This back-to-school shopping season, parents, students, and teachers are focusing on the basics while also trading down to cheaper stores amid surging inflation, which hit a 40-year high in June. Even though U.S. inflation recently eased slightly to 8.5% and moved off of historic highs because of lower gas prices, consumers are still seeing rising prices for food and rent and back-to-class essentials like clothes and school supplies.
“Inflation is still abnormally high, which will affect short-term spending such as back-to-school, which is on consumer’s minds now,” according to Barbara E. Kahn, the Patty and Jay H. Baker Professor of Marketing at the Wharton School.
Shoppers are turning to alternatives, like prioritizing discounts, or even buying more secondhand clothing. Such financial struggles, amid the second-most important shopping season behind the winter holidays, mark a big difference from a year ago, when many shoppers, flush with government stimulus money and buoyed by wage increases, spent freely. By May of this year, as gas and food prices surged, shoppers abruptly shifted away from the higher end merchandise to no-frills versions.
“While Walmart and Target are seeing revenues increase in food, the higher margin categories like apparel are seeing declines,” says Kahn, “and consumers are turning away from the premium brands to focus on essentials, so revenues might increase but profitability decreases.”
Retailers are also facing big challenges to get shoppers to spend, according to Kahn.
“The Wall Street Journal reported that some retailers are turning to innovative strategies to attract price conscious consumers,” she says. “Lululemon has been promoting their famous leggings at big discounts, but the catch is that they are not new—other fashionistas have worn them first.”
According to Kahn, other retailers are looking toward innovation to seize consumer attention.
“For example, Walmart’s EVP Tom Ward announced that Walmart is looking to augment their ‘last-mile’ delivery convenience, suggesting, for example, that soon drone drop-offs could become a reality,” Kahn says. “Macy’s is looking to capitalize on a kid’s desire for personal expression when they go back to school in the fall. The new Macy’s ad campaign highlights the fast-changing fashion landscape and encourages purchases that match basics with ‘expressive splashes of wearable art.’”
A report from U.S. News & World Report shows that more than 75% of Americans are worried about not having much wiggle room for spending on school supplies.
“This suggests the budget-careful shoppers are going to prioritize the purchase of essentials during the back-to-school season,” Kahn says. “Parents will wait to see exactly what their kids need, rather than buying in anticipation.”
The National Retail Federation estimates back-to-school spending will increase 36% this year compared to 2019. They also expect families will spend an average of $864 on school items this year, which is $15 more than last year and $168 more since the start of the pandemic.