Major mass market retailers reported solid sales gains for this year's back- to-school season, even though some of those sales were generated via aggressive pricing to lure shoppers to one store over another, which has raised some doubt on the final profitability achieved.
Nonetheless, sales were great. According to Retail Metrics, Inc., U.S. retail sales rose 3.1 percent in August - which is better than expected. One-third of all households made back-to-school purchases, spending an average of $427 by the third week of August, and estimated to spend an average total of $571 for the entire season, according to research by TNS Retail Forward.
Economists had feared that worries about the economy, mortgage foreclosures and gas prices would impact back-to-school sales, but Americans spoke with pocketbooks and proved back-to-school is a necessity - not a luxury.
Shoppers were prompted to buy with sharper discounts in some areas this year as retailers tried to keep up with category killers. For example, filler paper and other items were priced much lower than even last year. The hope was that the traffic lured by sharp pricing would not only result in a boost for the featured items, but also in impulse purchases of other higher margin goods.
One of the strongest sales trends was in supplies for college kids, including home goods to set up dormitories such as ready to assemble furniture and storage. Electronics also benefited from a big census bubble of kids heading to college. Chains who targeted the college crowd said they were pleased with sales of everything from bedding to organizing plastic storage bins. The current generation of parents seems more intent, experts say, in buying up everything their offspring need for college than past generations who left kids to fend more for themselves.
For products for younger kids in grade school and high school, the basics fared well. Mass merchants such as Wal-Mart and Target singled out traditional needs such as binders, notebooks, lunch boxes and backpacks as among items nudging up August sales. There was also a nice blip for licensed merchandise fueled by the popularity of properties such as Hannah Montana and High School Musical.
There were two sales bursts - the last two weeks of August, recorded in August sales, but also the first weeks of September. Some schools started later than in other years and many children wait to see what other kids have before making their major shopping spree.
Discussion questions: Given the general economic mood in the U.S., will the sales gains generated by back-to-school set the tone for the remainder of the year in overall mass market retail sales and, specifically, general merchandise sales? Are retailers and their supplier partners going to need to promote extremely aggressively for the remainder of the year to generate top line growth?