According to Katherine Cullen, Director of Industry & Consumer Insights of the National Retail Federation, the back-to-school season is a critical time for many consumers as well as retailers. It is second only to the winter holidays in terms of spending power and is bigger than Valentine’s Day, Mother’s Day and Father’s Day combined. At a recent Retail Marketing Society webinar, Cullen joined Larry DeParis, CFO & COO, LT Apparel, Lynn Husum, co-founder of Appaman and Nick Woodhouse, President & CMO, Authentic Brands Group to discuss the current state of the children’s back-to-school apparel market and the implications it may have for Holiday ’22 sales.
A Shift in Shopping Patterns
Clothing is a strong area for both back-to-school and back-to-college. However, a big shift is in the timing. Consumers started shopping in early July. Early shopping is a trend that is expected to continue into the holiday season and NRF predicts this is the precursor to a bigger trend spurred by the pandemic. However, even before COVID, consumers were moving up their holiday shopping. Thanksgiving weekend became Black November and retail sales for the holidays started in October.
“People are doing it because they want more time to shop for sales and promotions,” observed Cullen. “They feel burned by supply chain delays, so they want to allow more time for products to get to them. They’re trying to spread out this spending across multiple paychecks. We see that consumers like giving themselves a little less pressure, giving themselves more time to shop, thus avoiding crowds.”
Inventory Hangover
One of the impediments to robust sales is the glut of spring inventory. DeParis cited a recent Wall Street Journal article that reported on retailers resorting to stashing excess inventory in trailers. Some retailers stepped forward and took deep discounts to clear the inventory, resulting in better back-to-school performance. For those that didn’t, it leaves fall goods competing with spring goods. DeParis also expressed concern about the ongoing effects of this inventory glut.
“It’s tremendous what’s out there . . . the economy really started to slow down after people placed fall order,” said Woodhouse. ”Those goods are coming in and holiday goods are going to be coming in, too. If the retailers continue the need to clear the inventory, even the fresh holiday goods are going to be competing with deep discounts like we saw some years back. If we’re at 40 and 60 off trying to clear up fall goods, it’s not going to bode well for holidays.”
“Everyone’s concerned about inventory,” added Woodhouse. “But the one thing that always continues is that good brands will win, and bad brands won’t win. When the consumer chooses to buy, they will find something that is going to be price and value, not price or value.”
Market Bifurcation
“Overall, we are seeing continued strong spending this year,” reports Cullen. “We do see that lower income families are feeling the pressure of higher prices and inflation . . . and maybe taking some steps to address that.”
“The assumption is that the folks who are buying items anywhere from $10 to $20 average unit of retail were hit more by the turning off from stimulus checks, escalating gas prices, etc. But someone who’s buying a Brooks Brothers suit might buy one less bottle of wine at dinner and buy a suit, while the person who was buying a Forever 21 dress might be filling up their car instead.”
Both Woodhouse and Husum reported that their suiting business for the youth market is doing extremely well.
“We’re targeting a middle to upper class clientele that is still buying. We do a big suiting business (we call it ‘fine tailoring’) for young men, and it sells well. I think it’s a result of the welcoming back of events and people being excited to attend a special occasion,” said Husum.
LT Apparel’s school uniform business has also benefited from dress wear.
“Although our khakis, polos, jackets, skirts, etc. are bought predominantly for school, they are also being purchased for regular wear,” explained DeParis. “We have a high-quality product at a terrific value price. I think we’re getting the benefit of parents trading from other brands and then buying our clothes for events—for church and synagogue, for communions, Bar Mitzvahs and the like.”
There was general agreement that back-to-school spending patterns don’t necessarily correlate with holiday spending. Cullen pointed out that it’s important to remember that these are two very different buying occasions. One is an essential, as it relates to your child’s necessities. With holiday, there’s a much bigger slice of the population participating and it’s a gifting occasion as well as a celebratory occasion. During the pandemic, we saw a lot of focus on holidays and special events where people wanted to make them feel more celebratory, as they were focusing more on goods. If people are concerned about their finances, we may see a bit more of a focus on discount, trading down, possibly rethinking those gifts for coworkers or non-core gift recipients that you might have thought of in the past.
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