Back-to-School Budgets Earn Passing Grade

NEW YORK Beleaguered retailers looking for encouraging signs can take comfort in new Deloitte research showing that fewer consumers expect to reduce their spending on back-to-school items compared to last year. Still, amid continuing concerns about the economy and job security, shoppers are demanding value when they open their wallets. Among the 1,044 American consumers surveyed July 6-9, 64 percent said they plan to spend less on back-to-school items, compared with 71 percent in 2008, when concerns about higher food, gas and home energy prices caused shoppers to rein in spending. Four in 10 respondents, or 43 percent, say they'll trim their budgets by more than $100, down from nearly five out of 10, or 48 percent, last year. "Concerns about the economic situation and job security jumped this year over last year," said Stacy Janiak, vice chairman and U.S. retail leader, Deloitte. "But there is a glimmer of hope in that a lower percentage are saying they're going to spend less and 14 percent of them thought the economy is on the way back. Consumers' concerns this year are focused on value and price." Ninety percent of those surveyed said they would do their back-to-school shopping at discount/value department stores; 40 percent at dollar stores; 29 percent at office supply stores; and 28 percent at off-price stores. Seventy-four percent said they would buy more items on sale; 65 percent will buy only what their families need; 64 percent will buy more lower-priced back-to-school items; 55 percent will use coupons; and 45 percent will shop at different, less expensive stores than they usually do. Almost one-third of the respondents said they plan to buy more private label brands and more than one-quarter will comparison shop online before purchasing. When consumers were asked if they are likely to cut back on specific items, 81 percent said they plan to buy fewer clothes and 49 percent expect to spend less on shoes. Some 32 percent say they anticipate spending less on supplies and 30 percent intend to spend less on backpacks and book bags. More than three-quarters of shoppers expect to do most of their shopping in August. Janiak said retailers should implement promotions and use strategies now that include coupons, sales and loyalty programs to entice consumers to spend a greater share of their back-to-school budgets in one place. "Retailers who use loyalty cards are bifurcating that information even further when it comes to their core customer base to try to offer special value to core customers in order to retain them," she said. "They're also being very strategic about inventory and looking closely at category mix. They're looking at whether to carry a lower level of SKUs, variety and quality of material. They're changing inventory to demonstrate value to customers."Fifty-five percent cited concerns about the economy as the main reason they would spend less, followed by 50 percent voicing concerns about gasoline prices; 50 percent, food prices; and 46 percent, high prices for home energy. (These three inflation-related percentages are down significantly from 2008, however, when consumers largely attributed their reduced spending to these costs.) This year consumers cited additional reasons for cutting back-to-school budgets, with 22 percent indicating a loss of a job in their household and 17 percent fearful about being laid off. Almost one-third (32 percent) said they are saving more now, up 10 percentage points from last year, and 33 percent are paying down debt. Is this a temporary response to the economy or a more fundamental shift in consumer behavior? "It's a combination of both," Janiak observed. "Out of necessity, people are paying down debt because of lack of credit and saving because of the jobs situation. The responses this year were not dramatically different from the prior year. But there is the potential that this becomes a new paradigm of American consumer behavior. Whether because of fear or actual change, the longer people are doing something the more likely it becomes a habit."

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Back-to-School Budgets Earn Passing Grade

Noreen O'Leary

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Noreen O'Leary