War Comes Between Back-to-school Consumer Spending and Inflation – Deloitte Finds

Michelle Remo, “Big 4″ observer
July 28, 2011 /

Consumers are turning to savvy shopping tactics, smartphones and social networks to keep their back-to-school spending intact in spite of a volatile economy and rising necessity costs, according to a new Deloitte survey.

The survey showed that 86 percent of households indicated they will spend more or the same as last year, while consumer spending is expected to remain flat or increase on back-to-school items this year.

Deloitte’s survey found that 7 out of 10 respondents cite higher food prices (72 percent) and higher energy prices (70 percent) as reasons they may scale back spending this season, followed by roughly half (51 percent) who point to the lack of improvement in the job market.

“The study also indicates consumers will be vigilant about the cost of the items they plan to purchase,” Deloitte said.

According to the business consulting firm, 29 percent of consumers see higher prices on new back-to-school merchandise than they saw a year ago and nearly two-thirds (65 percent) believe low prices are the most important retailer attribute for back-to-school shopping.

“Retailers need to be prepared for a consumer who is sensitive to prices, especially with the pinch households are feeling from higher gas and energy costs this summer,” said Alison Paul, vice chairman of Deloitte LLP and Deloitte’s retail & distribution sector leader.

“Retailers should monitor customers’ reactions closely to recognize where they are flexible, and where promotions are necessary to drive traffic and generate purchases of higher margin products in the store,” Paul added.

‘Smartphone in one hand, wallet in the other’

Many consumers indicate to enhance their shopping overall through smartphones. But to find the best price, they intend to locate promotions and discounts and track down the items they want to buy.

Of those surveyed who own Web-enabled smartphones, nearly 64 percent plan to use these devices for back-to-school shopping purposes, while 61 percent will use them to get price information. In addition, 43 percent will download discounts, coupons or sale information to their smartphones.

“Social networks will play a greater role in back-to-school shopping this year,” the survey found.

More than 35 percent of parents plan to use social networking sites to assist in their back-to-school shopping, a 29 percent rise compared to last year’s. Among these respondents, nearly 69 percent plan to do so to find out about promotions. Additionally, 44 percent plan to visit social networking sites to browse products and 28 percent to read reviews and recommendations.

“Price-conscious and/or time-constrained, consumers are navigating virtual and physical storefronts to get the information they want quickly and easily,” said Paul.

“Retailers need to respond with an integrated experience. In short, they must unite the store with their online and mobile channels to enable consumers to easily access product availability, promotions and information.

“Retailers can also increase personalization through digital touch points. One example of this is to create targeted mobile advertisements that engage parents and students with advice and merchandise specifically relevant to their shopping preferences to help retailers increase engagement, conversion and loyalty this season.”

Sharpening consumer spending tactics

Consumers said they will change the way they shop to stretch their back-to-school dollars further this year.

More than half of respondents say they will buy only what the family needs while 26 percent indicate they will reuse last year’s items in fear of the impact of the unstable economy or their finances. Nearly three out of 10 (28 percent) will consolidate trips to save on gas.

However, some consumers who earn higher incomes are more confident in their own finances and are less inclined to alter their back to school shopping this season.

Eighty-two percent of respondents earning $100,000 or more say their financial situation is the same or better than last year, compared with two-thirds (66 percent) of respondents earning less than $100,000.

Less than one-third (31 percent) of individuals in the $100,000 and higher income bracket say they are likely to purchase more lower-priced items due to economic concerns, compared with 51 percent of those with household incomes under $100,000.


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