Deloitte: Back to School Spending Expected to Flatten Amid Financial Concerns

Why this matters

As families navigate the excitement of the back-to-school season, they're balancing between fulfilling what their children need and splurging on the novelties they want. The cost of school supplies has increased 24.5% over the past four years (per the Bureau of Labor Statistics' Consumer Price Index). Deloitte's ConsumerSignals research finds that 73% of consumers are concerned about rising prices for everyday purchases. According to the "2024 Deloitte Back-to-School Survey," K-12 parents spend cautiously, focusing on value and convenience to find the best deals. As the season moves earlier into July, families look for early savings to enable their spending on indulgences and extracurricular activities, underscoring an opportunity for retailers.

Financial concerns drive parents to prioritize spending

Ongoing perceptions of inflation and a cost-of-living squeeze is expected to keep spending steady from last year. Based on surveyed parents' intentions, overall spending is expected to reach $31.3 billion. Parents surveyed expect to spend $586 per student in grades K-12, down just $11 year-over-year (up $57 compared to 2020).

• Clothing and school supplies are expected to account for most of the back-to-school market spending, remaining flat at $12.6 billion and $7.4 billion, respectively. Technology spending is set to decline 11% this year, possibly because many parents who invested in tech products during the pandemic for virtual or hybrid learning may not be in the market for replacements or upgrades. Meanwhile, other products (including personal hygiene items and educational furniture) are up 22% year-over-year.
• Back-to-school spending strategies among surveyed parents include cutting back on other expenses across all income levels (64% of low-income earners, 57% of middle-income earners, and 39% of high-income earners) or delaying major household purchases (52% of low-income earners, 45% of middle-income earners, and 35% of high-income earners).
• Eight in 10 surveyed parents plan to enroll their children in extracurriculars, spending an average of $582 per child. Three-quarters (73%) consider such an expense an investment in their child's future.
• Despite keeping an eye on their budget, 85% of parents surveyed can be influenced by their children to splurge on must-have products and brands. Moreover, half of parents (50%) plan to shop for themselves during the season.

Key quote

We expect back-to-school spending to be flat to down modestly when adjusted for inflation, mainly driven by middle-income families juggling financial priorities and ongoing inflation perceptions. Retailers can expect headwinds to volume and loyalty as consumers seek to save money. However, wanting to please their kids, retailers will likely have opportunities to harness the indulgences parents are willing to make.

- Stephen Rogers, managing director, Deloitte Insights Consumer Industry Center, Deloitte Services LP

Value moves to the head of the class

Families surveyed prioritize value over brand and retailer loyalty to find the best deals, visiting more retail formats and shopping earlier in the summer as the back-to-school season continues to pull forward.

• More surveyed parents plan to make the most of early discounts, with 66% of spending expected to occur by the end of July, up from 59% in 2023. Moreover, 59% believe the best deals occur earlier in the season, compared to 41% who think they appear later.
• On the hunt for deals, parents plan to shop across 4.7 retail formats on average, up from 3.9 in 2023.
• While 62% of parents surveyed respondents plan to shop within a fixed budget, they may sacrifice loyalty to do so: 67% will shift brands if the preferred brand is too expensive, 62% will shop at a more affordable retailer, and 50% will shop for private labels over name brands, underscoring the need for retailers to offer incentives to keep shoppers engaged.
• Back-to-school shoppers overwhelmingly cite mass merchants (77%) as their most preferred retail format, followed by online retailers (65%) and off-price retailers (tied with department stores at 39%). Overall, 7 in 10 surveyed seek convenience (convenient locations, delivery options, and easy returns) - making it the number one driver for where they plan to spend the most.
• Multi-channel retailers account for 80% of the total back-to-school intended spend, up from 73% last year, and 70% of families plan to shop in-store and online, up from 66%.
• Circularity comes to the forefront as more families plan to purchase used items to maximize value further: 4 in 10 (across income groups) surveyed expect to buy a used or refurbished item this season, up five percentage points among both middle- and high-income families. Technology and apparel lead the charge among pre-owned products (both at 28%).

Social commerce patterns emerge

Technology continues to help families further economize by providing opportunities for product reviews and promotions.

• Social commerce is on the rise among K-12 parents, with 1 in 3 surveyed planning to use social media sites to assist in their back-to-school shopping, up eight percentage points year-over-year. In addition, 1 in 8 plan to make a purchase on social media, up six percentage points from last year.
• GenAI is nascent for back-to-school shopping, with 18% of parents planning to use the technology when purchasing.
• Nearly one-quarter of parents (23%) say their children use GenAI for schoolwork, up from 15% in 2023. However, parents are divided on its benefits: 35% agree that GenAI is a positive tool for academic performance and overall learning experiences, compared to 33% who disagree.

Key quote

Families are searching for deals and prioritizing value and convenience to save wherever possible. This dynamic creates an opportunity for retailers to take some of the anxiety out of the season by extending loyalty programs and incentives. In addition, building a seamless omnichannel approach could better position retailers to see consumers coming back throughout the season.

- Brian McCarthy, principal, Retail Strategy, Deloitte Consulting LLP

Deloitte's back-to-school survey was conducted online using an independent research panel between May 22 and May 30, 2024, and surveyed 1,198 parents with at least one child attending school in grades K-12 this fall.

Connect with us on X at @DeloitteUS or on LinkedIn @StephenRogers and @BrianCMcCarthy.

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