After a year of going to class behind a camera wearing nice shirts with sweatpants, children across America are finally beginning to go back to school, for real. Even as COVID-19’s delta variant picks up steam, parents are gearing up to send their kids back to the classroom, and it’s showing in their shopping behavior — back-to-school spends for 2021 are expected to reach all-time highs when all is said and done.
After a down year in 2020, back-to-school shopping has reached an inflection point, and there may be no turning back. A combination of rising e-commerce volumes, supply chain backups, shifting demand trends and COVID-driven uncertainty has made this year’s back-to-school season unlike any other. But retailers big and small will need to gear up for a future that may look a lot like this new normal.
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To understand where back-to-school shopping is headed, it’s important to understand how we got to this point. In 2019, back-to-school season was business as usual, with parents and students flooding brick-and-mortar stores and sales peaking around midsummer. COVID changed everything.
“For the most part, we have a generation of kids who were not in school last year overwhelmingly within the U.S.,” Stacy DeBroff, CEO and founder of influencer marketing company Influence Central, told Modern Shipper, “and yet, because of the at-home learning, parents last year spent a lot on upgrading electronics.”
It’s true — the computer industry’s powerful triumvirate of Lenovo, HP and Dell told school districts in 2020 that they faced a shortage of nearly 15 million laptops, and Deloitte found that back-to-school tech products saw year-over-year growth of 28% from 2019 to 2020. Not only were parents spending more on laptops, tablets and other electronics, but they were spending less on apparel, which saw its market spend dip from $15 billion in 2019 to $12.5 billion in 2020. Now, though, those trends may reverse.
For the most part, we have a generation of kids who were not in school last year.
Stacy Debroff, CEO and founder, Influence Central
“We talked to at least 350 houses, and 80% of parents and houses [plan to spend] the majority on attire — clothes, shoes, coats, you know, what kids are wearing to school,” said DeBroff. “Because for the most part, when you think about virtual learning, parents weren’t really shopping for outfits.”
As a result, items like backpacks, lunchboxes and clothing are flying off the shelves this year as kids get ready to revive their on-campus experience. But while that’s great business for L.L. Bean and Old Navy (NYSE: GPS), it also means that retailers and consumers could be facing significant shortages of those products.
“Because of the anxiety of going back to school for kids who have been out of the classroom for so long, you’re going to find that parents are willing to invest more upfront on making kids feel confident and cool and excited about their backpack,” said DeBroff. “It’s going to be a less functional purchase and more emotional.”
Online shopping is off the charts
Not only will parents be shopping for more clothing and apparel — they’ll be doing it online. A survey from KPMG showed that 34% of shoppers used online channels pre-pandemic, compared to 44% post-pandemic. In fact, e-commerce was on the rise well before the pandemic, but 18 months of pandemic conditions have forced most companies to put e-commerce at the center of their businesses. Not only that, but consumers are becoming increasingly e-commerce savvy.
“I think that what you’ve seen is that parents are really, really agile in ordering online. And the retailers have scrambled because retail, traditionally, has been a space that was not as e-commerce and tech-forward as others,” DeBroff explained. “Seventy percent of consumers say they’re going to split back-to-school shopping between both online and in-store. They’ve clearly become 100% comfortable ordering online.”
According to DeBroff, parents were already heavily using e-commerce channels to shop for electronics in 2020. But whereas parents once preferred to shop for attire in person so that their children could pick out apparel and try it on, it seems they no longer feel the need to do so. Additionally, she notes that a heavily digital 2020 has inspired the use of more social media and influencer marketing tactics, which has only served to boost e-commerce sales further.
“I think that the engagement and connection of shopper marketing, with retail and with influencers, has been the biggest trend that we’ve seen,” DeBroff said.
Trouble in the Suez
Of course, one of the biggest influencers on back-to-school shopping conditions this year and in the future is the supply chain. And it’s not doing too well right now.
“Certain items might be more scarce than they used to be. So I think whether its online or you go to a retail store, I think there’s two things that need to happen: If you see it, and you want it, I think you better buy it when you see it; and people may have to be more patient in acquiring that thing, whatever it is,” Mark Stanton, general manager of supply chain solutions for logistics technology company Powerfleet, told Modern Shipper. “It may not be readily available tomorrow — it may take a week or two before it arrives. Buy early and look early, so that if you see what you need or see what you want, then you have an opportunity to get it in time.”
The Suez Canal blockage earlier this year was just a portent of things to come for the fragile global supply chain. Ships are experiencing gridlock at ports all over the country, with companies struggling simply to get their containers unloaded, and that’s driving delays and shortages for products of all kinds.
As U.S. companies have increasingly outsourced manufacturing offshore to China and other Asian countries, it’s become near-impossible for retailers and logistics providers to guarantee on-time deliveries. While retailers are scrambling to make ends meet by boosting U.S. production, the vast majority of their products still have to go through a supply chain that’s very much in flux.
COVID is the gift that keeps on giving. Just when it seemed like the U.S. was turning a corner in its pandemic relief, the country was hit by the devastating delta variant, which is projected to play a big role in back-to-school shopping trends.
According to both DeBroff and Stanton, delta’s impact will likely vary geographically — states and counties hit hardest by the new variant, or facing the strictest mask and vaccine mandates, figure to see fewer parents doing their back-to-school shopping early, or at all.
Per DeBroff, just 59% of parents anticipate buying a new backpack or lunchbox for their kids, despite their having been out of school for over a year. Intuitively, one would expect that figure to be closer to 100%. But the uncertainty around in-person learning brought about by the delta variant has led to greater hesitancy to spend big on those products.
“I don’t think that parents are going to go splurge on a whole new set of clothing for their kids if they’re just going to be on virtual learning from Zoom,” DeBroff said.
Back-to-school isn’t going back to normal
COVID-19 may have accelerated the back-to-school shopping trends we’re seeing in 2021, but Stanton doesn’t foresee them losing steam anytime soon. He emphasized that these trends were underway before the pandemic hit, and that the two aren’t as inextricably linked as they may seem.
“People are getting more used to buying online, whether that’s food or technology or whatever other products. … Companies like Carvana and others sell exclusively online,” Stanton said. “I don’t think that trend is going to reduce. I do think it’s going to continue. I don’t see it slowing down, and some would even argue that it’s even going to accelerate further over the next 24 months.”
If that holds true, then many retailers are about to enter an era of back-to-school shopping where they’re at a distinct disadvantage. Experts predict that 85% of U.S. online shoppers in 2021 will do their shopping with Amazon (NASDAQ: AMZN). That’s not necessarily a surprise, but it is concerning for smaller companies without those extensive supply chain and e-commerce resources. Stanton, though, is bullish on the future for small and medium-size retailers.
“I actually do not believe that they have to concede,” he said. “Personally, I think there’s room for smaller companies as well as the major companies like the Amazons of the world. … They have to differentiate like every company, and they have to invest where it’s appropriate. I think there’s definitely room for success for everybody, but it then becomes about execution.”
I think there’s room for smaller companies as well as the major companies like the Amazons of the world.
Mark Stanton, GM supply chain solutions, Powerfleet
One suggestion he makes is to follow in the footsteps of Amazon’s major competitors and convert brick-and-mortar stores into micro-distribution centers, which are already revolutionizing retail. Walmart, Target and others have made major investments in their warehousing, distribution and fulfillment capabilities, bringing in new technology to overhaul their supply chain efficiency and visibility. Stanton thinks that this is where the competitive advantage lies for smaller companies.
“If you provide really high-quality customer service, which is really based upon information … you can start looking at that as a way of differentiating yourself from your competitors. I think there’s an area there where technology, like telemetry and other things, can play a part in that business model and that differentiation.”
In other words, if small or medium-size back-to-school retailers focus on speed, transparency and personalization, they can position themselves as more reliable than a larger firm like Amazon that handles millions of parcels every day. Stanton emphasizes that data and technology are the best way to make informed decisions around those aspects.
Of course, it could all be a fluke; the pandemic could end, and back-to-school shopping habits could return to the normalcy of 2019. But what’s more likely is that the definition of normalcy is shifting — and retailers will need to shift with it.