THE 

MONITOR

Keeping Our Finger On The Pulse Of The Retail Industry

Sales Results Mixed in July

Sales Are Up For Back to School Merchandise

Having held out last year on many purchases, kids heading back to school this year will be returning in style. The National Retail Federation's 2010 Consumer Intentions and Actions Back to School survey, conducted by BIGresearch, found that the average American family will spend $606.40 on clothes, shoes, supplies and electronics, compared to $548.72 last year, and close to the $594.24 in 2008. Total spending on school-aged children in grades K-12 is expected to reach $21.35 billion.

Total 2010 K-12 and college spending will reach $55.12 billion, making Back-To-School the second biggest consumer spending event for retailers just behind the winter holidays.

"We are encouraged by the fact that parents are eager to start their back to school shopping this year, but the industry still remains cautiously optimistic about recovery," said NRF President and CEO Matt Shay. "As the second half of the year gets under way, retailers will gauge their customers' spending appetites, which often serve as a bellwether for the all-important holiday season."

The economy will still play a role in American families' back to school spending. This year's survey found:

     • 44.3 % will buy more store brand or generic products (from 41.7 in 2009)
     • 30.3 % will comparative shop online (up from 26.4% in 2009.)
     •   8.1 % will decide if their children should attend public or private school (compared to 5.7% in 2009).

With growing children there are growing apparel budgets. Spending on apparel will take up most of consumers' budgets with the average family of school-aged kids expected to spend $225.47 on jeans, shirts and other types of clothing. From laptops and net books to smart phones and MP3 players, parents are expected to spend an average of $181.60 on electronic or computer-related school needs. Families will also spend an average of $102.93 on shoes and $96.39 on school supplies.

As far as where they will shop this year, seven in 10 (71.2%) will head to a discount store and more than half (53.9%) will visit their favorite department store. Other popular shopping destinations include clothing stores (49.0%), electronics stores (23.0%), office supply stores (41.2%), drug stores (19.5%) and thrift stores (17.0%). Whether saving a few bucks, comparing prices or simply because of convenience, more people will shop online this year (30.8% vs. 22.2% last year.)

Spending on school items for K-12 students is expected to increase this year while spending on college-specific items will remain similar to last year. According to the NRF's 2010 Back to College Consumer Intentions and Actions survey, conducted by BIGresearch, the average college student's family will spend $616.13 on new apparel, furniture for dorms or apartments, school supplies and electronics. Students and their families spent only slightly more last year ($618.12). Total spending on back to college merchandise is expected to reach $33.77 billion. The survey also found that just over half (51.8%) of college students will live with mom and dad, down from 58.5 percent last year when money was tighter and jobs were more scarce.
 

Sales Tax Holidays are Win for Retailers, Shoppers and States

As reported in an article in Retail’s BIG Blog, nearly all types of tax relief are well received with most of us, however, the current climate of budget shortfalls at both the state and federal level mean that relief is not in abundance in 2010. However, there may be some hope in with the upcoming Back-to-School season in the form of state sales tax holidays.

Here are a few reasons why sales tax holidays represent a big check in the “win” column for shoppers, retailers and the states that implement them.

Shoppers - Since 1997, a number of individual states (New York was the first) have offered sales tax holidays each year to help soften the blow of back-to-school expenses on families. NRF’s recently released Back-to-School survey found that the average family will spend $606.40 on back-to-school merchandise in 2010 – meaning a sales tax holiday in a state with a 5 percent tax rate would save the average family $30.32. (This assumes all items purchased were tax-free, when in actuality the list of items exempted from tax varies from state to state.) While those savings may seem small, a few extra dollars saved here and there is crucial for families trying to stick to a budget in the current economy.

Retailers - Retailers win because they sell more. NRF members report that stores in states with sales tax holidays see significant increases in traffic and sales during these periods. Retailers also report that increased sales are especially significant in the first year or two that a sales tax holiday is held. While it is true that some of these sales are just shifted from other weekends when people would shop, the importance to retailers is that the traffic in the stores results in many additional sales that would not otherwise be made.

States - Shoppers that are attracted to sales tax holidays generally make additional purchases of items that are not eligible for the tax holiday, raising additional sales taxes for the state and additional income taxes for the state. So far in 2010, 16 states have announced sales tax holidays for back to school. These tax-free holidays usually include a list of non-taxed items which range from clothing and footwear to school supplies, books and even computers and sports equipment. In many cases, residents of bordering states without a sales tax holiday will cross the state line to do their spending, shifting state sales and income tax revenue from the state without the holiday to the state with the holiday.

Many state governments have recognized the sales uptick and are getting creative with the incentives they offer. Some offer sales tax holidays at other times of the year for energy-saving appliances, or hurricane preparedness items, for example. Regardless of the type of sales tax holiday, the positives that this action brings – increased spending and saving budget-minded customers a few extra bucks, should put this movement at the top of the radar for retailers, shoppers and states alike.
 

Marshalls Discount Stores Heading North to Canada

Movers & Shakers
 

People you know, who are on the go…

September 14, 2010, International Centre – Conference Centre, Mississauga, Ontario, Canada

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