Sector Analysis: Back to school

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Going back to school

 

The Back-To-School season is about to begin in the US, but could retailers miss out on the adults returning to education?

 

The March retail figures in the US were almost too good, throwing economists into a little bit of a spin. Call it recession fatigue or spring time optimism but here once again was the consumer hitting stores, and crucially spending. It was a signal that they could play a wider role in a broadening economic recovery.

 

Purchases increased 1.6 percent for the month, the most in four months, and soon after gains for February and January were even revised upwards. As the numbers came in, it was clear that chain stores turned in their best year-over-year performance since 1999.

 

The surprise results led Michael Niemera, Chief Economist for the International Council of Shopping Centres to declare that by the close of the Back-To-School (BTS) season in September, confidence will be restored because the seeds of consumer growth have been planted and the late summer will bear fruit. As he said: "Recoveries do come".

 

The many false starts of the recovery during this recession should tell us all by now to beware such blatant optimism but it’s worth remembering last September proving to be something of a turning point when same-store sales posted their first-year-over-year rise in 12 months. Like Niemera the US National Retail Federation (NRF) believes the true test of whether March’s consumer spending has any legs will surely come with this year’s BTS sales results.

 

"Back-To-School results will be very telling," says NRF’s Chief Economist Rosalind Wells. "Right now consumer confidence is still wobbly. But the 90 percent of the people who have jobs are gaining confidence gradually."

 

So what will retailers do to exploit this renewed confidence? Last year saw the BTS season dominated by a heavy reliance on promotions. Some mass market stores started a week earlier in 2009 and it will be worth looking out to see if the Big Box office products retailers are tempted to follow suit.

 

With stiffening online and superstore competition, all the Big Boxes will surely look to seize the initiative and once again put a massive push on must-haves, such as office paper, presentation products, folders, notebooks, appointment and planner books, and calendars – which all saw dollar increases during the season in 2009.

 

The success story of last year was the boost from flu fears that (as OPI has covered in many other articles) boosted the sales of hand wipes, hand sanitizers, hand soap and tissues. All saw the biggest year-over-year revenue boosts with triple and quadruple digit increases during the period last year. That particular lightening is unlikely to strike twice so perhaps now is the time to look elsewhere for particulars strands of growth.

 

Overall 2010 is already forecasted to be a good year for higher learning institutions in the US. Indeed total enrolment at universities and colleges is close to 12 million and climbing. Enrolment at less expensive junior colleges, trade schools and online universities is also on the rise suggesting that demand for BTS-related product will be higher this year.

 

One demographic that could prove essential and well worth targeting could be adults that have returned back to education. Huge numbers of people are going back to school filling places at community colleges in the US to avoid the bad economy, retraining for new jobs, upskilling and even reinventing themselves completely.

 

Let’s say it’s a given that this group is unlikely to be looking for Miley Cyrus and Zack Ephron-branded pens (perhaps it’s time to give Eva Longoria’s and Hugh Jackman’s agents a call?), but it’s not too late for retailers and manufacturers to tweak their current BTS strategy. Talking value really could be the ‘in-thing’ this season.