Frugal is in: deals to drive back-to-school shopping for clothes
BANGALORE (Reuters) - For young Americans, frugal dressing is in this back-to-school season.
Retailers like Abercombie & Fitch (ANF.N), Aeropostale (ARO.N) and Zumiez (ZUMZ.O) may be showing off offers and promotions, but shoppers on skimpy budgets want to wait it out or check with value retailers for the best deals this season.
The back-to-school season -- the second-largest shopping period in the United States -- kicks off in July and runs through Labor Day in early September.
"The good news is that we're up against soft numbers (from last year), the bad news is that teens still don't have jobs and they still don't have discretionary income," said Marshal Cohen, chief industry analyst at retail market researcher NPD Group.
Consultants Challenger, Gray & Christmas, citing data from the Bureau of Labor Statistics, said employment among 16- to 19-year-olds increased by 960,000 jobs from May through July -- the lowest level of summer hiring in over 60 years.
Seventeen-year-old Kristen Rivera is a case in point.
Window shopping with her mother at Harlem-Irving Plaza in Norridge, Illinois, she was looking for deals to replenish her wardrobe. She didn't have a job, and said she prefers Target (TGT.N) and Kohl's (KSS.N) for her back-to-school shopping.
"I like PacSun (PSUN.O) but it's expensive there. They don't have good deals," she said.
Like Rivera, 19-year-old Scott Gamm, student at New York University's Stern School of Business and founder of personal finance website helpsavemydollars.com, said most of his purchases would be for school necessities, and he is waiting "till the end to find the best deals."
A poll of its roughly 12,000 members by NPD showed shoppers have roughly the same budget as last year for clothes and shoes.
But, having been trained to bargain hunt, people are more likely to play smart.
Retailers like Target Corp, (TGT.N), Kohl's Corp (KSS.N), JC Penney (JCP.N), Limited Brands LTD.N and Children's Place (PLCE.O) and Wet Seal WTSLA.O, which offer better deals, are expected to outdo others.
"They will be able to go to Abercrombie or American Eagle for one or two things, but the balance of the clothes is going to come from better value-oriented retailers," Cohen said.
Specialty clothes retailers are going to see very quickly that the consumer will not rush in, that they will prioritize their spending more on essentials, and fashion retailers are not going to get a July or even a early August push this year.
This season, clothes will be about 10 percent pricier than last year as companies, hurt by rising raw material costs, pass on these costs to shoppers.
At the same time, high gasoline prices and a 9.2 percent unemployment rate are still weighing on household budgets.
"You will see consumers disappointed when they reach for a pair of jeans at Abercrombie for $110, which was selling last year at about $80-$90," Brian Sozzi, analyst with Wall Street Strategies, said.
A PriceGrabber survey said 48 percent of shoppers polled by them were planning to spend $250 or more on back-to-school purchases, down from last year's 56 percent. People planning to spend $500 or more fell from 31 percent to 25 percent.
Manufacturers typically start shipping fresh merchandise to retailers during spring, in time to hit stores by mid summer.
With shoppers waiting on last minute discounts, it is getting difficult for stores to gauge customer sentiment and bet on when to increase discounts to push out inventory.
As customers keep pushing back their purchases, "the secret hope would be that the (supply) chain moves later in the year, but that's not what's happening," said Pierre Mercier, partner and supply-chain expert with the Boston Consulting Group said.
"It's still about who gets there first," Mercier said, adding that on the inventory front, "at this point in time, it's too late for retailers to fix things."
Though the days of 80-percent-off-on-everything are over, retailers need to plan targeted discounts to avoid getting stuck with stuff that won't sell.
For example, instead of a flat buy-one-get-one-free, what could appeal to shoppers more is an offer of a discount on a t-shirt on the purchase of a pair of jeans.
"They aren't going to go shopping for back-to-school clothing 5 times. They're going to do it once and are going to look for the right product at the right price," said Cohen. (Reporting by Nivedita Bhattacharjee in Bangalore, additional reporting by Eunju Lie in Chicago; Editing by Anthony Kurian, Saumyadeb Chakrabarty)
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