Marketers Must Respond Now to These Five Back-To-School Shopping Trends

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Marketers Must Respond Now to These Five Back-To-School Shopping Trends

By Andrew Billings and Nelson Ho, Retail and CPG Practice, North Highland Consulting - 07/27/2017

In a year filled with bleak U.S. retail reports for office supplies, clothing, and electronics, a silver lining has appeared: a National Retail Federation (NRF) survey predicts that consumers will spend nearly 10 percent more on BTS shopping (back-to-school and back-to-college) in 2017 than in 2016. The $83.6-billion projection of total estimated BTS sales represents the second highest U.S. holiday spending outside of winter. This is welcome news for department stores and specialty retailers who will look to recoup the margin from a soft first half of the year.

The prediction of a strong BTS season represents a significant opportunity for brick & mortar (B&M) retailers to hold off the continuing surge of online retailers. While the pace of online retailers is ahead of total retail sales, the majority of BTS shopping still occurs in-store, according to eMarketer.

All B&M retailers will do well to develop strong responses to five major trends impacting the BTS selling season.

Elongated season

BTS is the longest-selling season of any holiday or shopping event in the retail calendar, stretching three months, with nearly half of consumers beginning searches in June or July. The season length is exacerbated by differing school calendars (South begins early August, Northeast begins after Labor Day). As a result, retailer promotions begin as early as May. Online BTS shopping is starting earlier in the year, and this is due partly to Amazon Prime Day, a 30-hour event in July.  B&M retailers can still do well in early to mid-August, as most consumers shop three to four weeks before school starts.

Retailers can take advantage of this elongated season by learning from the data, and pivoting quickly. The true ‘winners’ will be able to observe early BTS trends (June/July) and introduce new and updated products before the end of the BTS season (August/September). Fashion retailers are well positioned to observe initial consumer buying behaviors and respond with ‘trend injection’ programs to update select styles and bring to market in 8-12 weeks.

Sales taxes neutralization

Amazon now charges sales tax in 45 states, leveling the playing field for brick & mortar retailers. This recent development has made tax-free shopping weekends more lucrative for consumers who live in some 20 states that offer tax free weekends from May to August.

This represents a significant opportunity for retailers to drive large customer traffic into stores, especially considering that a Retail Me Not’s BTS survey found 24 percent of BTS consumers plan to do all their shopping in a single weekend.

Retail leaders will plan promotions to coincide with tax-free weekends, including discounts on big ticket items such as electronics to appeal to parents. Considering the large potential spend on tax-free weekends this year, retailers will be challenged to ensure inventory is well positioned to avoid stock-outs, and stores are prepared to handle the large crowds to maintain high levels of customer service.  

The free shipping standard

Consumers in 2017 are conditioned to free shipping. NRF indicates that 90 percent of shoppers expect free shipping for online purchases. Brands like Amazon, Dell, L.L. Bean, Nordstrom and Wayfair thrive on the free shipping trend, and others offer free shipping during special promotions.

To combat of eroding margins from free shipping, retailers are encouraging the Buy Online Pick-Up In-Store (BOPIS) fulfillment option, which NRF says 54 percent of BTS shoppers plan to use in 2017. BOPIS protects margins and just as important, drives consumers into the store. More progressive retailers will consider discounts for BOPIS transactions due to the foot traffic potential. Retailers like Walmart have significantly expanded their BOPIS and same-day pick-up offerings, and even introduced “Pick-up Discount,” which will provide discounts to customers who stop in for select online-only items.  

Given the increasing trend of BOPIS transactions, retailers must ensure that customers are able to pick-up orders in stores quickly and with minimal instruction. Retailers who force a customer to endure a 20 minute wait to pick-up BOPIS orders will not only discourage customers from using BOPIS again, but potentially drive customers to their competitors.

Year-round shopping and subscription services

A growing number of consumers are moving away from traditional BTS shopping excursions in favor of year-round shopping, spreading traditional BTS spend across the year. Retail Me Not’s survey indicates 20 percent of consumers fall into this bucket. This trend necessitates that retailers maintain a portion of the BTS product assortment in stores or online beyond September. As this trend increases, retailers are likely to take advantage by delaying liquidation of BTS inventory.  

Over the last five years, subscription retail services have expanded in popularity, with many retailers trying their hand at reoccurring customer purchases. Consumers enjoy the ‘autopilot’ system and savings that go along on products such as dog food, coffee, cleaning supplies and diapers. While subscriptions have been primarily targeted at adults, the subscription trend is expanding into younger age groups in items like clothing, where purchasing frequency can be well predicted. BTS is ripe for subscription service for both young adults and parents of younger children. Consumers are likely to see BTS subscription services in pilot this year and next with select retailers.

The brick & mortar customer experience advantage

Despite recent headlines touting Amazon dominance and retail store closings, the majority of BTS spending still occurs within physical stores. According to eMarketer, 64 percent of total BTS spend in fact.

To maintain market share, brick & mortar retailers must execute on two fronts. First, target timely digital/mobile marketing to customers. Collecting and utilizing data analytics is crucial to an effective digital marketing campaign. A well-executed campaign will help accomplish goal number one, get the customer into the store. Second, immerse your customer in an experience that far exceeds those offered by online retailers and discounters. Customer service is paramount, and retailers are smart to "staff up" during the BTS peak period. For the first time, retailers such as Walmart are introducing “Back-to-School Helpers,” doubling down on the promise of store associates assisting customers in the search for items and at check out. While temporary workers are often required to meet demand, retailers that are able to attract, train and retain the best floor associates will stand out.

Final thoughts

NRF’s projected 10 percent increase in spending for BTS from 2016 to 2017 should not be viewed as a rising tide that raises all boats. Instead this increased revenue projection is an opportunity for leading retailers to demonstrate their ability to respond to the rapidly changing consumer purchasing behaviors by evolving the end-to-end customer experience. This quick and adaptive response will be sure to separate the winners from the underdogs during BTS 2017, and will set the stage for retailers as the other big shopping seasons approach later this year.

 

Andrew Billings is a principal and senior leader in North Highland Consulting’s Retail and CPG practice. He has a decade of management consulting experience within retail, apparel and consumer products industries, including wholesale organizations, vertical retailers, manufacturers, department stores, and big-box retailers. Billings can be reached at [email protected].

Nelson Ho is a manager with North Highland’s retail and CPG practice. He has more than seven years of experience in end-to-end supply chain transformation in retail and manufacturing industries. Specific areas of expertise include supply chain strategy, strategic sourcing, and cost transformation. Nelson can be reached at [email protected].