EDITORIALOP-EDOPINIONPOINTS OF VIEW

Pencils, paper and clothing beat technology in back to school needs

Macro commentary by eToro analyst for Romania, Bogdan Maioreanu

 With September around the corner, the start of the school year is rapidly approaching. Retailers both online and brick and mortar are preparing for traditional back to school shopping. But the lifting of Covid restrictions and the return to in person classes, combined with high inflation is changing customer behavior.

This year schools in Romania will start on September 5th, earlier than the traditional date of September 15 in the previous years. This will push parents to a shopping spree to buy the necessary school supplies for the year.

So far this summer, despite the rapid increase in prices not matched by a similar rise in salaries, the retail sales have been growing on a yearly basis, though consumption is showing signs of slowing down. The latest data is showing that the adjusted retail sales for June increased 25.1% compared with the same month last year overall, including a 10.1% rise in non-food items. But compared with May 2022 the sales decreased by 2.1%.

The approaching start of the school however, has the potential to bring an additional boost for Romanian retailers. A recent report coming from France, which starts school on September 1st, is showing that despite the volume of items purchased for school decreased by 2% the business increased by 5.7%.

In Europe most parents are planning for their children to return to class. 52% of Italians, 54% of Spanish, 57% of UK and Portuguese, 68% of Turkish, 75% of French and 77% German parents have responded to a survey, stating that their children will attend school in person this year. And due to this fact 66% of consumers in the UK are planning to buy school items (pencil, notebook, eraser), 54% clothing and accessories, 42% electronics, 26% study/office supplies, and 14% sanitary products. We are seeing a similar situation in France with an even bigger percentage of parents – 77% – that will buy school supplies but only 49% that will buy clothing. Parents from Italy, Portugal and Spain favor school supplies and clothing over technology this year.

While a similar percentage of parents, around 40% in France, Portugal, UK and Turkey are prepared to buy electronics this year for their student children, only 21% of the Germans want to do so, 39% buying office furniture and sanitation products instead. Laptops are coming back 62% of the Portuguese, 50% of the Spanish, 47% of the British, 43% of the French and only 34% of the Italians and 32% of the German respondents planning to buy one.

Between 40 and 52% of the European back to school shoppers this year will prefer to buy their school supplies in the shop. The largest number of online shoppers is in Turkey – 60% with the smallest in Spain – 48%. This is showing that despite the return to normal, internet shopping is remaining strong.

While inflation is affecting consumer patterns, a Deloitte survey made in the US shows parents consider school supplies as an essential item despite the inflation and the deteriorating sentiment about the economic future. According to the survey, in the US, this year is estimated to bring an 18% volume increase in clothing and 7% in school supplies with an 8% decrease in technology purchases for school.

This year, parents will have to pay more for their children’s supplies. Inflation increased prices of stationery, furniture and bedding by over 21%, the prices of school supplies by close to 10%  but books prices grew with only 4.5% compared to 2019. In order to purchase what they need for the upcoming school year and to afford the pricier products, parents are taking whatever steps they can, including cutting back on discretionary spending, buying on sales only and buying store- or off-brand items. According to the United States National Retail Federation, total back-to-school spending is expected to match 2021’s record high of 37 billion dollars. Families with children in elementary through high school plan to spend an average of $864 on school items, approximately $15 more than last year. Back-to-school spending has increased dramatically since the onset of the pandemic, as families adjusted to virtual and hybrid learning. Compared to 2019, this year, back-to-school shoppers are expected to spend 168 dollars more on average.

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Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.

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