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Parents Shift Spending to Cope With Back-to-School Costs

Thursday, 19 Jul 2012 | 12:35 PM ET

While there are few certainties in life, regardless of economic conditions, children grow and pencils wear down.

Matthew Staver | Bloomberg | Getty Images

This year, parents are saying they are planning on spending more on back-to-school supplies despite the tough economic times. After all, parents have to fulfill the supply lists schools send out in August and replace the outgrown jeans and jackets. This gives retailers a great opportunity to push plush new backpacks, sporty new sneakers, and fresh unsharpened pencils.

The National Retail Federation's 2012 Back-to-School spending surveyconducted by BIGinsight indicates the average person with children in school will spend $688.62, up 14 percent from last year's survey. That puts total back-to-school spending at $30.3 billion. Add in spending on supplies for college students, which aren't included in the first number, and spending hits $83.8 billion.

But the economy is front of mind for consumers. After all, unemployment is still stubbornly high, and uncertainty abounds with anupcoming electionand a looming "fiscal cliff."

The NRF says nearly 85 percent of consumers with school-aged children have noted the economy will impact spending in some way. More consumers say they plan to shop more often in order to spread out the expenses, and more plan to cut back on their children's extracurricular activities than did last year. Almost half of shoppers will start back-to-school purchases three weeks to a month before the first day of classes soften the blow of back-to-school spending.

But some analysts don't see back-to-school as a slam dunk for retailers. Consumer spending trends have been weakening and Citigroup analyst Deborah Weinswig expects the situation to worsen in the second half of the year. Earlier this week, she slashed earnings estimates for companies such as JCPenney,Kohl's, Macy's and Targetas a result.

Also, according to Experian Marketing Services, through July 13, online searches for back-to-school are down year-over-year.

Amid this uncertainty, retailers are gearing up for a back-to-school battle, offering a number of promotions and events both in-store and online to capture the affection, and dollars, of even the youngest of shoppers.

That's smart because children may be contributing more to the back-to-school buying than in years past. The NRF's 2012 back-to-school survey finds kids ages 6 years old to 12 years old are saving up their allowance money and will spend an average of $25.63 on what they want for school, that's up 70 percent from last year.

Wal-Mart Stores is trying to appeal to the notion that the school year is a perfect time to get a fresh start. This follows a survey of 1,000 moms the retailer conducted that showed the vast majority use back-to-school as a time to make resolutions to get organized, save money and eat healthier. In order to tap into this behavior, Wal-Mart is offering online tools to help organize shopping and mix and match outfits on a budget. They also are offering 100 back-to-school items for 88 cents each.

JCPenney is hoping to lure shoppers in with free kids' haircuts, which are being offered at the store's salons for the entire month of August. And the first wave of its store-in-a-store shops will be launched, featuring denim from Levi's, Arizona and Buffalo just in time for back-to-school.

Kohl's will host flash sales on Facebook that allow "fans" to vote on items they want to see at a big discount by "liking" the item. The most-liked item will be featured in a flash sale on Friday. They also will hold their first-ever sweepstakes.

And the discounts have already begun. Sears is already offering 50 percent off back-to-school fashions and will extend promotions throughout the season, targeting Generation Z through Sears mobile featuring daily deals and a personal shopper. Best Buy started its back-to-school promotions in June with savings on laptops and discounts on Geek Squad Tech Support. In addition, apparel promotions through its stores, Macy's is hosting reading campaigns and its 7th annual spelling bee with a gift card and iPad going to each local champion.

So who will win in the end? The NRF says discount stores will be the most popular shopping destination according to its Back-to-School survey. PriceGrabber.com, which has conducted its own survey of back-to-school shoppers,says online retailers offering free shipping will have an edge.

But we won't really know who the winners are until it's time to start talking about the holidays...Christmas is just 158 days away.

(UPDATED: This story was updated from an earlier version to include more detail about back-to-school retail promotions.)

Questions? Comments? Email us at consumernation@cnbc.com. Follow Courtney Reagan on Twitter @CourtReagan.

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