Stingier shoppers schooling retailers
Tammy Groppe had already purchased a pair of lunch boxes from Toys R Us and a few Dollar Store back-to-school items by the time she got to Wal-Mart on Tuesday.
Picking over the pocket folders, the House Springs mother of two noticed a theme beginning to emerge — more discounts and less spending on this year’s back-to-school necessities.
"I’m finding the sales for what is on their list," said Groppe, whose sons will start second grade and preschool in the fall. "I’ll probably spend less this year."
That’s a refrain retailers are bracing to hear as the back-to-school season heats up.
Nearly two-thirds of U.S. consumers are expected to spend less this year on school supplies and apparel, according to a recent survey by consulting firm Deloitte. The National Retail Federation estimates that overall back-to-school sales, which includes spending for college students, will fall 7.6 percent compared with 2008.
Next to Christmas, the back-to-school season — which runs from about mid-July through Labor Day — is generally the retail industry’s most lucrative.
Expected to generate about $47.5 billion in sales, the eight-week period is also a barometer and momentum-builder for holiday sales.
This year, retail experts say stabilization is the best hope for an ailing industry.
"I don’t think anybody’s looking for that (momentum) to happen this year," said Neil Stern, senior partner at McMillan Doolittle, a Chicago-based retail consulting firm. "Consumers are buying on need and necessity — they’re really curtailing nondiscretionary purchases, and that’s continuing in the back to school."
Discount retailers might see a bump from increasingly cost-conscious consumers, who are limiting purchases to schoolhouse essentials. But analysts expect that the state sales tax holidays offered by more than a dozen states, including Missouri, will have little impact on the ailing retail industry as a whole. Missouri’s tax-free weekend runs this Friday through Sunday.
"If we look at consumers
individually and collectively, I think they’re tapped out," said Bob Buchanan, an adjunct professor at the John Cook School of Business at St. Louis University and a former retail analyst with A.G. Edwards.
Groppe sought out discounters to maximize her back-to-school budget. Her strategy was simple: Start early and save often.
Many retailers are taking a similar approach. To combat the grim outlook, retailers like Wal-Mart Stores and Old Navy have offered back-to-school sales earlier than in years past. They’re also pushing low prices on everything from pens and pencils to computers.
Coinciding with back-to-school season, Wal-Mart in late July unleashed a $298 Compaq laptop on the tech world same day cash advance. Retailers like Target and Best Buy are putting a similar focus on value and discounts, and with good reason: Forty-three percent of consumers planned to cut spending by more than $100 this year, and a similar percentage planned to shop at less expensive stores than normal, according to the Deloitte survey.
"Consumers are looking for ways to make the most of their dollar," said Target spokeswoman Jana O’Leary. "By providing lower prices on our products, we feel like we’re addressing consumers needs."
On most fronts, the retail sector has limped into the back-to-school season. Department store sales fell 1.3 percent in June compared with May and were down almost 10 percent from June 2008, according to the Commerce Department. Teen-focused retailers like Abercrombie & Fitch and American Eagle also have taken a beating this summer.
Stern, the retail analyst, expects the pain to linger. He anticipates about a 5 percent decline in back-to-school spending this year.
"It’s a great time to be a consumer from the deal standpoint," Stern said. "Starting price points are lower this year."
But the back-to-school stretch might spark a few bright spots for some niche retailers. Student spending on electronics and computer equipment is expected to rise 13 percent over last year, thanks largely to cheaper laptops and desktops, according to data provided by the retail federation.
Specialty clothing chain Glik’s foresees healthy back-to-school sales, said Jeff Glik, chief executive and president. The Granite City-based chain operates 52 stores in eight states, mostly in smaller communities.
Glik said price points will actually increase slightly in time for back-to-school shopping.
"We’re finding a little bit more success in bringing in that higher tier," he said. "I’m confident our margins will be up at least a half a point over last year — that’s amazing for a back to school."
Retailers selling used goods also stand to expand their market share. The crush of teens and parents started weeks ago at Plato’s Closet in St. Peters, said owner Susan Moore. The national recycled retail franchise, with five St. Louis locations, buys and sells used clothes.
Moore expects back-to-school sales at the region’s five stores to increase 20 to 40 percent over last year’s totals, driven in large part by the tax-free holiday.
"I think people really are watching out for their money and are being cautious," Moore said. "The economy has actually helped us."
Filed under: legal by Fred