December 1, 2022

Mariedelices

Taking The Lead For Fashion Quality

Many Americans are struggling with back-to-school shopping this year as wealthier households keep spending

Retailers are expecting a record back-to-school season as families prepare for in-person classes, even as inflation eats into many shoppers’ purchasing power. But while wealthier households are set to spend more in the face of higher prices, low- and middle-income families are straining to cover the cost of school supplies, consumers and retail industry analysts say.

Many middle-income shoppers such as Sam Waldorf, a 33-year-old mother of four in Fort Campbell, Tennessee, have lived comfortably throughout the pandemic. But her husband’s Army salary of about $80,000 doesn’t go as far now. Waldorf said she plans to get a part-time job in retail to help cover the higher costs of sending her kids to school this year.

“Everything’s gotten more expensive,” she said. “We need the extra income because grocery bills have doubled and I basically have my own little army.”

Even with a rotation of hand-me-downs and new shoes gifted by family members for the school year, Waldorf’s budget is stretched thin. She plans to spend $200 total, down sharply from the $800 she recalls spending last year.

The National Retail Federation, a retail trade group, estimates U.S. shoppers will spend $37 billion this back-to-school season, matching last year’s record, with households averaging $864 apiece. With inflation at a four-decade high of 9.1%, the share of consumers expecting to shell out more than $500 on school-related purchases this year shot to 25% from just 7% last year, a Morning Consult poll found in May and June.

But some consumers’ buying power is waning faster than others’. Wealthier shoppers are still capable of spending at levels that outstrip inflation, while less affluent people are struggling to afford higher prices, according to the NRF. Higher-income households are largely driving the expected jump in back-to-school outlays this year. Families with budgets unaffected by inflation are forecast to spend about 32% more on school-related purchases than in 2021, according to a report last week from commercial real-estate services firm JLL.

Among mid-to-low-income households, the outlook is murkier. Families whose budgets are significantly affected by inflation plan to spend 15% less than last year on back-to-school shopping while those somewhat affected by inflation will spend roughly 6% less, according to JLL. The NRF still sees less affluent households boosting rather than trimming their spending to start the school year — but with more belt-tightening elsewhere to do so.

“Lower- and middle-income consumers are sticking to the necessities, and they’re starting to trade down,” said Katie Thomas, lead at the Kearney Consumer Institute, a research arm of global consulting firm Kearney. “Then there are individuals who are aware of inflation and say, ‘Yeah, I noticed my latte was $7, but I still bought it.’”

The back-to-school season comes as middle-income shoppers experience the steepest rise in their cost of living over the last year and low-income consumers face fewer options to manage high prices, according to Wells Fargo research. Federal stimulus payments and the expanded child tax credit — which Congress allowed to lapse at the end of 2021 — helped low-income people save, pay down debt and raise their net worth to record levels last fall, said Sarah House, a senior economist with Wells Fargo. But that growth is beginning to be erased by inflation, which has outpaced wage gains.

“I don’t think it’s all doom and gloom for the consumer,” House said. “But I think we are at a turning point where the very solid financial picture of households over the past almost two years now is starting to deteriorate.”

This is the first year since the pandemic began in 2020 that Jim Thompson will take his three kids shopping for in-person schooling. The 45-year-old former auto technician in Fallis, Oklahoma, said he’s been unable to work after suffering a series of medical crises in recent years, including a stroke in January 2021. Thompson said he hasn’t been able to collect disability-insurance payments, so the family depends on his wife’s income as a fast-food worker earning $9.50 an hour plus about $100 a week in tips.

“If it’s what the school calls for and what they need, then I’m going to make sure they have it,” he said.

Thompson plans to take his kids to Walmart for school supplies and thrift stores for clothes. He registered his children to attend a different school district that provides students with Google Chromebooks. But even with that cost out of the way, Thompson expects to spend about $150 on each of his kids this school year, roughly $50 more than last year.

“Consumers are treating the back-to-school season like any other essential category,” said Katherine Cullen, senior director of industry and consumer insights at the NRF. “So they are prioritizing the items their kids will need and making it up by pulling back in other areas or shopping more for sales and discounts.”

Back-to-school promotions are rolling out sooner than in years past, with more in bundles like “buy one get one 50% off,” which encourages shoppers to buy multiple items, said Nikki Baird, vice president of strategy at retail-technology company Aptos.

Walmart priced 100 school supplies at under $1, including a 24-pack of Crayola crayons, child-safe scissors and spiral notebooks. Target raised its student discount for loyalty program members to 20% from 15% last year. The Container Store is offering a 15% discount to parents and students who sign up for its loyalty program and 25% off orders over $200 for existing members. Dozens of school backpacks, including Adidas and Jansport, are currently 25% off at Kohl’s, which is also discounting Levi’s clothes by up to 40%.

Some retailers expect spending will slow as the year carries on. Joel Anderson, CEO of the discount retail chain Five Below, told investors in a June earnings call that stores in lower-income markets are seeing sales declines relative to last year, while sales are rising among those in higher-income markets. Abercrombie & Fitch and Best Buy cut their guidance for the year, saying inflation continues to dent demand.

In the meantime, families on solid financial footing are monitoring price increases but largely staying the course.

Heather Sweren, a 42-year-old mother of two in Gaithersburg, Maryland, expects to pay more this back-to-school season but so far isn’t worried.

“I know it’s going to cost me more money, but I’m not willing to sacrifice certain things,” she said.

Even with a household income of $300,000, she’s always looking for a deal and uses her credit cards to earn points and cash back. She won’t shell out $400 for the Apple Watch her son wants for school, but she might splurge on a dress for her daughter.

“I’m lucky because I can afford it,” she said. “So I don’t have to really make that choice.”