NEW YORK (TBEN) — To understand the impact of rising inflation on this year’s spending, look no further than kids’ wellies with frog and ladybug motifs made by Washington Shoe Co.
Spending on these evergreen items remained stable even after the Kent, Washington-based company was forced to pass on 15% price increases to its retail customers in January due to rising transportation costs. But by May, when gas and food prices also rose, shoppers abruptly switched from the more expensive $35 wellies to the no-nonsense versions that were $5 to $10 cheaper, CEO Karl Moehring said.
“We’re seeing consumers slide down,” said Moehring, who notes dramatic 20% sales swings in opposite directions for both types of products. “Wages don’t keep up with inflation.”
This season of back-to-school shopping, parents — especially those in the low-to-middle income brackets — are focusing on the basics, while also trading in cheaper stores amid rising inflation, which hit a new high in 40 years in June.
Last week, Walmart noted that higher gas and food prices are forcing shoppers to make fewer purchases of discretionary items, especially clothing. Best Buy, the country’s largest consumer electronics retailer, said inflation has weighed on consumer spending on gadgets. As a result, both companies lowered their profit expectations.
Such financial troubles during the sector’s second-biggest shopping season, after the winter holidays, mark a big difference from a year ago, when many low-income buyers, relieved by government stimulus and buoyed by wage increases, spent leisurely.
Matt Priest, CEO of the trade group Footwear Distributors & Retailers of America, noted that the group’s retail members saw a noticeable increase in online sales mid-month last year as shoppers received their monthly child tax credit checks for several hundred dollars. This season, without that bump, he expects shoppers to buy fewer shoes for their kids and rely on private label brands.
Inflation has strained household finances for Jessica Reyes, 34, who took her daughters Jalysa, 7, and Jenesis, 5, to a “Back to School Bash” event in Chicago’s north side last month, where free backpacks filled with supplies for students were provided.
“I feel like everything is going up these days,” she said at the event. school supplies.”
While shopping, her girls were attracted to the school stuff with TV characters and animals that they love, but she will focus on the regular versions.
“They want the cute, you know, the kitties. And those are always more expensive than the simple ones. And the same goes for folders, or notebooks, or pencils,” Reyes said.
Previously, Manny Colon and his daughters Jubilee, 8, and Audrey, 5, stopped by the back-to-school event to pick out backpacks.
Colon, 38, works at his daughters primary school. He said his wife had to pick up extra work because of the high prices for school supplies, groceries and gas.
“I think it definitely affected us,” he said.
Multiple forecasts point to a solid back-to-school shopping season.
Mastercard SpendingPulse, which tracks spending for all forms of payment, including cash, forecasts back-to-school spending to increase 7.5% from July 14 to September 5 compared to the same period a year ago, when sales increased by 11%. For the 2020 back-to-school period, sales fell 0.8% as the pandemic wreaked havoc on schools’ reopening plans and back-to-school shopping.
Still, higher prices support much of the numbers.
A basket of about a dozen delivery items showed an average price increase of nearly 15% for this back-to-school season compared to a year ago, according to retail analytics firm DataWeave. For example, the price of backpacks has increased by almost 12% to an average of $70.
Back 2 School America, an Illinois-based nonprofit that distributes back-to-school kits to children from low-income families, has “seen a significant increase in the cost of supplies,” including a 10% increase in supplies. their supplier with another possible figure -up the road, said the organization’s CEO Matthew Kurtzman. And the shipping costs have also increased.
With more support this year, Back 2 School America is able to cover the new costs and is on track to distribute more kits than ever before — 12,000 so far and more than 30,000 by the end of August, Kurtzman said. But funding is not guaranteed going forward as concerns about a recession mount.
Retailers face major challenges in getting shoppers to spend, especially on clothing.
Walmart said last week it was taking additional discounts on clothing to help clear out its inventory. Analysts believe these sales will put more pressure on other rivals to give more discounts to stay competitive. However, Walmart said it is encouraged by the early signs for school supplies sales.
Meanwhile, Gap’s low-cost Old Navy division is guaranteeing a price freeze on its denim from July 29 to the end of September.
As for Washington Shoe, Moehring said he will be shifting production from more expensive children’s boots to cheaper products in the coming months. The company still sees annual sales higher than last year, but it is cautious.
“I believe it’s a muddy prospect,” he said.
Claire Savage reported from Chicago and is a member of the The Bharat Express News/Report for America Statehouse News Initiative corps. Report for America is a national, not-for-profit service program that places journalists in local newsrooms to report on classified issues.
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