Back-To-School Spending to Drop By 10% Due to Inflation
As the back-to-school season approaches, families across the United States are bracing themselves for the impact of rising inflation on their household budgets. With less disposable income at their disposal, parents are expected to face challenges while shopping for back-to-school essentials like clothes, shoes, and electronics. According to a new forecast from Deloitte, back-to-school spending is anticipated to decrease by 10% compared to last year, with an average expenditure of $597 per student. This decline is particularly significant as Deloitte's forecast has not anticipated a decrease in back-to-school spending since 2014.
Cracks in the economy
Despite robust consumer spending in the US, inflation is gradually taking its toll on discretionary purchases, leading to cracks in the economy, per CNN Business. Major retailers, including Target and Home Depot, have revised their profit and sales outlooks in recent months as Americans become more cautious about their discretionary spending habits. The current survey report from Deloitte indicates that spending on clothing is projected to decline by 14% year-over-year while technology-related purchases are expected to drop by 13%. In contrast, purchases of school supplies are anticipated to increase by 20% compared to last year.
Factors influencing spending patterns
The report highlights that 51% of parents who plan to spend less this year attributed their decision to reduced disposable income. This figure is a significant increase from 45% in 2022, indicating the growing financial strain on families. On the other hand, 75% of parents who expect to spend more this year attributed their decision to increased prices, reflecting the impact of inflation on consumer purchasing power. These figures reveal that parents are becoming more strategic in their spending choices, prioritizing essential items like school supplies while delaying non-essential purchases like new clothing until necessary.
Opportunities for retailers
Despite the overall decline in back-to-school spending, there is still a silver lining for retailers. Deloitte's report suggests that many parents are willing to splurge on specific items to treat their children, presenting an opportunity for retailers to capitalize on this trend. Retailers can focus on marketing and promoting items that appeal to parents looking to provide their children with a memorable back-to-school experience. By understanding the changing dynamics of consumer behavior, retailers can tailor their offerings to meet the needs and desires of parents while ensuring a successful start to the school year for children.
Preference for discount and online stores
In an effort to stretch their budgets, deal seekers are expected to favor discount, online, and dollar stores during the back-to-school shopping season. These retailers often offer competitive prices and special promotions, making them attractive options for price-conscious consumers. Additionally, the report highlights a shift in payment methods, with more families planning to use cash or debit cards this year (77%, up from 72% in 2022) rather than credit cards. This trend may be influenced by the rising interest rates, prompting families to opt for cash transactions to avoid accumulating additional debt.
Survey methodology
The Deloitte survey was conducted online between May 26 and June 1, 2023, and involved 1,212 parents with at least one child attending school in grades K-12 this fall. The survey results shed light on the changing landscape of back-to-school spending, driven by factors such as inflation and reduced disposable income. While the overall spending forecast indicates a decline, retailers can still find opportunities by strategically targeting parents who are willing to splurge on specific items for their children. By understanding consumer preferences and offering attractive deals, retailers can navigate the challenges of the back-to-school season and position themselves for success.