Retailers Take Different Routes Going Back-to-School
According to a study conducted by BIGresearch for the National Retail Federation (NRF), the 2007 back-to-school season is shaping up to be a good one as consumers expect to spend nearly seven percent more than last year.
Retailers, many that have watched sales soften in recent months, are looking to the back-to-school period as a means to make up some lost ground.
Wal-Mart, for one, has developed a back-to-school ad campaign emphasizing its low prices and how they help during a period when consumers are paying higher prices at places such as the gas pump. The chain announced it had rolled back prices between 10 percent and 50 percent on 16,000 items for back-to-school.
“We mean business when it comes to price leadership,” said Bill Simon, executive vice president and chief operating officer, Wal-Mart Stores, U.S. in a press release.
According to the NRF, Wal-Mart begins its campaign in a year when consumers are showing more of a willingness to look beyond mass to fill out their back-to-school shopping lists. The number of consumers planning to shop at mass merchandisers is down to 67.6 percent this year compared to 72.2 percent in 2006.
All other channels, based on the NRF’s survey, should expect to see more shoppers this year than last. Office supply stores (41.4 percent vs. 35.8 percent) look as though they will be the big winner while drugstores, department stores and specialty outlets may make more modest gains.
Staples is making a concerted effort to grow back-to-school sales.
Jevin Eagle, executive vice president of merchandising at Staples, said in a press release earlier this month, “We track the trends and talk to teens. This year, we paired focus group research with the latest fashion trends from Europe, resulting in our widest selection of back-to-school items ever. We know that teens know how to organize, so we wanted to offer them the coolest new colors, patterns and products that will help them personalize their back-to-school gear in a whole new way.”
On the product front, clothing (excluding footwear) will top many back-to-school shopping lists with 95.4 percent indicating they expect to buy apparel items. While many will shop the category, the survey indicates that consumers are not looking to spend much more this year ($231.80) than last ($228.14).
Three categories that are expected to see solid growth compared to last year are consumer electronics (up 13 percent), footwear (up 10.3 percent) and school supplies (up nine percent).
Discussion Questions: What do you make of the competitive landscape for this year’s back-to-school season? Why, assuming it is true, are consumers showing a willingness to shop other channels other than mass for back-to-school? Will Wal-Mart’s price cutting campaign swing sales back its way?
- Back-to-School Spending This Year to Top $18 Billion – National Retail Federation (NRF)
- Wal-Mart Invigorates Price Message in New Ads as it Launches Aggressive Program to Save Shoppers More – Wal-Mart Stores
- Staples Makes It Easy To Be Totally Organized AND Totally Fashionable This School Year – Staples, Inc./Business Wire
- Discounters lure in school supply buyers – Sacramento Bee
We look at BIGresearch survey data through segments–(the lens of the primary back-to-school shopper by key account) to find the story behind the story, and the opportunities that may be uncovered within.
We looked at moms with kids under 18 who shop at Wal-Mart and found the biggest increase in “plan to shop” store type in 2007 vs. 2006 is shopping online–28% more Wal-Mart moms said they’ll shop online for back-to-school products this year. But while the percentage increase is significant, the penetration is only 18%, a little shy of the national average of 21%. Still, an opportunity for Walmart.com at the very least.
The more significant opportunity is uncovered when looking at the decrease in Wal-Mart moms who plan to shop in the discount channel this year. In 2006, 81% of Wal-Mart moms said they’d shop in the discount channel, for 2007 that number is down to 78%. Seems like a small percentage change, until you consider that Wal-Mart claims 138 million shoppers a week, and focuses its marketing efforts on the moms. Do the math, it’s roughly 1.7 million shoppers less each week, if you assume that just 40% of its shoppers are moms with kids under 18.
However, among Moms who shop at regional discount chain Meijer, there is a 13% increase in those planning to shop the discount channel this year.
My question is this–is it all just about low price? Or could the BTS shopping experience be improved? Do the retailers and the BTS product vendors know why moms are choosing more expensive options like department and specialty stores? That’s the real opportunity.
I know Wal-Mart is listening to the shopper as well as to the analysts. In the end, listening to shoppers and improving the experience may have more lasting positive effects on the bottom line.
What can the vendors in key categories do to help? Marketers can learn more by looking at data through a segmented shopper filter to see if there is a story behind the story. When they find one, there is opportunity to open our ears and eyes and seek shopper insights, then act on them for BTS 2008.
No question it will be a competitive BTS in areas like school supplies, electronics, footwear and jeans that historically drive this business. However, apparel retailers don’t always get as much traction out of Back to School because they will tend to front-load stores with too much fall apparel rather than “buy now” merchandise still timely for August and September weather.
Keep in mind that the NRF forecast of 7% increases from 2006 need to be taken with a big grain of salt. Retailers are by nature optimistic but the NRF is guilty every year of blue-sky sales forecasts that have little to do with that season’s economic reality…in 2007, characterized by concern about gas prices, mortgage rates, and political uncertainty. I’m sure if you study the NRF’s history of holiday sales forecasts vs. actual results you will note quite a difference.
Back to School (BTS) has evolved and developed to one of the most significant shopping events of the year beyond the traditional mass markets channels, however, Wal-Mart’s aggressively advertised price strategy will lure chunks of BTS market share back to their stores, and to that channel.
The competition for BTS dollars is healthy for the economy and I think it’s positive for the retail world and exciting for consumers. Many products that are not even necessarily BTS items in a traditional sense, are benefiting from these traffic events, and smart retailers are capitalizing by taking full advantage from the traffic and indirect selling opportunities, as well.
Those who have been following Wal-Mart press in the last year may have noticed that Wal-Mart has been hinting that they are returning to an emphasis on their core competence…Price Leadership.
While it may seem to be obvious to many that Wal-Mart is a low price leader, the reality is that this leadership position has been eroding over the last decade. Marketbaskets show that Wal-Mart’s advantage has been shrinking.
BTS is one of the key seasonal selling periods and the company has determined that they are not going to be undersold and are marketing the fact that they are lowering prices to serve their customers. The fact that their COO, Bill Simon, is acting as spokesperson tells you a lot.
You can expect more of this press as each of the key selling periods approach (Thanksgiving, Christmas, Easter and so on). Wal-Mart is focused on reinforcing to the consumers and the financial world that they are THE price leaders.
Retailing’s growth slowdown in recent years means every store is now doing all it can to get every 1% more comp sales possible. Previously overlooked areas are getting emphasis. Every seasonal event is getting more attention, not just back-to-school. Successful retailers used to focus on building sales growth through e-commerce and building new locations. Now that e-commerce is in a slower growth mode, and many retailers see than building new locations often hurts their comp sales trends (via cannibalization), retailers are doing all they can to build sales organically.
From the July issue of Integrated Retailing:
By every indication, consumer spending will continue to grow through the rest of the year and beyond. Economic, employment, income and spending growth, although not spectacular, are all in positive territory. Any declines in the value of home equity are marginal and by no means permanent; the overall drag on the economy from the housing industry should decline in coming months (Moody’s). Leading indicators, including new orders for consumer goods, are rising.
The resiliency of the US economy and American consumers are again trumping all predictions of doom and gloom. We have weathered the worst. The run-up in gas prices has hurt, but the effect has not been profound or lasting. Consumer sentiment may be restrained, but is not gloomy. There is no hint of recession anywhere on the horizon: economic conditions are good, equity markets are strong.
What this means for retailers: be prepared for breakouts — sudden explosions of consumer desire and spending for goods and services in high demand. As always, we counsel following trends, not fads, but anticipation and foresight are also rewarded!
Every season, BTS never ceases to amaze me. The product mix gets bigger and bigger and the price ranges get wider and wider. There is selection for every budget. I think some consumers may sway out of Wal-Mart this year based on the quality of products sold last year. Many of the BTS skus Wal-Mart carries are no-name and have questionable quality. A discounted backpack or calculator that lasts for only 2 months is hardly a deal. With that, I don’t think Wal-Mart will see that big a dent in sales this year and their price cutting program will more than make up for customers who question quality. Wal-Mart has established itself as the BTS destination for the price conscious and those who seek value and they will continue to hold that position. Staples and the other chains can only compete by offering exclusives and unique products not carried by WM.