Lower prices a boon to supplies category

Except for those parents compelled to outfit their kids with an iPhone, designer duds and a Mini Cooper, the prospect of sending kids back to school has never been more affordable, thanks to aggressive price promotions on back-to-school basics.

Deflation among core supplies offered during BTS selling reached a new level this year as retailers of every ilk sought to establish themselves as a BTS destination by offering hot prices on key items.

The result was promotions such as a 5 cents bottle of store brand glue at Office Depot, a 50 cents two pack of scissors at Staples, a 10-pack of pencils for 19 cents at Walgreens and 70 sheet spiral notebooks at Kmart for 10 cents. A 24-pack of Crayola crayons for 20 cents at Wal-Mart was one item among 16,000 the company said it lowered prices on for its “unbeatable prices” promotion.

Such promotions are the equivalent of post-Thanksgiving door-buster deals retailers use to entice customers to buy products that offer higher margins. Unlike the holidays when retailers have an entire store from which to draw upon when selecting promotional items, during BTS season a core group of basic supplies are promoted each year with prices reaching new lows, even as overall BTS sales maintain solid growth.

“The No. 1 venue[s] for back-to-school shopping [are] discount stores, and the No. 1 motivation for consumers is price,” Michael Niemira, chief economist and director of research with the International Council of Shopping Centers said during a Citigroup sponsored conference call.

The ICSC expects the average household will spend $450 during the BTS season, pushing total sales ahead 5% to approximately $27 billion. The key assumption underlying Niemira’s optimistic forecast is several years’ worth of personal income growth in the 5% to 7% range, which is expected to trump other consumer spending concerns such as volatile fuel prices and weakness in the housing market.

“No one really knows a hard number on back-to-school sales,” Niemira said, offering that differences in estimates depend on definitions and tracking methodologies.

For example, in ICSC’s estimates, nearly three quarters of the projected $27 billion comes from clothing and shoes, with computers accounting for 13% and books representing 14%. The ICSC estimate does not include school supplies. Although the National Retail Federation does include supplies in its estimates, its projection for sales this year is lower than the ICSC’s, even though its estimate of per household spending is higher.

NRF estimates total BTS spending this year will reach $18.4 billion while average household expenditures will increase nearly 7% to $563. Of that amount, a survey of more than 8,000 consumers indicated about $94 will be spent on supplies this year as compared to $86 last year.

That number represents a 9% increase from last year, and suggests that consumers who responded to the survey conducted in early July had not yet seen retailers’ circulars promoting all manner of school supplies at never before seen prices.