Consumers are not backing down on their back-to-school spending despite increased prices.
"Consumers treat back-to-school shopping as an essential spending category," said Amanda Barrett, senior deposit product manager at BOK Financial. "Sending children to school with the supplies they need is a necessity, and shoppers are willing to forego in other areas to cover those costs."
This year the average household will spend $864 getting ready to return to the classroom, up $15 from $849 last year, according to an annual survey released by the National Retail Federation and Prosper Insights & Analytics. Total back-to-school spending is expected to stay on par with 2021's record high of $37 billion.
Higher prices on clothing to electronics
With inflation at a four-decade high, it's not surprising that most (68%) survey respondents have seen higher prices on school-related items. Clothing and accessories, school supplies, shoes and electronics were among the top areas where consumers noticed higher prices. According to the National Retail Federation, prices for back-to-school items have risen 2.2% to 9.9%.
Inflationary Impact on Back-to-School Items
"Families are bearing the full weight of extra costs this year," explained Barrett. "Inflation stood at 9.1% in June 2022, up from 5.4% in June of 2021. Families may be feeling the pinch after the monthly checks distributed as part of the American Rescue Plan Child Tax Credit expired in December 2021. A Deloitte Insights Back-to-School survey showed 33% of people thought they were in a worse financial situation than last year."
Consumers are taking steps to make their dollars count during this inflationary period, including switching to cheaper alternatives like generic brands and shopping at discount stores, according to the National Retail Federation.
To cover the costs of back-to-school items, more than one-third (38%) of consumers in the survey reported they are cutting back spending in other areas by dining out less or taking less expensive vacations. Some were also working overtime or using alternative payment options such as "buy now, pay later" offers to spread out the costs over a longer period.
Some consumers' buying power is waning faster than others. Households making less than $50,000 per year reported they were more likely to dip into savings or go into debt to cover classroom-related expenditures.
Pandemic boosted school spending
Back-to-school is the second-largest annual consumer spending event, behind the holiday season. According to the Deloitte survey, the market skyrocketed during the pandemic, growing by 24% since 2019. Electronic purchases drove the surge in buying as families adjusted to virtual and hybrid learning. After investing heavily in technology for the past few years, parents are returning to more traditional purchases. Device purchases like laptops, phones and calculators have reached a saturation point but remain firm. However, electronic accessories like printers, cases and keyboards seem to be softening while items that must be replenished are up, like clothing and school supplies.
While market size continues to grow, its increase is slowing due to waning K-12 school enrollments from population changes and homeschooling. Today, 8% of parents are currently homeschooling their child compared to 4% in 2021, and homeschoolers are likely to spend 15% less than the average back-to-school shopper.
Consumers got a jumpstart on their back-to-class shopping this year, with 56% of shoppers saying they started shopping in early July compared to just 44% in 2019. And, just as they're shopping early, they're also shopping often.
Consumers report doing more comparative shopping online, shopping for sales more often and buying more generic products. About a quarter (24%) of the National Retail Federation survey respondents also plan to make do with last year's items.
Tips for back-to-school budgeting:
- Wait to shop until you have your school's supply list so you don't purchase unnecessary items.
- Set a budget and stick to it.
- Buy store brand or generic items.
- Shop on tax-free weekends, which some states offer right before school starts. New Mexico, Oklahoma and Texas all have tax-free weekends on August 5-7.
- Buy in bulk and divide the cost of supplies among multiple families. Bulk prices per item tend to be lower than buying individually.
If you're in a position to donate or you're struggling to cover the costs of school supplies this year, reach out to local nonprofits or schools. A number of organizations and districts engage in helping make sure all students have what they need for a productive and successful school year.