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Back-to-school outlook: Consumers will seek value
REAL ECONOMY BLOG | July 27, 2023
Authored by RSM US LLP
In our four-part blog series, RSM’s senior industry analysts explore back-to-school shopping trends and the impact on consumer businesses.
The upcoming back-to-school season is influenced by shifting consumer behavior as families prioritize value-oriented choices amid the long-term impacts of inflation on the household budget. However, despite these challenges, consumer spending remains strong, supported by continued low unemployment and a bounce back of consumer confidence. Understanding these considerations is essential for brands and retailers to meet customer expectations and succeed in the back-to-school marketplace. The following indicates various buying preferences and key considerations for middle market retailers this season.
Preference for affordable brands, retailers and discounts
The focus on value for money spent remains strong as families seek cost-effective options to meet their back-to-school needs. According to data from First Data Merchant Services, average ticket sales for clothing and accessories have declined from a peak of $112 in March 2023 to $97.28 in June, decreasing over four consecutive periods. Despite this decline, transaction volume and overall sales remain robust. The decrease in average ticket sales can be attributed to the prevalence of discounts and value items, which are impacting per-sale transaction values. This trend suggests that consumers are actively seeking out value-driven options and taking advantage of discounts, contributing to sustained sales figures.
In addition, consumer confidence and low unemployment have contributed to an increased demand for discounts, promotions and special offers during the back-to-school season. Brands and retailers that offer compelling deals and bundle options are likely to attract more customers as families look for ways to stretch their budgets amid the long-term effects of inflation.
Emphasis on quality and affordability
Consumers maintain their emphasis on finding products that offer both quality and affordability. Balancing cost-effectiveness with durability and functionality remains crucial. Brands and retailers that effectively communicate the value proposition of their products, emphasizing both quality and affordability, resonate well with back-to-school shoppers seeking solutions that fit within their tightened household budgets.
Ultimately the buyer is catching on to the availability of better deals. Brands offering discount days, free items with purchase and better availability of products at value retailers has shifted the behavior of the consumer. The buyer who shopped full retail during the COVID-era is now aware of deals that can offset inflation. Buyers will look to purchase typically higher-priced items like clothing or backpacks from value retailers, or look for discount deals in their email direct from their favorite brands. Companies should be expecting a more cost-conscious buyer as the competitive landscape intensifies for share of purchasing power.
Online and mobile shopping vs. instore
The convenience of online and mobile shopping continues to be important during the back-to-school season. According to a Coresight research survey in 2023, 70% of shoppers expect to buy online, which is 8% more than last year, and 48.4% expect to buy online from two or more channels. Consumers appreciate the ability to compare prices, access a wide range of products and make purchases from the comfort of their homes or on-the-go. Brands and retailers should ensure their online platforms and mobile apps offer seamless experiences, meeting the needs of cost-conscious consumers navigating the long-term impacts of inflation.
In addition, the data from Coresight Research tells us that instore spending will increase 9.2% over last year. Despite the convenience of online shopping, instore could be the highest growth opportunity for this year’s back-to-school season. Retailers should ensure instore inventory is available for shoppers.
Amid economic considerations, consumers will prioritize essential back-to-school items such as school supplies, clothing and technology. Non-essential purchases, like designer brand shoes, new backpacks and jeans that students may already own may take a backseat as families focus on meeting practical needs while managing their budgets. Brands and retailers should align their product offerings and marketing strategies to address these core necessities, understanding the financial pressures households face.
The takeaway
Strong retail sales will be a welcome relief this year to retailers that have been concerned about demand. Margin will remain a headwind with discounts and promotions as key drivers to motivate buyers. Retailers should consider product costs as they plan for the holiday season. Data analysis on product margins, channel allocations based on buying preferences, along with technologies to support multichannel sales will be critical to the success of middle market retailers.
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This article was written by Nick Stuart and originally appeared on 2023-07-27.
2022 RSM US LLP. All rights reserved.
https://realeconomy.rsmus.com/back-to-school-outlook-consumers-will-seek-value/
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