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Sunday, Dec. 21, 2014

Middle-class shoppers more sensitive to back-to-school supply costs

By Rick Romell And Kylie Gumpert, Milwaukee Journal Sentinel (MCT)

Published: Mon, Aug. 18 7:18 a.m. MDT

 Back-to-school supplies

Back-to-school supplies

(Michael De Groote, Deseret News)

WEST MILWAUKEE, Wis. — The giant pencil cutouts screaming “One Big Sale Here” throughout the Target store are a dead giveaway: This is the country’s second-biggest shopping season.

And for the great majority of Americans, the annual back-to-school extravaganza is unfolding across an increasingly price-sensitive landscape.

Cash-strapped, middle-class parents are being economically challenged by ever-growing lists that have expanded beyond protractors and No. 2 pencils to include graphing calculators, flash drives and Handi Wipes.

Retailers, meanwhile, have launched a wave of promotions as they vie more and more on price alone — potentially pinching their bottom lines and signaling a hypercompetitive environment for the critical holiday season just three months away.

“It seems very aggressively promotional,” said Brian Yarbrough, senior analyst for investment firm Edward Jones, who pointed to pricing at big-box giants Walmart and Target.

Among Target’s promotions: $5 gift cards for customers who spend $25 or more on school supplies. That’s one reason Maria Garcia, 38, and her two daughters recently trekked to the Target store.

“For us, quality matters, but price matters too,” Garcia said.

She shops around for the best sales, paying close attention to the Sunday advertisements so she can compare prices. Because of that, she knows to buy her high school daughter’s graphing calculator at the big-box store, but to take her binder-shopping to Dollar General.

The sort of price sensitivity Garcia is showing meshes with the observations of every analyst interviewed.

“Retailers are heavily competing on price this year,” said Matt Ong of San Francisco’s NerdWallet Inc. “And that’s not surprising (because) really what we’re looking at in retail right now is too many stores.

“There are too many big-box retailers. There are too many department stores. Some of these stores will fail in the next few years and because of that they’re really throwing everything they have out there.”

And many of those stores — the ones that cater to middle-class shoppers — are fighting over a shrinking pie.

The recession bit hard into the wallets of average Americans. In real, inflation-adjusted dollars, median household income in the U.S. fell by $4,800 from 2007 through 2012, data from the U.S. Census Bureau and the Bureau of Labor Statistics show.

“You say, how is back-to-school going to be?” asked New York-based retail consultant Howard Davidowitz. “Back-to-school is going to be price-sensitive for 80 percent of the people. They’re going to watch every nickel, and they should. … So if you’re a retailer — of course they know all this, and they recognize that price has never been more important.”

All the same, the average family with kids in kindergarten through 12th grade will spend $669 on back-to-school shopping, up 5 percent from last year, a National Retail Federation survey estimates.

Clothes represent the largest single category of spending, which is why chains like Kohl’s Corp. scour the streets and runways for fashion trends that can be tweaked a bit to resonate with the stores’ customers.

This year’s focus includes offerings for girls that mix laces and florals with flannel plaids and leather in a style dubbed “School of Rock.”

“It’s got kind of a rock ‘n’ roll vibe to it, but for girls it’s very feminine,” said Sofia Wacksman, Kohl’s vice president of trend.

Wacksman works out of the company’s design office in New York. It’s fertile ground for fashion-spotting, and Wacksman is always on duty, “just seeing people and how they’re putting their clothes together.”

“We collect as much fashion information as we can,” she said. “…We watch runways, even the high-end stuff. We’re shopping. We shop all over the world. We go to Europe several times a year. We go to Asia, Tokyo. We’re kind of out there looking at as much as we can. And what our job is is to filter it through for the Kohl’s customer.”

Kohl’s also is selling school supplies this year — a first for the company. The range of supplies being offered, in a partnership with Office Depot, is limited, but it gives Kohl’s another weapon in the battle to get customers through the door.

Retailers want to position their stores as the consumer’s first stop because that’s where most back-to-school purchases are made, said Jeff Green, a retail-real estate consultant based in Phoenix.

While back-to-school is the second-biggest shopping period of the year, its importance is dwarfed by the leader, Christmas. Shoppers shelled out some $600 billion in 2013 on Christmas and the other winter holidays — eight times the amount expected to be spent this year on back-to-school items.

Back-to-school, though, signals the shape of holiday sales to come, and that may add to retailers’ worries. They already have plenty. Beyond the still-sluggish economy, the increasing use of the Internet as both a shopping venue and a shopping tool has put pressure on prices.

Even mighty Wal-Mart Stores Inc. has seen lower same-store sales — a key retailing metric — for five straight quarters, Davidowitz noted. Kohl’s was down four of the last five periods. Target, which also has had to grapple with the expense and public relations black eye from its massive data breach in December, posted lower same-store figures in three of its last five quarters.

With this year’s heavy discounting on school supplies and such, retailers have “already set the stage for the holiday to be very price-sensitive,” Green said.

Yarbrough agreed.

“I would expect holiday this year to be extremely promotional,” he said.

©2014 Milwaukee Journal Sentinel. Visit the Milwaukee Journal Sentinel at www.jsonline.com Distributed by MCT Information Services

Recommended
1. JSB
Sugar City, ID,
Aug. 18, 2014

"...Clothes represent the largest single category of spending, ..." The cost for clothes could be significantly reduced if a district went to school uniforms. They are less expensive and they look good. I don' know why but school uniforms seem to improved academic performance and decrease bad behavior. Why doesn't some district in Utah try it? It couldn't do any harm and there might do some good.