Consumer Behavior

Why back-to-school in 2021 presents unique opportunity to impress shoppers

Photo by istock.com

August 18, 2021 | Keith Jelinek, Rick Maicki, Darren Morrison and Frank Jones

This blog was written by Keith Jelinek, managing director; Rick Maicki, managing director; Darren Morrison, managing director, and Frank Jones, director, at the Berkeley Research Group.

The back-to-school season (BTS) is a critically important selling period — and an opportunity for retailers to reconnect with shoppers before entering the holiday season. COVID has written a new script for schools and businesses in 2021. Consumers have adjusted in significant ways during the crisis since early 2020. Last year, we experienced extensive school closures and education taking a dramatic turn to 'Zoom' learning, along with businesses shifting to a work-from-home model that in many cases has become the new norm. Schools are set to reopen in 2021, but the rise in COVID cases in many parts of the country could impact how consumers shop for BTS and back-to-office (BTO).

BTS and BTO will bleed together this year since most offices won't open until after Labor Day. This should have a significant impact on total spending. Based on an annual survey by the National Retail Federation, consumers will spend record amounts as students — including college level — return to in-person learning. The NRF predicts back-to-school spending to reach a record high of $37.1 billion, compared to $33.9 billion last year. Mastercard likewise expects back-to-school spending to increase by 5.5% over 2020 and 6.7% over 2019.

As we look to the coming weeks entering fall, it will be worth watching how the recent rise in COVID cases will change consumer spending. The environment is fluid, and retailers will need to know their shoppers' preferences when it comes to what they want to buy and, equally important, HOW they want to shop.

Consumer perspective

Physical stores suffered during BTS shopping in 2020, as many consumers were hesitant to shop in store. Reluctance to shop in person and the numerous school closures drastically impacted school shopping last year. Schools are making every effort to open their classrooms, but consumers' approach to shopping may have shifted in recent months.

Several industry surveys taken in early summer showed that consumers were willing and excited to shop more in physical stores. Shoppers like interacting with the product — especially in apparel. Shopping for back-to-school can be a fun family affair. In a 2019 BRG survey on school shopping, 84% said their child picks out at least some of the items to purchase, and 38% said their child picks out most items with limited parental input. Parents were looking forward to a return to normal in 2021. Enter COVID — again.

According to a First Insight consumer survey cited by CNBC, shoppers are growing more concerned about in-store shopping with the rise of the Delta variant of COVID. S&P's Sarah Wyeth noted, "The tail winds that retailers and restaurants have enjoyed recently may be short-lived."

In the First Insight poll, 64% of those surveyed were "anxious" about the pandemic, an increase from 51% in July; 56% said they feel nervous about interaction with sales staff in stores, up significantly from 43% in July.

Further, the Centers for Disease Control and Prevention recently issued updated guidance on wearing masks, calling for all individuals — even those fully vaccinated — to wear masks indoors to prevent the spread of new variants. The early gains in consumer comfort with in-store shopping have taken a turn for the worse in just a few weeks.

We expect consumers to be mission focused, whether they shop in store or online. Apparel should be a particular focus for shoppers as they look to refresh their children's two-year-old outgrown wardrobes — that will drive sales in tops, bottoms, accessories, and footwear. Parents will look to replenish their students' basic school supplies, and, with the presence of COVID, basic supplies will include sanitizers, wipes, masks, and other items to keep kids safe. Primary destinations for BTS and BTO shoppers will be mass retailers like Walmart and Target, Amazon, and other traditional destinations that offer good value day in and day out (e.g., Kohl's, Old Navy, big box office supply stores, and club stores). Department stores could benefit as well, as shoppers will be in the mood to refresh wardrobes that went untouched in 2020.

Challenges for retailers

Retailers face a unique set of challenges this year for not just back-to-school but also the critical fourth quarter of 2021. Shipping and supply chain logjams persist, creating potential inventory shortages on key items. Labor shortages are still a challenge, impacting in-store operations and efficiencies. The resurgence of COVID fears due to the Delta variant resurrects the need for retailers to make shoppers feel safe in their stores. These challenges (and others) could harm near-term financial performance and carry through the remainder of the year.

Comments from retailers echo these concerns:
"…we're planning for one of our biggest back-to-school and college seasons ever. Of course, we'll have great deals on all the traditional school supplies, but we'll also have the new normals on the school supply list, like hand sanitizer and disinfectant wipes.

With local school lists on target.com and our industry-leading fulfillment options, back-to-school shopping has never been safer or easier. And with the great new apparel offerings… all found only at Target, we'll have our school-bound guests looking and feeling fresh for that first day of school."
Target (Christina Hennington) Executive VP & Chief Growth Officer in earnings call

"Levi Strauss is doing just that… as the company expects supply chain challenges to continue into the second half of the year, 'we're going to be airfreighting more.'"
Chip Bergh, CEO in earnings call

Walmart (WMT), a top destination for school shopping, said "while inventories of most of its basic supplies are on track, some other categories are experiencing shortages."
CNN Business

How can retailers attain success?

1. Prepare stores, BOPIS and website: Stores need to wow and excite customers with excellent customer service, a safe environment, and a fun in-store experience. The omnichannel experience must present wide-ranging options for shoppers who want to browse and/or shop online (e.g., BOPIS, curbside pickup, attractive shipping and return options).
2. Stay in-stock on key items: Stores must have correct allocations across styles, colors, and sizes as much as possible given supply chain challenges. Make it easy to find key fast-moving school-supply items whose sales will be driven because they are required items for local schools.
3. Find alternatives if the store is out of stock: Don't lose the sales. Leverage e-commerce capabilities and visibility to another store location's inventory, and offer free shipping to get the customer the item(s) they want.
4. Offer compelling promotions and value: Make sure advertising, digital campaigns, and the retailer website call out exciting BTS promotions to drive customers to your store. Promotions likely will be diminished compared to previous years given inventory and supply chain challenges, but retailers can call out value without promoting as in past seasons. For example, private label or unique offerings provide an opportunity to create a value message for shoppers.

Back-to-school is always a critical shopping occasion — and in 2021, the importance of the season is accentuated by the unique environment we find ourselves in.

Retailers that win at back-to-school this year will get a great jump start for the coming holiday season. Don't let that opportunity slide!

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.