Coresight Research Labs

albert Chan

FROM THE DESK OF DEBORAH WEINSWIG

US Retail Plans for Late Back-to-School Spending but an Early Holiday Season

The retail impacts of the coronavirus crisis have not just altered levels of spending and channel shifts but have also had a knock-on effect on how consumers shop for major calendar events. The two biggest events on the retail calendar are coming up—back-to-school and the holidays—for which each has different implications from the crisis.

• Back to School: Late Spending Shift

With uncertainty over how education will be managed in the fall, we are seeing US shoppers delay their back-to-school purchases. Spending is not only estimated to be depressed—by 7.5–9.5% year over year, according to our estimates—but it also looks to be in a state of flux. Underscoring this, Walmart CFO Brett Biggs this week remarked, “The back-to-school season is off to a slower start than usual given the uncertainty around the timing of students physically returning to school. As a result, we expect the season to be choppy and come later than normal.”

Shopper uncertainty around the nature of returning to school is reflected in the intra-season shifts in spending intentions recorded in our early-August US back-to-school consumer survey update. Our findings indicate that a greater proportion of shoppers now expect to spend less on products for in-school learning than they did last year—30% in August versus 19.9% of consumers surveyed in July. At the same time, the proportion of respondents that expect to spend more on products for learning at home than they did last year fell to 21.5% in August from 27.3% in July. Nevertheless, learn-at-home categories will do unusually well this year: Walmart reported this week that laptops, tablets and home-office furniture are performing well, while demand for basic school supplies, backpacks and apparel is soft.

• Winter Holidays: Early and Surprisingly Strong Demand

For the end-of-year holiday season, the picture currently looks different—shoppers and retailers alike are expecting demand to be pulled forward. Our latest weekly survey of US consumers saw 22.7% of respondents indicate that they plan to start holiday shopping earlier this year, while only 7.6% expect to start later than usual. Amazon Prime Day, which is expected to be held in October this year, is likely to contribute to this trend—one-third of holiday shoppers reported to us that they expect to buy on Prime Day, well above the one-quarter expecting to buy on Cyber Monday and the 16% on Black Friday.

Retailers are preparing for this timeframe shift. Kohl’s CEO Michelle Gass reported this week that the company expects many customers to “get ahead of their holiday shopping and increasingly leverage our digital and omnichannel capabilities.” She explained that the company is “making adjustments to drive and capture anticipated early holiday demand beginning in October across all of our channels.” Kohl’s CFO Jill Timm similarly remarked, “We expect the holiday season to move earlier” and pointed to the benefits of such a shift in easing the costs associated with shipping over the peak period. Target’s CEO Brian Cornell stated this week that the company is also “preparing to start earlier than before in the October period.”

We expect retailers and consumers alike to see the benefits of shopping early this holiday season, including alleviating supply-chain pressures and securing product in a market where bought-in inventory levels are likely to be down year over year. Recent strong total retail sales suggest that holiday-season demand may prove relatively solid—although we have several uncertain months until we get there—and in some categories, we could see constrained inventory volumes and squeezed logistics prove to be more significant inhibitors to total growth.

Keep an eye out for the launch of our holiday season coverage in the coming weeks, including our answers to 12 questions that we think will prove pressing for retailers this holiday season.