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Overall Back-To-School Spending To Increase, Apparel Sales Flat

Total back-to-school spending is expected to rise 6.9% this year from 2006, though consumer spending on apparel is not expected to rise significantly, as consumers splurged on apparel last year.

Overall, this year’s numbers will be “completely opposite” from last year’s, said Mike Niemira of the International Council of Shopping Centers, as apparel posted a 10.4% gain and computers posted a modest 3.4% gain in 2006, according to ICSC’s annual back-to-school sales report.

This year, it seems consumers will be cutting back on apparel not only because of the excessive expenditure shown during the 2006 back-to-school season, but also because of consumer weariness over volatile gasoline and energy prices.

Ringing up the sales during the back-to-school season is key, as many consider it to be the second biggest shopping event of the year after the fourth-quarter holiday period.

Footwear, electronics, and teen retailers are expected to see the biggest sales increases this back-to-school season, while apparel and discount stores are expected to see fewer customers than last year.

Footwear sales are expected to rise 10.3% from 2006, according to NRF’s survey.

That percentage increase might have something to do with shoes selling well during economic downturns in general, said CNBC’s Margaret Brennan, as consumers want to accessorize their old outfits rather than purchase new ones.

Retailers who cater to teens, however, are trying more innovative approaches than ever in order to attract teenagers, who have “tremendous impact on their family’s spending decisions,” according to Phil Rist, vice president of strategy for BIGresearch.

American Eagle, for example, is sponsoring a contest in which shoppers can win a free pair of jeans. Rivals Old Navy and Wet Seal also are thinking up new ways to attract customers. Wet Seal teamed up with A&M/Octone Records in a sweepstakes that offers the winner various prizes, including tickets to a concert featuring the pop band Maroon 5. Old Navy, meanwhile, is stepping up its promotional sales.

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Electronics retailers have also been preparing for back-to-school, and BIGresearch predicts families will spend 13% more on electronics this year than in 2006.

That increase may be due to the emergence of new product categories. MP3 players, iPods, and cell phones are no longer being seen as a necessity, but as “a fashion accessory,” said Scott Krugman of NRF.

Electronics retailer Best Buy created an entire back-to-school shopping section on its Web site. The site guides the user to five categories: logic, creativity, communication, comfort, and entertainment. Best Buy hopes the site will spur sales as consumers shop for school, home, or the dorm room.

Best Buy even generated a checklist consumers can use to track the items they need by surveying local middle and high school students to find out what items are actually on their wish lists this back-to-school season.

One of the reasons for this is online spending has gone up – NRF expects 40.8% more parents will purchase merchandise online – is because of retailers’ increased efforts to attract all types of consumers both through their stores and online, said Krugman.

Best Buy expects the Hewlett-Packard Verve notebook, which it will sell exclusively beginning in mid-August, to be one of its hot items. The special edition notebook with Intel Centrino Duo processor technology boasts two gigabytes of memory space, which allows faster speed than other notebooks of a similar cost. It also has a built-in Web camera with microphone for chatting with family members, and is easily portable at 5.5 pounds and 1.6 inches wide.

The Verve will be “hard for any student to outgrow,” said Andre Sam of Best Buy, who called the laptop “a computer on steroids” because of its speed and efficiency.

Over the past two years, electronics have become more important items for younger students as well as those in college.

“While some students may be pleading with mom and dad for an iPod or a cell phone, parents are also investing in desktop or laptop computers, educational software, and printers to support their children’s learning,” Tracy Mullin, president and CEO of NRF said in NRF’s back-to-school survey.

Cell-phone providers might perform well because of heightened interest in mobile family share plans with the start of school approaching, said Kathy Grannis, a NRF spokeswoman. “Parents want to keep in touch” with their children during the school day, she added.

Large-scale electronics retailers are not the only stores to watch. Warehouse stores like Costco and BJ’s and discount retailers like Wal-Mart are on analysts’ radar.

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In an effort to turn around sales for the back-to-school season, Wal-Mart announced price cutbacks in July on more than 16,000 of its products. The decision comes after the retailer failed to generate sufficient sale growth last back-to-school season, despite its shift towards trendier and more expensive apparel aimed at more affluent customers.

Wal-Mart will appeal to more price-conscious consumers, as gasoline prices remain high. The Bentonville, Ark., retailer trimmed the prices of staples such as notebooks and pens between 10% and 50%.

Wal-Mart’s plan is to generate revenue by luring consumers through cheap “basics” and hoping they will “buy the backpacks and electronics, and apparel, and those things that are becoming more important for back-to-school,” said Leon Nicholas, an analyst at Global Insight, on CNBC’s “Morning Call.”

Although Wal-Mart is known for its low prices or rollbacks, the prices on these items are extremely low, he said.

“This may be a sign that the Wal-Mart era of efficiency has run its course,” Nicholas said.

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