After two years of benefitting from gasoline price tailwinds, still-stressed consumers will generate only a sluggish 3.3% year-over-year increase in this year’s back-to-school sales, according to Customer Growth Partners’ 14th Annual BTS Forecast.
Total BTS sales for the season will reach $540 billion — a new record, but the lackluster 3.3% growth represents a marked slowdown from the 4%-plus BTS growth seen in both 2014 and 2015, when sales were boosted by declining gasoline prices.
“As in past years, the single biggest driver of retail sales is real income growth, which remains anemic for all but the highest income quintiles,” said Craig Johnson, president, Customer Growth Partners, a consulting and research firm covering the retail industry.
Johnson noted that rising gasoline prices in many parts of the nation are another factor in consumer spending.
“At the same time, discretionary income normally available for retail spending has been “crowded out” by non-discretionary spending for health care, insurance, housing and student debt — to the tune of about 4% of consumer spending,” he added.
Key findings of the study include:
• This year’s 3.3% growth for the July to September BTS season is a marked deceleration from last year’s 4.1% growth, and would be the slowest BTS growth since 2012’s 3.1% growth.
• Sales growth would be paced by the ecommerce channel forecast to grow 11%, accelerating from last year’s 10% BTS growth. The online sales represent a record 18% of all BTS category sales — and account for nearly two-thirds of the year over year increase in BTS sales.
• Amazon alone will account for about a quarter of the $17 billion increase in BTS sales this year — and perhaps more so if today’s “Prime” day meets even half of its hype.
• Health and personal care stores will pace the growth among merchandise categories, with an increase of 6.6%, up from 4% last year. Sporting goods and toys will grow a solid 4.4%, led by a toy sector coming off its best year in a decade.
• The department store sector continues to contract, and is forecast to see a disastrous 7% decline, as traffic exits the mall and as department stores struggle to make themselves relevant to today’s new generation of shoppers.
• Consumer electronics stores will also have a challenging BTS, with sales forecast to decline over 2%.
• Apparel will also dip slightly, by 0.8%, with weakness at the mall — and as “Fast-Fashion” retailers continue to peak out as store productivity plunges after the segments’ overexpansion in recent years.
• Some apparel retailers will thrive at BTS, however, including off-price retailers such as TJX, and British newcomer Primark, both of which are thriving. Primark will open its fourth and fifth U.S. stores over the next week in Freehold, New Jersey, and Willow Grove, Pennsylvania.
“Back-to-School shoppers in 2016 will be cautious in spending, but relentless in searching for value,” Johnson said. “The retail winners will be those that provide real newness, relevant to consumers and how they like to shop today — at a great price. However, stores selling strictly discretionary goods — particularly commodity product — will face a very tough BTS this year. The reason why shoppers are flocking to stores like Primark and TJ Maxx is that they doing what Marshall Field said over a century ago: ‘Give the lady what she wants.’”