for discount stores, K-Mart, target, Walmart. Is that where most of the back to school money will be spent?
COPIC: A large part of it will be spent there. It's more stable items, clothing. In Christmas, you don't want to get the underwear or the socks, but here you have to get them. Kids' clothing, they're outgrowing it, you don't want to go to Nieman Marcus or Macy's and buy some high-end clothing when you know in six months it's going to be passed onto somebody else or outgrown completely. So looking for value, stores like
Old Navy, H&M, good places to go.
CAVANAUGH: I've seen a big push on TV by JCPenney. And they have been struggling with slumping sales. It's putting a lot of its back to school campaign, called first day look, what do you think the strategy is here?
COPIC: JCPenney is in desperate straits. The current CEO said that the old CEO who came from the apple retail stores wanted to clean up the stores, make it sleek, have everything that's branded, and they took away the discounts. That hurt them because their shoppers range from the upper middle income to the upper middle income, and it really alienated those buyers. So they're taking advantage of some of the good things they did with the previous CEO, they're really bringing back in the discounts, the special deals, and the private label products that will make it more acceptable to the lower middle income people. And the retailers who are seeing a resurgence because people are willing to try them again because they have had a good experience going in stores.
CAVANAUGH: And also they have that history as a child, you might have bought your back to school clothes as JCpenny. So you bring your kids there at this time.
COPIC: Absolutely. So it's kind of a make or break for them. They really need to regain that momentum. So there's going to be a few retailer who is are aggressive in their back to school advertising.
CAVANAUGH: Are there tips on what is good to buy early and what is perhaps better to wait for until later in the season? What items?
COPIC: That's a great question. Generally, two things that are very important. Jeans are a great way to attract consumers. So the pricing on jeans is very aggressive from the early part of the season in July. So if you're looking for jeans, get them now. Backpacks, the closer you get to school, the bigger the discounts. So this weekend, are next weekend, whether you're starting kindergarten or going to college, backpacks are a big driver. And a lot of stores, like Costco or Staples use backpacks as a big driver to increase the overall ticket ring for school supplies or other items that you go to Costco, get clothes, food, whatever it happens to be. But backpacks are front and center in those stores.
CAVANAUGH: So this weekend or next weekend.
COPIC: That's where the discounts are the deepest.
CAVANAUGH: Okay. College students going back to school, they have bigger ticket items to buy. What are some of the things they're looking for?
COPIC: They're looking for electronics, primarily. Productivity items like computers, tablets, and cameras. This is an interesting time because we all heard about the challenges that Microsoft is having with their Windows 8 release, it's affecting PC sales. They're concerned. Consumer electronics retailers are pushing very hard to offer laptops in particular, accessories, stereo equipment, speakers, tablets, those things are available right now that have reasonable deals.
CAVANAUGH: And also I would imagine things for dorm rooms and things of that nature. I see a lot of that being sold in places like Target.
COPIC: Target is very typical, the Container Store, all those things in terms of dorm room supplies. There are dedicated websites only for dorm room supplies. And what they're trying to do, this is one of the big things that marketers do, they try to find an unmet need. It used to be you brought your suitcase, the furniture that was there was fine, and you had your bedding, and that was it. And you might go in with your roommate to get a fridge. But now, you really want to personalize your dorm room. And they're really offering ways to do that it's relatively inexpensive. So you'll see marketers trying to reach your pocketbook in different ways.
CAVANAUGH: I'm thinking about shopping online in general. Is that a big thing for back to school sales?
COPIC: If you're buying staples, underwear, socks, things like that, you could buy it online. If you're buying jeans, you can buy online. A lot of times, little kids, yes, being able to make sure that the clothes fit is important. So you'll see a lot of traffic because people also -- it's the summer, it's nice weather, they like to go around. It's a great opportunity to go out with the family. And what malls have been doing to attract families, not just individuals, they have had events, they have had concerts at the malls, so they'll get whether it's teenaged girls or young men who are whomever, they're trying to drive that traffic to feed them into the various retailers.
CAVANAUGH: What do you hear about what parents are doing to save?
COPIC: Parents are just trying to be smart. They're looking for the best deals, they're looking for online coupons that they can take in-store or use online, they're using their mobile devices to compare prices. So if you see a Levi's pair of jeans in a store, you might find it at another retailer at a lower price that you're looking to buy something else. So they're trying to be very smart. The whole concept is value. They're being a little bit more frugal. They have limited dollars to play with, so they're trying the best way to extend those dollars.
CAVANAUGH: Let me go back to the point you were making about back to school sales and the comparison to the Christmas season. The sales so far are down this year. If that trend holds, what does it say to retailers about the upcoming Christmas season?
COPIC: They're nervous. The National Retail Federation has been a little bit muted in their projections for the holiday season. If you paid attention to the earnings reports last week from Kohl's, Macy's, and Walmart, Walmart not only missed their numbers, but they're projecting lower sales in the 4th quarter which is the holiday season. Macy's for the first time in six years completely missed their numbers which is very shocking. Everyone is a little bit concerned. You don't know how it's going to go because there isn't an "it" item, whether it's the back to school season or maybe in the fall, and there may be some mid-items, Apple is announcing some new iPHONEs in September. Windows is going to come out with a new version of Windows 8, and Xbox and Playstation are coming out with new items. The more traditional clothing items, people are concerned.
CAVANAUGH: Seven state, not California, actually taking a step of offering a tax-free holiday for back to school sales. I believe that happens this weekend, Alabama, Connecticut, Florida. Could they possibly boost sales for the retailers?
COPIC: Absolutely. Whatever the sales tax is in those states, 5%, 7%, is directly into the pocketbook of the consumer. And the retailers pass it along. Here in San Diego and other cities in California, there are retailers who will do it. Kohl's, for example, has done that a couple of years in a row where in different windows of time, they'll give you that 7.75 tax back. And that's an important discount. Especially with retailers where the cost provided is fairly reasonable, they're allowed to buy that extra item that you otherwise couldn't get.
CAVANAUGH: So there's really no time to wait now, because it's looming in front of us. When will we start to see the back to school displays begin to fade away, and then Halloween begin to descend upon us?
COPIC: I think in the second half of September you'll start seeing some Halloween things. What's going to happen this year in particular is parents are going to wait to see the first two weeks of school to see what is missing from their child's back to school lineup. So there may be a blip between after labor day and mid-September where there's going to be a tale to the back to school season where people realize I didn't get these supplies, these jeans, I should get that to prepare for school.
CAVANAUGH: That's very interesting. I noticed at the end of certain seasonal shopping sales, they used to have a long period of time where you could pick up items, like for Halloween two weeks later, you could pick up an item at a very discounted rate. Now Halloween supplies disappear, the Christmas supplies disappear like a week afterward. Is that a strategy that stores are using now?
COPIC: I think it's more they're better ordering of inventory. Because sometimes, before these just in time ordering systems came into being, they may have way overordered. So they would do clearance sales, and they're being much more efficient in what is being sold over the holiday.
CAVANAUGH: Thanks so much.
COPIC: Thanks, Maureen.