5 ways COVID-19 has changed back-to-school shopping

For the parents of K-12 children heading back to school or young adults going back to college, this year is quite different. Many of the country’s major K-12 school systems are going to a remote learning environment for the fall, such as Los Angeles, San Diego and Chicago; or are using a hybrid model of remote and in-person learning. Similarly, colleges are also weighing a combination of remote, hybrid and in-person learning options, all of which will have an impact on this year’s back-to-school shopping season.

One thing that many parents are finding unusual this year is the amount of money being spent on school supplies during the coronavirus crisis — it’s actually going up.

Despite some expectations that less might be spent with a large number of children remote learning, families are being asked to buy supplies normally provided by schools, and to have the proper technology for distance e-learning. It’s particularly challenging for families of children whose school systems do not provide laptops or tablets, as well as when a household does not have WiFi or sufficient bandwidth to support parents working from home alongside children attending classes online.

Spending on a return to school has been relatively flat in the K-12 segment for the last five years and has seen a moderate increase in the college segment. However, that is changing for the 2020-2021 school year.

According to the National Retail Federation, back-to-school spending in 2020 will reach $101.6 billion, up from $80.7 billion in 2019, representing a 26% increase in volume. This total combines both K-12 and college-bound spending, and it will break the previous record of $82.8 billion set back in 2018.

For 2020, K-12 spending will be approximately $33.9 billion, up 29% from 2019’s $26.2 billion spent. This year’s spending represents about $789 per household, up by $92 from the $689 per household spend in 2019.

The larger back-to-college segment will reach $67.7 billion in total payment volume, up 24% from the $54.5 billion spent in 2019. On a household basis, families will spend $1,059 this year compared to $977 in 2019, up by 8%.
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It should be no surprise that there will be a decidedly strong shift to online shopping for the 2020 back-to-school shopping season, as retailers such as Amazon are benefiting from lockdowns and store restrictions. Similarly, retailers with heavy online presences such as Walmart.com are also benefiting from consumers’ move to e-commerce.

Based on data from the NRF survey, about 55% of families said they would shop at online merchants this year for back-to-school items, up from 49% in 2019. In contrast, all of the in-person retail shopping outlets have fallen as choices for back-to-school spend.

Only 37% of families said they would shop at department stores this year, compared to 53% in 2019. Similarly 36% of families said they would shop discount stores and 30% at clothing stores, compared to 50% and 45%, respectively in 2019.

Office supply shopping stores are also taking a hit, as only 23% of families said they would be shopping at those outlets this year compared to 31% in 2019.
In past years, children’s clothing (excluding shoes) has always been the largest category of household spending for back-to-school shopping and only until 2010 has it become closely rivaled by spend on electronic goods.

According to data from the NRF, 2020 will mark the first year where household spending on electronics will exceed spending on clothing. Families in the NRF survey expect to spend an average of $274 on electronics this year, compared to $203 in 2019 and just $187 in 2018. This represents a 35% one-year increase on electronics spending and a 47% two-year increase. In contrast, spending on clothing is expected to experience an almost 3% decline, going from $240 in 2019 to $234 in 2020.

Spending on school supplies will rise, no doubt in response to families having to purchase items normally provided by schools. Household spending on school supplies will reach $131 in 2020, up by about 12% from the $117 total reached in 2019.

For clothing retailers already on the ropes of bankruptcy, it's not good news that spending on new clothing will be down for this year’s back-to-school shopping season. According to online media outlet Retail Dive, 26 major retailers have already declared bankruptcy so far this year, including JCPenney, Lucky Brand, J.Crew, True Religion, Ascena Group (Justice, Loft), Stein Mart and Centric Brands (Joe’s Jeans, Hudson Jeans, Buffalo Jeans). Meanwhile Money.com reports that other major clothing retailers may soon follow these stores into bankruptcy if things don’t turn around soon — including Gap, L Brands (Victoria’s Secret) and Macy’s.
Despite the White House’s calls for reopening K-12 schools and the demand by students and parents for colleges to reopen, the challenge facing everyone is the veracity of the virus to spread so easily, which is causing many schools to evaluate all learning options ranging from remote to hybrid in-person learning. The net result is that many students from Kindergarten to college may be learning at home, which will end up requiring some type of e-learning support from families.

Based on data from the NRF, the top item families of K-12 children plan to purchase for this school year to support remote e-learning is a laptop at 35%. Unfortunately, this burden is likely to be borne more by families in less affluent school districts that do not already provide laptops or tablets, as well as by families with younger children that normally don’t receive these devices from their schools until an older age.

Speakers/headphones and electronic accessories were the second and third most popular shopping items on families’ e-learning support lists at 22% and 21%, respectively. This is followed by workbooks, desks, chairs, calculators and printers, each at a 17% level.

According to the NRF survey, 63% of K-12 families expect to buy computers and other electronics this year, up from 54% in 2019.
In the college segment, there is an ominous storm brewing that could portend significant spending problems for retailers, electronics manufacturers and universities far beyond the return shopping season — the rapid decline in new student loan originations.

When the national emergency was declared in mid-March, student loan origination volume was tracking at or slightly above 2019 levels, according to Equifax. However, by early May, when many new college freshmen had to make a decision on which school they will attend in the fall, new student loan originations began to drop in earnest.

By the week of July 12, the cumulative student loan origination volume, beginning from March 1, reached approximately $24.9 billion in new balances. This is down by about 21% from the 2019 volume, which was about $31.4 billion for the same time period. In other words, $6.5 billion less in student loans were taken during this time, which means that drop in spending for the fall semester and will drop by at least $6.5 billion.

One reason behind the drop in student lending is that there is a growing trend of high school seniors deferring their first year of college, as many are unwilling to spend the money for a remote learning experience. According to the Boston Globe, Harvard — which is teaching all of its undergraduate classes remotely this fall — expects its incoming class to be down by nearly a quarter. The New York Times noted that coronavirus is causing widespread college deferrals across the country, and not just at elite schools.