Retailers face sluggish back to school season

Watch for longer sales season stretching into September

With only a few weeks left until classes resume, brick-and-mortar retailers are indicating they expect a slower start to the back-to-school shopping season.

A survey by global professional services firm Ernst & Young shows Canadian consumers are unlikely to open their wallets for new school supplies, with shoppers delaying spending to first research items online.

Consumer reticence is expected to extend the shopping season well into the school year, according to the report.

“Retailers continue early promotions, fighting for every consumer dollar,” said Daniel Baer, Ernst & Young’s Canadian retail and consumer products sector leader in a release. “But consumers will likely wait for further promotions, extending the back-to-school season into early September, after the start of the school year.”

Higher debt levels, as well as increased costs for food and gas, are leaving consumers with fewer dollars to spend, Baer said.

Alberta, Saskatchewan and British Columbia are expected to lead retail sales through the back-to-school season, with Quebec and Ontario closer to average expectations and the Maritimes lagging the national average.

Sales of traditional items such as clothing, shoes and stationary will be on par with 2013 levels, while spending on computers, tablets and various electronics is expected to fall flat.

Baer said the forecast is based on an analysis of several economic indicators including employment rates, current retail sales by province, consumer confidence levels and public company disclosures. The data, gathered during the last two weeks of July, was supplemented by interviews with retailers from various sectors.

In addition, the data shows that consumers under 25 are more likely to recycle items and, as a result, spend less.

“There isn’t a lot of room in people’s budgets for discretionary items,” said Baer.

Consumers are becoming more savvy, he added, using mobile devices more often to search for markdowns on items.

In response, retailers are increasingly trying to differentiate themselves with pop-up stores, limited time collaborations, exclusive targeted events, the report said.

“In a competitive economy, retailers need to compete on more than just price,” said Baer.

Target has forecasted overall Canadian back-to-school sales will be stagnant compared to a 3.7% gain a year earlier, according to an article in the Globe and Mail. “Consumers are very thrift sonscious – they’re looking for bargains,” Bruce Winder, president retail specialist in Toronto told the Globe. “It’s a very important time for Target. … This might be Target’s coming-out-party.”

To match the number of online shoppers, Walmart has doubled the number of back-to-school items its selling online compared to 2013. It’s also cut prices on some items by up to half.

This story originally appeared in Canadian Grocer

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