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Mixed Signals for Back-to-School: What Lies Behind Prime Day's Rosy Headlines and Which Retail Stocks Will Prevail

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Back-to-School Shopping Season Begins Amidst Financial Pressure

Record Spending Predicted Despite Financial Strain

According to recent consumer surveys, the back-to-school shopping season is underway, with consumers in the Southeast feeling the pressure to stock up on supplies for their children. Despite feeling worse off financially than the previous year, parents are still expected to increase their spending compared to last year. The National Retail Federation forecasts record spending of $41.5 billion for K-12 students and $94 billion for college students. While over 40% of consumers polled by KPMG said they felt financially worse off than the previous year, they still anticipate spending more this year, with an average budget per student across all grade levels rising by 21% to $377.09.

Consumers Brace for Higher Prices

The majority of respondents in the KPMG survey, 82%, expect prices to be higher this year compared to 2022. However, about half of those planning to spend less this year said it was due to a lack of available cash. Capital Economics suggests that consumers, despite benefiting from lower inflation, are working fewer hours and experiencing slowing wage and employment growth. This situation has made consumers more budget conscious, leading them to compare prices online and shop at mass merchants. Additionally, consumers are looking for early discounts to stretch their budgets and mitigate sticker shock.

Top Retailers for Back-to-School Shopping

In surveys conducted by JLL and Stifel Financial, top retailers for back-to-school shopping were identified. Walmart, Target, and Amazon were among the top choices for parents, followed closely by Old Navy, Kohl's, Staples, Macy's, and Office Depot. Costco and Dollar General also made the list. Stifel Financial's consumer survey, however, revealed that consumers plan to spend 19% less this year compared to last year. Lower income groups are under pressure, impacting the overall spending outlook.

Looking at Prime Day Trends

The recent Prime Day event served as a barometer for the upcoming back-to-school season. Adobe Analytics reported that shoppers across the internet spent $12.7 billion during the two-day event, a 6.1% increase from last year. However, it fell below Adobe's forecast of 9.5% growth. Data from Sensor Tower showed that Walmart experienced an acceleration of momentum leading up to Prime Day, while Amazon and Target saw more modest increases in traffic. This indicates that Walmart is gaining market share and becoming a go-to retailer for back-to-school shopping.

In conclusion, the back-to-school shopping season is in full swing, despite financial pressure on consumers. Record spending is predicted, with parents expected to increase their budgets for supplies. Consumers are bracing for higher prices and are becoming more budget conscious, searching for discounts and comparing prices. Top retailers for back-to-school shopping include Walmart, Target, and Amazon. Overall, the Prime Day trends suggest a positive outlook for Walmart's sales during the back-to-school season.

A "Hot Take" on the Impact of Back-to-School Shopping Season on New Businesses

The back-to-school shopping season, despite financial pressure on consumers, presents both challenges and opportunities for new businesses looking to capitalize on this significant market. While parents are expected to increase their spending on supplies compared to the previous year, consumers are also bracing for higher prices and becoming more budget conscious. This dynamic creates an environment where new businesses need to find ways to stand out and attract customers while offering competitive pricing and value.

One key aspect for new businesses to consider is the trend of consumers searching for discounts and comparing prices. This highlights the importance of providing competitive pricing and promotional offers to entice customers. Offering bundle deals or exclusive discounts for back-to-school essentials can attract budget-conscious shoppers and differentiate a new business from established retailers.

Moreover, with top retailers like Walmart, Target, and Amazon dominating the back-to-school shopping landscape, new businesses need to find innovative ways to position themselves as alternatives or complementary options. They can focus on niche segments or unique product offerings that cater to specific needs or preferences not fully addressed by the major players.

Furthermore, leveraging online platforms and digital marketing strategies is crucial for new businesses to reach and engage with the tech-savvy consumers who increasingly rely on e-commerce and online research. Establishing a strong online presence, leveraging social media, and investing in targeted advertising can help new businesses capture the attention and interest of back-to-school shoppers.

Overall, while the back-to-school shopping season presents challenges due to financial pressure and competition, it also offers opportunities for new businesses to tap into the market by focusing on competitive pricing, unique offerings, and effective online marketing. By strategically aligning their offerings with consumer needs and preferences, new businesses can carve a space for themselves amidst the back-to-school frenzy and establish a foundation for long-term success.

Article First Published at: https://www.cnbc.com/2023/07/19/prime-day-sent-mixed-back-to-school-signs-these-stocks-will-fare-best.html

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