PORTLAND, Ore. (TheStreet) – Parents and students are still back-to-school shopping. It's just some retailers that are dropping out.
As the burden of school preparation shifts from school districts to families, parents and students alike shift from years-old routines to a hunt for the cheapest items and best values. There's still a lot of back-to-school money on the table, but some of the usual retail suspects aren't sticking around long enough to collect.
The National Retail Federation retail industry group notes that the $26.5 billion consumers are expected to spend on back-to-school items for kindergarteners through high school seniors is down from last year, but that spending per student is up to $669 from $634. Altogether, school and college shoppers are expected to spend roughly $75 billion before the school year starts.
According to an NRF survey, back-to-school shoppers will spend an average $212.35 on electronic items, up 7% percent from $199.05 last year, with total spending expected to reach $8.4 billion. High school students and their families specifically will spend an average $229.88 on electronic items.
As schools cut budgets, spending on school supplies will increase 12%, to an average $101.18 compared with $90.49 last year. Additionally, shoppers will spend an average $231.30 on clothes, up from $230.85, and $124.46 on shoes, up from $114.39 in 2013.
Those increases dictate where and how parents and students shop this year. The survey found 53.8% of back-to-school shoppers will shop a clothing store, up from 51.5% last year and a survey high; 27.5% will shop at electronics stores, up from 25.9% last year and another survey high. Six in 10 (64.4%) will visit discount stores, 59.1% will shop at their favorite department store, 42% will shop at office supply stores, 38.2% will shop online and 20.5% will shop at drugstores.
What they're spending varies widely. Roughly eight in 10 back-to-school shoppers say the economy will dictate just how much they spend and how many new items they buy. More families will buy store brand/generic items for school (34% vs. 32.8% last year), 25.6% will make do with last year’s items, up from 23.7 % last year, and 19.6 % will shop online more often to save money, up from 18.5% last year and the highest percentage the NRF has seen.
So who gets left out of the shuffle? We took a look at the retail landscape and found five chains that are hurting as we head into the new school year:
Office Max/Office Depot
Stores closing: 400 through 2016
It turns out that maybe the local strip malls don't need so many office supply superstores.
But how many is too many, you ask? Well, last year's $1.2 billion “merger of equals” between Office Depot and Office Max made the ensuing Office Depot realize that the one-time competitors had at least 400 redundant stores.
That's right: Where once families had two warehouse-sized options for buying their reams of paper, pens, desks, chairs and the like, they're now going to have one. Those 150 stores closing by the end of this year are just a fraction of the 400 store the newly combined chains will be closing by the end of 2016. This $1.2 billion merger will close more than 20% of the chain's 1,900 stores.
So that's a huge opening for a big-box competitor, right?
Stores closing: 225 through 2015
As it turns out, you don't need a small airline hangar to sell parents and kids school supplies anymore. You just need a website, a storage facility and a means of distribution.
This is the lesson staples has learned over the past year or so. As a result, it announced in March that it planned on closing 12% of its North American stores and shifting its focus to online retail. It turns out that roughly half of all Staples sales come from online orders and that $500 million in overhead from these stores really isn't helping a chain that's already in flux.
Technology has just kept kicking away at Staples as big margin products such as paper, ink, toner and printers are seeing reduced demand. While it's great Staples is embracing online retail, it's also aware Amazon has beat it there and will force it into deep discounting just to survive. Staples execs claim they want to broaden the store's reach by offering tablets and other electronics, but those are low-margin products already being offered by similarly troubled chains including Wal-Mart, Target, Sears and Best Buy.
It's getting tough for big-box stores all around, especially those most commonly associated with paper.
Barnes & Noble
Stores closing: 223 by 2023
The kids who grew up waiting in line outside Barnes & Noble and Borders for Harry Potter and Twilight presales likely read the Hunger Games trilogy on a tablet or e-reader.
This fact isn't lost on Barnes & Noble, which has closed roughly 20 stores a year over the past two years. Its Nook readers have been clobbered by Amazon's Kindle and by various tablets, resulting in the Nook being spun off into its own business. B&N's book sales are being beaten by Amazon on price and availability.
The losses are mounting and its 600 or so stores are struggling. Its former flagship location on Fifth Avenue in New York City is now gone. Justice served, right? It's just getting the same fate it dealt to independent bookstores, no?
No. The American Booksellers Association notes that since 2009 more independent bookshops have opened than closed in the United States. Sales at those stores dropped 1.6% last year, but grew by 8% in 2012. By comparison, Barnes & Noble's same-store retail sales decreased by 6% last year after dropping 3.4% a year earlier. Including all its divisions — retail, college and Nook ‚ Barnes & Noble's combined sales dropped 7% in 2013.
Abercrombie & Fitch
Stores closing: 180 by 2015
We realize that mall competitors including Aeropostale, American Eagle Outfitters, Gap and Pacific Sunwear aren't faring so well, either, but Abercrombie & Fitch deserves special recognition.
Not only did Abercrombie & Fitch completely fail to recognize a shifting U.S. consumer base that's leaving shopping malls for outlets and online bargains, but it just couldn't keep its mouth shut. Chief Executive Michael Jeffries once announced that his clientele was composed only of “the cool kids.” He also let it be known that the staff on his private jet wears only boxer briefs and flip-flops and is forced to play Phil Collins' Take Me Home on return flights. He's also banned black garments from all his stores.
Not surprisingly, that attitude trickled down Abercrombie's corporate structure and landed the chain in court on more than a few occasions. A federal judge required the company's Hollister stores to make their entrances wheelchair accessible. The flagship chain has now lost two discrimination cases in three years after demanding that two Muslim employees remove their hijabs to conform to the chain's “look” policy.
Oh, and their U.S. same-store sales just keep slipping. Thus far this year, sales at U.S. stores are down 9%, while total online and in-store sales are down 4%. The kids don't miss the mall and they certainly don't seem to miss wearing this shop's logo all over themselves as if it's 1999.
Stores closing in 2014: Up to 1,100 by 2018
We'll just say it: Nobody shops here anymore.
You know it, the landlords who host RadioShack know it and even the chain itself seems awfully aware of the fact. It's a big reason RadioShack is hacking away more than 20% of its stores. It has thousands of locations, but has been coming up short on inventory, customer service and even the tech-geek items that built its foundation.
"A 3-D printer? What's that? Can I find it on this cheap burner phone I'm going to try to upsell you?”
This company spent $8 million on an ad at this year's Super Bowl that proudly told customers it had emerged from the '80s, only to announce to those same customers two months later that one in every five of its stores was about to be as dead as Alf. It has no direction other than “sell the same gadgets everyone else is selling,” it has no plan for survival other than streamlining and it still has thousands of stores anchored to strip malls and dying indoor shopping plazas.
Don't wonder if kids still want to go back-to-school shopping at RadioShack: At this point, there's a strong chance that even their parents didn't shop here when they were young.
-- Written by Jason Notte in Portland, Ore.
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