Thursday, July 21, 2011

Back-to-School Sales Expected to be Flat

NRF's report is in, and the news isn't pretty. It should, however, be expected.
Although the worst of the recession is over, a shadow of insecurity still remains when it comes to how the economy will impact consumers’ back-to-school plans. According to the survey, Americans are compensating for the economy by purchasing more store-brand or generic items (39.9%), comparison shopping more online (29.8%), and shopping for sales (50.0%). Additionally, nearly half of survey respondents said the economy is forcing them to simply spend less in general (43.7%)
We continue to hear parents tell us that if it isn't worn out, it won't be thrown out. This mirrors the behavior we saw in 2008 and 2009 as the recession first started barreling in and everyone battened down the hatches. Hand-me-down clothes continue to be handed down until they can't be any longer. School supplies that are still usable will be used, and anything they don't have to buy, they won't.

So everyone is still feeling the effects of the recession, right? Well, according to an article in the Wall Street Journal yesterday, that depends.

In 2008/2009, the massive job losses and news of a failing economy made everyone freeze and re-evaluate their spending habits. I know I sure did. For those who lost jobs, lost homes, and had to tap into their savings, they continue to feel the pinch three years later. But for those who didn't, the future isn't looking quite as grim.

Consumers earning more than $50K a year are showing increased confidence and are willing and able to spend. All those iPads are being bought by somebody, right? In addition, all U.S. consumers are making more purposeful purchasing decisions, and some things have greater personal value than others. And having been retrained over the past few years that everything can be bought cheaper - promotions, discounts and deals are still pretty much king. Combine this with the fact that both kinds of shoppers are alongside each other in the aisles, and you have a dichotomy of decisions.

Bottom line? Those with the money to spend on higher priced consumer electronics will still likely hunt for discounts on crayons. The challenge to retailers will be effectively speaking to them both.