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Back-to-school season a test for retailers

Around the country, retailers like Office Depot are in the thick of their back-to-school sales seasons, and they are working hard to gain an edge in a very competitive environment. By's Roland Jones
Back-to-school shoppers crowd a Wal-Mart in Fenton, Mo., in August 2004. This year, families with school-aged kids are expected to spend an average of $443.77 on back-to-school items.Charles Rex Arbogast / AP file

Summer’s only half way done, but back-to-school shopping season is well underway and retailers are already breaking out their fall clothing lines, touting latest backpacks and pushing PC-bundle deals.

Take Office Depot, for example. The office supply firm began its 2005 back-to-school national advertising campaign on July 10 with a Sunday newspaper insert that reached up to 40 million households. It rolled out two national television commercials in late July, and now the firm is tailoring its back-to-school offerings according to the nation’s various school districts, hoping to maximize its profits in each region of the country.

“School districts in the south go back to school earlier than those in the Northeast, and while in the past it was okay to start your back-to-school campaign across the whole country and it would be on time for some and early for others, this year we want to focus our offerings,” explained Ray Tharpe, head of investor relations at Office Depot.

Retailers around the country are in the thick of their back-to-school sales seasons, and they are working hard to gain an edge in a very competitive environment, in some cases starting their back-to-school campaigns earlier to capture some extra profit.

It’s a wise move. The business generated by parents shopping for their children’s school supplies is the second-busiest shopping season of the year after Christmas, and sales are expected to slip this year, falling to $13.4 billion from $14.8 billion in 2004 according to the National Retail Federation (NRF).

Grabbing a slice of the back-to-school business is getting harder, analysts say. It has become a much more complicated affair for retailers in recent years, growing beyond the traditional two-week period in late August to take in almost the whole of July and August — a change that offers American retailers new opportunities, and new challenges, according to Wendy Liebmann, president of marketing and retail consulting firm WSL Strategic Retail.

“There’s an ‘elongation’ of the shopping season,” Liebmann explains.

“As the population has shifted to the south and west where it is warmer and where schools are going back earlier, retailers have been forced to get new back-to-school merchandise in their stores earlier than ever before,” she said.

There are some advantages to retailers, analysts say. Putting back-to-school merchandise in their stores in July can snatch sales from rivals, and selling products at full price for longer can potentially increase their profit. And the earlier the goods go in stores, the greater the chance consumers will come back to shop later in the season, and stores can assess what’s selling well and make adjustments accordingly, they note.

“Back to school is changing, so retailers need to adapt,” said Liebmann, pointing to the example of the Christmas shopping season.

“People are getting more gift cards for Christmas, and so they are shopping more in January and so retailers have adapted by getting new stuff out in their stores after Christmas — it’s just one more example of how traditional shopping seasons are shifting.”

Still, it is possible to mistime back-to-school retailing, as Office Depot learned two year ago when it rolled out its national back-to-school television campaign on July 7 — a date that was too early for consumers to think about shopping. This year it has moved that start date to July 25.

“We came out too early,” said Mindy Kramer, Office Depot’s public relations manager. “We wanted to see ourselves as the back-to-school destination, and you can do that only to a point. You really have to synchronize with when kids are thinking about back to school.”

This year, Office Depot hopes shoppers will splurge on technology. Its television ads aggressively promote a PC bundle package for $589.99 with a mail-in rebate.

An Office Depot survey of back-to-school buying trends conducted with Harris Interactive earlier this year showed 93 percent of parents think their kids need at least some form of technology to be successful in school, while 43 percent said it was a crucial factor, Kramer said.

But the NRF predicts overall back-to-school spending will slip this year, especially for electronics.

The retail organization’s 2005 Back-to-School Consumer Intentions and Actions Survey finds that families with school-aged children will spend an average of $443.77 on back-to-school items, down 8.2 percent from $483.28 last year, with most of the spending drop coming in the electronics category, where spending is expected to fall to $2.06 billion compared with $3.09 billion last year.

While 44 percent of consumers say they plan to purchase electronics, similar to the 41.7 percent who purchased for that category last year, average spending is expected to fall to $68.08, compared with $101.03 last year, the NRF data show.

“Though many consumers will be buying electronics this year, they may be taking a break from spending on high-end computers and other expensive gadgets,” said Tracy Mullin, NRF’s President and CEO, adding that after several years of strong gains and record-breaking sales, demand may cool slightly for electronics merchandise this year.

“The real windfall for electronics retailers will likely be from college students, who are continuing to spend money on computers, MP3 players, and cell phones,” Mullin said.

Clothing, shoes, and school supplies are expected to be the top-selling categories again in this year’s back-to-school season, but sales are off to a sluggish start. The latest retail sales data show record high temperatures across the country in July left consumers focused on staying cool and not in a shopping mood.

Wendy Liebmann expects teen fashion to benefit the most from this year’s back-to-school season, as long as retailers offer the products teenagers want, but she also expects interest in technology to grow, as it’s becoming a fashion accessory for kids.

“Last year, when we talked to consumers in the post-back-to-school season we asked teenagers what they are buying and while fashion and accessories are still top of their lists, technology and entertainment were really creeping up that list quite fast,” she said. “Kids’ fashion has gone from what I’m wearing to what the latest technology is. Kids are concerned about having the latest and coolest phone, and that’s a challenge for retailers.”