NEW YORK (AP) — Mass market retailers in the U.S. are plying shoppers with offers for computers, clothes and other back-to-school essentials at affordable prices. To seal the deal, they are marketing “buy now, pay later” services as a way for customers to spread out the cost of going back to class in style.
The strategies for securing sales are on display to coax consumers, particularly those in lower income brackets, into spending during the retail world’s second-most important period behind the winter holidays, retailers and analysts said. Various forecasts project back-to-school sales this year will be about the same or lower than last year.
Even as inflation has come down, the costs of food, rent and other necessities remain much higher than before the coronavirus pandemic. High interest rates have made it more expensive to carry a credit card balance. Savvy shoppers across the income spectrum have proven willing to shop second-hand and to buy store labels and brands, which are typically cheaper than nationally advertised brands.
“Inflation is the main thing dictating the change in my spending,” Jasleen Reyes, 43, a mother of three who works as a hotel operations manager and lives in New York City’s Harlem neighborhood, said. “Before it wasn’t so bad. Now, I have to watch every dollar.”
For Reyes, that means looking for more discounts, particularly when it comes to getting sneakers and jeans for her children. She also planned to use a “buy now, pay later,” or BNPL, plan to buy a laptop for her 24-year-old son, a college student, and school uniforms for one of her teenage daughters.
Reyes estimates she will spend $3,200-$3,400 on back-to-school items this year, about $1,500 more than last year mainly because of the laptop. She uses credit cards but prefers the four installment BNPL option because it splits up her costs over two months, interest-free, instead of adding them to a monthly bill that would accrue interest if she were unable to pay off the balance right away.
Unlike gifting holidays such as Christmas and Valentine’s Day, the back-to-school period is dominated by spending on essentials like class supplies and replacing clothes and shoes that kids have outgrown.
But like the winter holidays, the back-to-school shopping season keeps starting earlier. One reason is Amazon’s Prime Day. Rivals hoping to capture some of the online behemoth’s momentum have helped make July a good month for discounts.
Target, for example, offered 20 school supplies, including notebooks and colored pencils, that together cost less than $20. The discount retailer moved the sale to the third week of June from the first week of July a year ago.
More people are using “buy now, pay later” services heading into the back-to-school season. In June, $6.75 billion worth of online purchases in the U.S. were made with BNPL services, a 14.3% increase from the same month a year ago, according to Adobe Analytics data.
Many shoppers appreciate the flexibility of “buy now, pay later,” but consumer advocates have expressed concerns that the growth of the payment method may reflect financial stress and ultimately leave Americans in more debt.
BNPL company Afterpay said millennials made a majority of the back-to-school-related purchases on the platform from April through June, followed by members of Generation X. Spending for back-to-school products grew across “accessories, apparel, electronics, footwear and home furnishings,” a company spokesperson said.
Afterpay data from May, June and July show a 65% year-over-year increase in backpack sales made through the company’s payment system, while sales of flashcards and electronic tablets grew by more than 50%. Sales of “school shorts,” “school skirts” and low-top sneakers purchased through Afterpay increased more than 100%.
The National Retail Federation forecasts back-to-school sales will reach $38.8 billion this year, the second-highest figure since the group started recording the figures in 2007. Last year’s $41.5 billion still holds the record.
“Households are dealing with inflation right now,” Jack Kleinhentz, the federation’s chief economist, said during a media briefing last week. “Even though it’s improving, they have to prioritize. They have to be more selective.”
Professional services and consulting company Deloitte estimates back-to-school spending will reach $31.3 billion, essentially unchanged from $31.9 billion a year ago.
Back-to-school shopping contributed to the record sales that Amazon reported from its 10th Prime Day event on July 16-17, with big spikes in spending for products such as backpacks, lunchboxes and stationary supplies, Adobe said. The tech company does not adjust its analytics data for inflation but said new demand, not higher prices, have fueled most increases in consumer spending this year.
Chummy Tees, an online T-shirt company based in Sonora, California, has been running more deals compared with a year ago, founder Josh Neuman said. He said the shopping frenzy kicked off in late June; last year, business picked up in mid-July and intensified in August, Neuman said.
“Seems like parents want to get ahead of the game to score the best deals and make sure their kids are set for the first day,” he said.
For the back-to-college crowd, dorm supplies e-tailer Dormify is playing to both ends of the budget, according to co-founder Amanda Zuckerman.
This season, Dormify created two different bundles, one for big spenders and one for customers on a budget. The 16-piece deluxe bundle starts at $329, while the “core” bundle starts at $199 and includes 27 items.
The retailer also has lowered the starting prices for some items. For example, comforters start at $69, $30 lower than a year ago.
Zuckerman said back-to-college spending, which usually kicks off in late May, kicked off this month. She thinks the late spending was due to the delays and glitches with the government’s Free Application for Federal Student Aid approval process after an updated version of the financial aid form was released.
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