Back-to-school Outlook 2013

7/9/2013
This August, retailers can expect that prepared parents will shop and spend more during the "back-to-school season" than they did last year.

According to ShopperTrak the world's largest counter and analyzer of retail foot traffic national retail sales, when compared to the same period last year, will rise 4.3 percent in August, and retail foot traffic will increase 0.6 percent.

"Back-to-school shopping is the first major 'shopping season' of the calendar year, and has the potential to set the tone for the holidays," said Bill Martin, ShopperTrak founder. "The economy is, in many ways, stronger than it was last August. We expect that the 2013 season will continue the growth trend of both retail sales and foot traffic."

Indeed, in 2012, back-to-school sales increased 5.9 percent compared to the previous year. In 2011, those sales increased 4.5 percent over 2010.

Likewise, while this year's retail foot traffic increase may seem incremental, it continues the positive trend. In 2012, foot traffic turned around and increased a substantial 11 percent, compared to the back-to-school traffic in 2011. That year, foot traffic declined 5.1 percent from 2010.  

Slow, steady gains mean opportunities for retailers
The expected increases in August reflect the U.S. economy's slow but steady gains. For instance, unemployment this year is lower than it was during last year's back-to-school time. Though consumer sentiment does not impact retail sales immediately, the University of Michigan Consumer Sentiment Index recently reached its highest level since the beginning of the recession. The last time consumer sentiment was as high as it was in May 2013 was in September 2007.

In recent years, back-to-school shoppers had focused on stores with the best values. But with this positive consumer sentiment, shoppers may be more willing to "shop around" at more stores – not just the value locations – thus adding to the increased foot traffic and sales.

"On the whole, more people feel better about their financial situation than they did last year in August," said Martin. "Parents are ready to spend on their children's school necessities.

Consumers will be browsing. In order to seize this opportunity, smart retailers must prepare their marketing and operations to increase their foot traffic, sales and ultimately, their shopper conversion rates."

Meanwhile, importers and manufacturers who sell to America's major retailers are seeing growth in sales for both the summer and back-to-school seasons, according to Capital Business Credit (CBC), a non-bank lender that services the retail sector.

Fall/back-to-school
According to the quarterly Global Retail Manufacturers and Importers Survey, 46 percent of wholesalers indicated that they are receiving increases in orders from retailers for the back-to-school season compared to last year. Of the wholesalers experiencing growth, one third said that orders are increasing by 3 to 5 percent, and a quarter said they are seeing increases of 6 to 8 percent.

Beyond seeing individual increases in orders from major retailers, more than half of manufacturers and importers surveyed believe that the back-to-school/fall retail season will be stronger than last year. When asked the same question in 2012, only a third of respondents believed that they would see growth year-over-year. When it comes to estimating how much stronger 2013 will be, the majority (46 percent) believe that it will be between 3 and 5 percent stronger. A quarter of respondents believe that the season could improve by as much as 10 percent.

"It paints a positive picture for the retail sector that not only are importers and manufacturers experiencing individual growth, but they believe the overall retail sector is also continuing to get stronger," said Andrew Tananbaum, executive chairman, CBC. "At CBC, we believe that small gains are the 'new normal' when it comes to retail sales growth. As long as the economy continues to move forward and interest rates do not skyrocket, we can continue to see this type of momentum moving forward."

Summer
It is not just the back-to-school season that is experiencing growth. Respondents also indicated that they experienced increases in summer orders and believe that the summer season will be healthier overall. This is in direct contrast with their outlook a year ago when asked about the 2012 summer season.

Forty-one percent of respondents believe that the 2013 summer season will be better than last year. In 2012, only 24 percent believe that the 2012 summer season would experience growth. Of those who believe that the summer of 2013 will be stronger, a third (36 percent) believe the sector could see gains of 10 percent or more and a third (32 percent) believe that it will be between 6 and 10 percent stronger.

When it comes to individual orders, nearly half (48 percent) of respondents indicated that they experienced an uptick in summer orders overall, and 58 percent said that retailers placed re-orders for summer merchandise. This is strikingly different than the summer of 2012 when only 28 percent of respondents indicated that they experienced an uptick in orders from the previous year (2011).

"With a late start to summer from a weather perspective, there is a lot of speculation on how the summer season will perform," said Tananbaum. "Based on the survey results and feedback from our customers, we believe that summer will not be gangbusters for retailers but that moderate gains can be expected."
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