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Retailers, consumers and prices

Back-to-school spending “not as bad” but job fears weigh – survey

July 20, 2009

USA-RETAIL/Retail experts don’t expect this back-to-school season to be anything to write home about, as consumers continue to pare back expenses.
But a recent survey cited fewer people cutting back on back-to-school items than last year – 64 percent compared with 71 percent. 
“It’s going to be bad but it’s not going to be as bad,” said Stacy Janiak, vice chairman and U.S. retail leader for Deloitte LLP, which conducted the survey, speaking of spending during the season.
She pointed to data showing that 1 in 7 consumers — 14 percent — believe the economy is starting to recover.
“It was only 14 percent but it was 2 percent last year,” she said. “It’s not a lot for anyone to get optimistic about, by any stretch, but it’s a ray (of hope).”
“People have a sense that we’ve been through the worst of it,” Janiak said, noting that people seem to believe another big drop in the economy unlikely.
Still, the gloom this year is driven more by a desire to save, as well as worries over job losses.
“Last year what was driving people’s concern was these things that would eat into their wallet — higher gas and higher food prices, energy costs,” said Janiak. “This year it’s about what’s in the wallet to begin with — the loss of a job, or fear of that, or intensity on savings to keep what’s in your wallet.” 

Some 22 percent of survey respondents cited “loss of job in household” for their frugality, compared with 12 percent last year, and 17 percent cited “fear of loss of job” compared with 9 percent a year earlier.
In June, Deloitte found that the pace of decline in consumer spending appeared to be abating. Its consumer spending index, which tries to track consumer cash flow to point to future consumer spending, rose in June after falling four consecutive months. 
The U.S. jobless rate hit 9.5 percent last month, the highest in 26 years, and many economists expect it to hit 10 percent this year.
Last week, the National Retail Federation predicted the average U.S. family with kids in school through 12 grade would spend 7.7 percent less than last year, but college students and their families would spend 3 percent more. Nevertheless, overall college spending is expected to decline 4 percent to $30.08 billion due to fewer people planning on attending college this fall.

One surprising note in the Deloitte survey was consumers’ consistent interest in sustainability, Janiak said. Some 41 percent of respondents said they would likely search for green products this season, with nearly a third saying they’d seek out green retailers. The data points were steady from the year-ago survey.
“The assumption is the consumer isn’t going to pay attention to that in a down economy. It’s clear they’re still paying attention to it,” said Janiak, acknowledging that the survey does not ask shoppers how much they’re willing to spend on green products.

The survey, conducted between July 6 and July 9, polled a sample of 1,044 consumers online. The study has a margin of error of plus or minus three percentage points.

(Photo: Reuters)


Wish I could agree with the findings in this article. As owner of a small fashion related business, back-to-school is usually our biggest season. June was OK sales wise, but this July has been absolutely awful, and after speaking to fellow business owners and our manufacturers, we are finding that everyone else seems to be experiencing the same decline. We have plenty of foot traffic, and we are slashing prices to try to stimulate spending, but it doesn’t seem to have any effect. People just aren’t buying! After stretching our budget and cutting expenses for a year and a half, and losing 80% of our financing due to the possible bankruptcy of CIT, this comes at a particularly bad time :( I wish more focus would be put on the struggling small businesses. It really feels like we are hanging off a cliff by a thread right now!

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