Back to basics: Inflation slows school shopping season
To understand the impact of soaring inflation on this year’s back-to-school spending, look no further than children’s rain boots with patterns like frogs and ladybugs made by Washington Shoe Co.
Spending has held steady for these evergreen items even after the Kent, Wash.-based company was forced to pass on January’s 15% price increases to its retail customers due to the skyrocketing transport costs. But in May, as gas and food prices also rose, shoppers abruptly shifted away from high-end $35 rain boots to no-frills versions that cost $5 to $10 less, he said. its CEO Karl Moehring.
“We’re seeing consumers look down,” Moehring said, noting dramatic sales swings of 20% in opposite directions for both product types. “Wages are not keeping up with inflation.”
In this back-to-school shopping season, parents – especially in the low-to-middle income bracket – are focusing on the basics while turning to cheaper stores amid soaring inflation, which has hit a new 40-year high in June.
Last week, Walmart noted that higher gas and food prices are forcing shoppers to make fewer purchases of discretionary items, particularly clothing. Best Buy, the nation’s largest consumer electronics chain, said inflation has dampened consumer spending on gadgets. Both companies have cut their earnings forecasts as a result.
Such financial hardship amid the industry’s second busiest shopping season after the winter break marks a big difference from a year ago, when many low-income shoppers, fueled by the measures government stimulus packages and supported by wage increases, spent freely.
Matt Priest, CEO of the Footwear Distributors & Retailers of America trade group, noted that last year, member retailers of the group saw a noticeable increase in online sales mid-month when shoppers received their monthly credit checks. child tax bills that amounted to a few hundred dollars. . This season, without that bump, he expects shoppers to buy fewer shoes for their kids and rely on private labels.
Inflation has taken a toll on household finances for Jessica Reyes who took her daughters to a “Back to School Bash” event last month in north Chicago that offered free backpacks full of student supplies.
“I feel like everything’s going uphill these days,” she said at the event. “We’re a single income household right now…so I think it’s affected us a lot in all areas, in bills and home and school necessities.”
While shopping, her daughters have been drawn to school supplies featuring TV characters and animals they love, but she will focus on simple versions.
“They want the cute, you know, the kitties. And these are always more expensive than the simple ones. And the same with folders, notebooks or pencils,” Ms Reyes said.
Earlier, Manny Colon and his daughters stopped by the back-to-school event to pick out some backpacks.
Mr. Colon works at his daughters’ primary school. He said his wife had to take on extra work due to high prices for school supplies, groceries and gas.
“I think it definitely affected us,” he said.
Many forecasts point to a strong back-to-school shopping season.
Mastercard SpendingPulse, which tracks spending on all payment methods including cash, projects back-to-school spending will increase 7.5% from July 14 to September 5 compared to the period last year when sales had increased by 11%. For the 2020 back-to-school period, sales fell 0.8% as the pandemic wreaked havoc on school reopening plans and back-to-school shopping.
Still, higher prices support much of the numbers.
A basket of about a dozen sourcing items posted a nearly 15% price increase on average this back to school compared to a year ago, according to retail analytics firm DataWeave. The price of backpacks has increased by nearly 12% to an average of $70, for example.
Back 2 School America, an Illinois-based nonprofit that distributes back-to-school kits to children from low-income families, has seen “significant increases in supply costs,” including a 10% increase of their supplier with another possible brand-up on the way, said the organization’s CEO Matthew Kurtzman. And the shipping costs have also increased.
With increased support this year, Back 2 School America will be able to cover the new costs and is on track to distribute more kits than ever before – 12,000 so far and over 30,000 by the end of the year. late August, Mr. Kurtzman said. But funding is not guaranteed going forward as worries about a recession grow.
Retailers are facing big challenges getting shoppers to spend, especially on apparel.
Walmart said last week it was accepting additional apparel discounts to eliminate inventory. Analysts believe these sales will put more pressure on other rivals to cut further in order to stay competitive. However, Walmart said it was encouraged by early signs of school supply sales.
Meanwhile, Gap’s low-cost Old Navy division is securing a price freeze on its denim from July 29 through the end of September.
As for Washington Shoe, Moehring said he is shifting production from higher-priced children’s boots to lower-priced products in the coming months. The company still sees annual sales ahead of last year, but it’s cautious.
“I think it’s a muddy prospect,” he said.
This story was reported by the Associated Press. Claire Savage reported from Chicago and is a member of the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places reporters in local newsrooms to report on underreported issues.