The International Council of Shopping Centers (ICSC) said last week that American consumers will spend $38.4 billion on back-to-school merchandise in 2010, which would be a record high. But never to be outdone in consuming optimism, the National Retail Federation (NRF) called that prediction, and raised it to $55.12 billion. The NRF's annual Back-to-School Consumer Intentions Survey predicted that the average American family will spend $606.40 to prepare their children for a return to the classroom this year, which would be a generous budget allowance for a consuming population that has needed multiple government rebate bribes to motivate them to open their wallets this year.
From these disparate predictions we can probably safely conclude two things. One, retail trade associations have about as much objectivity as helicopter parents at a dance recital. Two, consumers do intend to spend money in the next two months, and retailers better be ready with the right products at the right price at the right time in order to best capitalize on the temporary spending mood.
The back-to-school shopping season officially started on July 14th. How do we know that? Because Staples (SPLS) said so, of course. Somewhere along the way we gave the Staples corporation the power to designate a back-to-school consuming start date, which they make official when their company representatives ring the bell to start NASDAQ trading on that day. Without a "real" event like Black Friday as a cue, how else will consumers know that they're supposed to start spending money for the second busiest shopping season of the year?
The U.S. retail industry is still under the mistaken notion that it is in the drivers' seat of consumer spending cycles. The ups and downs of the monthly same store sales figures are telling a different story, however. Marketing-led shopping habits have been significantly replaced by conscious consuming, which is not so easily manipulated. As I strolled through the sea of 75% OFF signs at Macy's (M) this weekend, I couldn't help but think of the many U.S. retail industry leaders who boldly declared at the beginning of 2010 that they would no longer need deep discounts to drive sales since they had mastered their inventory levels and overhauled their supply chain processes.
Consumers, however, have a different opinion about discounts. They still want them, and they still want them to be significant. And they're willing to hold onto their money until they get what they want. Likely this will be the case in the back-to-school season as well.
Consumers made it clear in the NRF survey that they will be doing more comparison shopping online during the 2010 back-to-school season. Because of that, they're not going to be easily fooled by hi-lo pricing smoke-and-mirrors.
But winning the back-to-school retailing game is going to take more than discounts this year. Retailers are also going to need to be good retailers in order to capture the back-to-school dollar.
When I was browsing through the Macy's sales racks this weekend, a peppy, perky Macy's associate walked up to me and asked me if I was finding everything alright, a question which made me laugh out loud. The women's clothing racks were a jumbled mess of sizes and styles, worse than any off-price overstock store I had visited recently. I politely suggested to Macy's Girl that if she wanted me to find what I was looking for, then somebody needed to spend some time putting the right sizes back in the right places. She replied by chuckling and walking away. The net result of my Macy's shopping visit that day was the return of a full-priced item and cash in my pocket. It just wasn't worth the effort.
It's not going to be enough to lure back-to-school shoppers through the front door with discounts. It's the shopping experience once they're inside that will make - or break - the sale. Even though employees and companies may have forgotten this retailing 101 principle, shoppers haven't. The loss of a back-to-school purchase due to poorly executed retailing fundamentals this year will be a big loss because spending sprees are finite in the post-recession consuming paradigm.
Retail industry experts and analysts keep wanting to use increased event spending as evidence of economic recovery, but that extrapolation hasn't proved to be valid in 2010. After each holiday spending uptick this year, there has been a decline, which seems to take everyone by surprise. It's really not that difficult to figure out. If consumers are spending more on back-to-school items, they're likely going to be spending less on other things in the months before and after school starts to make up for it. That's the new normal in a consuming world which is still lacking in jobs and devoid of cheap credit.
If back-to-school spending predictions actually turn into spending reality, the retailers that aren't able to secure a respectable share of back-to-school spending won't be able to blame it on the economy. Some will probably still try to blame it on the economy, but that excuse is wearing thin. It's sell now or hold your retail peace until Black Friday because once the kids are safely tucked into their desks and dorm rooms, wallets are likely going to be shut tight until obligatory Christmas gift-giving pries them open again.
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