Mall stores make the grade

De­spite e-com­merce surge, many back-to-school shop­pers pre­fer phys­i­cal shops

Los Angeles Times - - MONDAY BUSINESS - By James F. Peltz james.peltz@la­times.com Twit­ter: @PeltzLATimes

The $84-bil­lion back-toschool shop­ping sea­son is back just in time as far as be­lea­guered mall mer­chants are con­cerned.

Con­sumer spend­ing on kids and young adults re­turn­ing to the class­room not only is the sec­ond-largest shop­ping pe­riod be­hind the win­ter hol­i­days, but it’s one when many con­ven­tional phys­i­cal stores are hold­ing their own against the surge of on­line com­pe­ti­tion.

Although the growth of ecom­merce has forced dozens of U.S. re­tail chains to close thou­sands of lo­ca­tions at malls and else­where, an­a­lysts said that chil­dren and their par­ents still like vis­it­ing stores to pur­chase items on their back-to-school lists — note­books and lunch boxes and clothes and com­put­ers.

“This is one cat­e­gory where we’re see­ing a sur­pris­ing level of sup­port for the in­store ex­pe­ri­ence,” said Jim Mills, who heads the South­ern Cal­i­for­nia con­sumer busi­ness prac­tice for Deloitte, the con­sult­ing and au­dit­ing firm.

Back-to-school shop­pers plan to do most of their buy­ing in phys­i­cal stores, ac­cord­ing to a sur­vey con­ducted for the Na­tional Re­tail Fed­er­a­tion by Pros­per In­sights & An­a­lyt­ics.

On­line shop­ping came in third, tied with cloth­ing stores, when con­sumers were asked to name all the places they were plan­ning to do their buy­ing. Nearly 46% of those sur­veyed said they would do some on­line shop­ping, al­most un­changed from a year ago but up about 10 per­cent­age points from 2015, show­ing the strong growth of e-com­merce.

In a sep­a­rate sur­vey, the In­ter­na­tional Coun­cil of Shop­ping Cen­ters trade group found “that 68% of shop­pers said they don’t en­vi­sion buy­ing all of their school sup­plies on­line,” spokes­woman Stephanie Cegiel­ski said.

“Peo­ple still want to see and touch and in­ter­act with prod­ucts,” she said.

Re­tail­ers in­creas­ingly are mak­ing it eas­ier for con­sumers to or­der prod­ucts on­line and then have them de­liv­ered to their homes or pick them up at the store. The lat­ter op­tion of­ten prompts shop­pers to stroll else­where in the store to buy other merchandise or — in the case of Wal-Mart Stores Inc. and Tar­get Corp., for in­stance — pick up gro­ceries as well.

For many young­sters and their par­ents, the store vis­its are as im­por­tant as the con­ve­nience of e-com­merce. It’s one thing for kids to give their par­ents a hol­i­day wish list and hope for the best, and quite an­other for kids to de­mand a se­lect type of note­book, back­pack or ap­parel af­ter they’ve looked them over in per­son, an­a­lysts said.

“They’re on­line a lot, don’t get me wrong,” NRF spokes­woman Ana Ser­afin Smith said. “But they’re us­ing on­line more to do re­search than to ac­tu­ally pull the trig­ger and buy.”

The NRF’s re­search also is show­ing that youths age 20 and un­der are “re­ally in­ter­ested in bring­ing the brick-and-mor­tar ex­pe­ri­ence back” for buy­ing backto-school items, Ser­afin Smith said. “They love go­ing into the stores and shop­ping the way their grand­par­ents did.”

In con­trast to back-toschool shop­ping, the win­ter hol­i­days find par­ents of­ten pre­fer to shop with­out their chil­dren. The NRF’s 2016 hol­i­day shop­ping sur­vey re­flected that, with on­line shop­ping out­pac­ing every other store cat­e­gory: About 52% of shop­pers planned to buy on­line; the No. 2 cat­e­gory was depart­ment stores at 42%.

Back-to-school sales, in­clud­ing those for young adults re­turn­ing to col­lege, are ex­pected to climb a stout 10.3% this year to $83.6 bil­lion from $75.8 bil­lion, the NRF es­ti­mates, cit­ing stronger em­ploy­ment, higher con­sumer con­fi­dence about the econ­omy and lower gaso­line prices.

The Con­fer­ence Board, a busi­ness trade group, last week said its con­sumer con­fi­dence in­dex rose in July to its high­est level since mid-2001.

“This is good news for re­tail­ers, ar­riv­ing just as the back-to-school re­tail sales sea­son is be­gin­ning to heat up,” said Chris Christo­pher Jr., ex­ec­u­tive di­rec­tor for eco­nom­ics at the re­search firm IHS Markit.

“Our fore­cast calls for growth of 4.3% in back-toschool re­tail sales this year com­pared to last year, which would be the strong­est growth since 2014,” Christo­pher said.

The por­tion of back-toschool sales for kids in el­e­men­tary school through high school is fore­cast at $29.5 bil­lion, and the por­tion for col­lege stu­dents is $54.1 bil­lion, the NRF said.

Col­lege sales in­clude a va­ri­ety of merchandise that’s of less or no value to the even-younger set, in­clud­ing items for dorm rooms, such as bed­ding and mini-re­frig­er­a­tors, and branded col­le­giate ap­parel and other goods.

Com­put­ers and other elec­tron­ics top the list for col­lege stu­dents, with the NRF find­ing that they’ll spend $12.8 bil­lion on elec­tron­ics, fol­lowed by $8 bil­lion for cloth­ing.

Be­yond the im­me­di­ate sales it gen­er­ates, the backto-school sea­son is cru­cial for re­tail­ers be­cause it “re­mains an im­por­tant bell­wether for what is to come over the hol­i­days” in terms of con­sumers’ will­ing­ness to spend, Christo­pher said.

Mills said the back-toschool sea­son is a key mar­ket­ing tool for re­tail­ers be­cause the level of their ser­vice, prices and con­ve­nience will de­ter­mine whether cus­tomers re­turn in four months for the Christ­mas sea­son.

“They’re fo­cused on this sea­son be­ing a great plat­form to ex­pose to the con­sumer what they can of­fer,” Mills said.

That ex­po­sure starts with ded­i­cated back-toschool sec­tions in stores and on­line. Ama­zon’s “Back to School Check­list” link sits at the top of its home­page; Sta­ples Inc.’s “Back to School Cen­ter” link also tops its web­site.

Wal-Mart’s web­site al­lows schools to post check­lists of their re­quired sup­plies so that stu­dents and par­ents can im­me­di­ately or­der them with a few clicks. In its phys­i­cal stores, the gi­ant re­tailer also has “back-toschool helpers” to di­rect cus­tomers to the merchandise they’re look­ing for and the short­est check­out lines.

Re­tailMeNot.com, a web­site that con­nects shop­pers with re­tail­ers, said its sur­vey of back-to-school buy­ing habits found that “nearly one in three con­sumers (28%) al­ways search for items on­line be­fore go­ing in the store.” But 54% said they end up do­ing most of their shop­ping in a phys­i­cal store.

When it comes to choos­ing which stores to pa­tron­ize, the same prob­lems plagu­ing cer­tain types of re­tail­ers show up in back-toschool shop­ping as well.

Deloitte found that mass mer­chants such as Wal­Mart and Tar­get not only are the most pop­u­lar des­ti­na­tions, with 73% of par­ents say­ing they planned to shop at such stores, but the per­cent­age rose sharply from a year ago.

Con­versely, par­ents’ pref­er­ence for tra­di­tional depart­ment stores — which would in­clude Macy’s Inc. and J.C. Pen­ney Co. — fell from a year ear­lier to 34%. Their pref­er­ence for spe­cialty cloth­ing stores also fell, to 9%.

“You’re see­ing a shift to more dis­count-re­lated stores, away from the tra­di­tional depart­ment stores,” said the ICSC’s Cegiel­ski. Although con­sumer con­fi­dence is up, “peo­ple are be­ing much more price con­scious,” she said.

Cegiel­ski said an­other rea­son peo­ple still visit phys­i­cal stores is the need to make last-minute pur­chases, and she con­fessed she is in that group.

“Every year, it’s two days be­fore the start of school and I’m in Sta­ples buy­ing school sup­plies,” she said. “You’re al­most forced to visit a brick-and-mor­tar store rather than wait­ing for a ship­ment from on­line be­cause it’s too late.”

Ro­ge­lio V. So­lis As­so­ci­ated Press

CON­SUMER spend­ing on stu­dents re­turn­ing to class­rooms is the sec­ond-largest shop­ping pe­riod be­hind the win­ter hol­i­days. Above, a stu­dent in Mis­sis­sippi in 2014.

Danny John­ston As­so­ci­ated Press

SHOP­PERS at a Sta­ples store in Arkansas in 2010. For many young­sters and their par­ents, store vis­its are as im­por­tant as the con­ve­nience of e-com­merce.

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