(Podcast) 2020 back-to-school survey: The next normal | Deloitte Insights

2020 back-to-school and back-to-college surveys Spending stays surprisingly flat in the face of uncertainty

08 July 2020

Parents are still planning to shop for the new school year. But what they’re buying and how they’re shopping are changing in the face of the pandemic. Deloitte’s Rod Sides and Kate Ferrara discuss the data with host Tanya Ott. 

Kate Ferrara: My two older kids are in high school, so their days are a little bit more structured with online learning and of trying to keep up with the curriculum. My youngest son, he’s grade-school age. While I think the teachers did their absolute best to try to keep the kids engaged, and there was certainly a level of online learning that went on, I won’t lie—it was a really challenging time.

Rod Sides: I have a fibers major [at] Savannah College of Art and Design and trying to learn fibers and weaving, there were many classes she was unable to take because the campus was shutdown. So much of it is lab-based that it was impossible for her to take some of those courses. And it really has created a higher level of anxiety for her that she feels like she’s off track because now the sequencing of classes and coursework is not the same.

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Tanya Ott: Nothing is the same about school these days. But one thing is constant, and we’re talking about it today on the Press Room.

Tanya: I’m Tanya Ott, and like millions of parents, my kids still don’t know whether they’ll be in the classroom or on remote learning this fall. It’s not as tough for me because mine are in college, but for many parents and kids, COVID-19, coupled with uncertainty about what school will look like, is causing a lot anxiety.

A new survey from Deloitte finds that nearly two-thirds of parents with kids in primary and secondary school say they’re worried about sending their kids back to school. Nearly as many parents of college-aged kids feel the same. There are also concern about money—40% of parents worried about paying for tuition and other college expenses.

Despite the economic uncertainty, they don’t plan to cut back dramatically on back-to-school spending. I invited Rod Sides and Kate Ferrara, on the show to talk about it. Rod is the vice-chairman and leader of the Retail, Wholesale & Distribution practice at Deloitte Consulting LLP and Kate is the U.S. retail, wholesale, and distribution leader [at] Deloitte & Touche LLP’s Risk & Financial Advisory practice. They surveyed more than 2,000 parents across two surveys at the beginning of June.

Kate: Never before has education been as disrupted as it was this past spring. There’s still so much uncertainty about the fall. Parents are concerned. They’re concerned about the education of their children, if they are falling behind. What is back to school going to look like this year?

Rod: As parents, we all worry about a kid keeping up. Are they doing the things they need to do? And when you are uncertain about the learning that has gone on, and even some of the differences the school districts have had in terms of how they handled the last quarter, it does add to that heightened concern. The other thing is, how much of the first quarter will need to be a repeat of things that they didn’t get, and what does that mean? There’s been some discussion about whether or not standardized tests need to be taken for colleges, as an example. And so there is a high degree of anxiety when you think about it. A lot of parents had chosen to do other things like online learning, where they’ve gotten tutors. But again, that’s a minority of folks who’ve been able to do that in this pandemic. So there’s a lot going on in the minds of the parents as we think about back to school.

Tanya: All of this anxiety on all fronts is probably shifting the way the customers approach their back-to-school shopping. Give me the big overview of what you heard, and then we’ll dig down into some of those numbers a little bit more deeply.

Rod: To me, the surprising part of the numbers is that we’re not down nearly as much as we thought we would be across the board. If we look at traditional back-to-school, we found categories that we’ve surveyed in the past only to be down about 5%. We had a new category this year for specifically personal hygiene products, and we actually saw the spending for back-to-school go up slightly year over year. So you would say, how in the world did that happen in the midst of a pandemic, given all the uncertainty?

I think folks have a desire for things to get back to normal, number one. The other thing is, they’re going to make sacrifices and do what they can for their kids, regardless of the economics. Same thing with back-to-college. We actually found that the spending was pretty flat year to year and has been over the past four to five years. So, again, given the uncertainty, those who are going back to school seem to have in their mind that they’re going to spend about the same as last year, which to us was pretty shocking.

Tanya: One of the areas that’s increasing is technology, which makes a ton of sense because some of our students will be in e-learning in the fall. And I know from personal experience, my sister has a child and they never had a laptop at home because she had a business laptop for her work. But they had to buy one in the spring so that he could Zoom from home. So there’s going to be an increased focus on technology. Kate, is that hardware, is it software? What are parents looking at?

Kate: It’s a combination of hardware and software. Unlike college students that knew they needed a device or laptop to go to college, many elementary- or high-school students weren’t necessarily prepared to have their own hardware, and some schools did not give out computers. So, there’s certainly an element where students are getting that. But there are several other items that we found really interesting in the survey. More and more parents are paying for things like tutors, subscriptions for online platforms to supplement some of the things that the students are learning, online courses, apps, things like that. Those are some of the items that we saw a big increase this year that we haven’t necessarily seen in the past.

Tanya: That’s interesting. And kids are more involved in those decisions? They might have opinions about laptops and other things.

Rod: They absolutely do. I mean, they certainly influence it at our house. Kate, I don’t know about you, but I get more input than probably I ask for …

Kate: I think this is a good opportunity for the kids to convince their parents that they need the new latest and greatest. In all seriousness, I do think that the parents are needing to spend more on technology than they ever have. And for the most part, I’d say the students certainly will have a say in a lot of that.

Tanya: One of the other things that folks tend to spend a lot of money on this time of [the] year is clothing. They grow really fast. You got to upgrade those shoes and clothes and everything

Kate: They do. I’ve studied this back-to-school survey and done outreach for many years. Apparel and shoes have always been one of the top items every year because students, as you mentioned, grow and they want a new wardrobe for back to school.

For a group of parents that are assuming that kids will go back to school, there’s no doubt that there will still be [spending on] apparel and clothing. But we did see that go down in terms of overall plan to spend for next year. Where we saw the shifts is in areas like computers, technology, and some of those other things.

Tanya: Because it’s still a question mark in many communities. I know where I live, they’re not quite sure yet what they’re going to do. There’s probably going to be an in-person version of school and there’s definitely going to be an e-learning version of school, and parents will get to choose. That would really influence whether or not you need a whole lot of new clothes.

Kate: For some retailers and certainly some apparel, I think there's been a bit of a pent-up demand. Now that we’re seeing some of those retailers open up, we are certainly starting to see clothing and items like that make a bit of a rebound. But again, uncertainty is the number-one word here. If you're not going back to school, you probably don't need a whole new wardrobe. There’s a bit of a wait-and-see [approach]. If we’re seeing that the students are going to be going back in the fall, as predicted, clothing will certainly be one of the top spending items. The question is how much?

Tanya: You mentioned earlier personal health products, things like sanitizers and wipes. Those might be items that particularly parents of young elementary school kids might have been purchasing anyway to donate to a classroom, but we’re going to see a jump in that for personal use now.

Rod: We looked at that category in general and we think it’s probably US$2 billion of the total spend that we expect coming out of that specific category. Again, we didn’t break out last year how much. But out of the US$28.1 billion, about US$2 billion is just for those kinds of products. So it is substantial, almost 10%.

Tanya: Where are people going to be doing this shopping? I assume a good portion of it’s going to happen online.

Rod: So that’s the really interesting part. Historically, back-to-school [shopping] was an in-store event for the most part. For the last five years, pre-COVID, about 56 or 57% of the shopping was in-store, and online was starting to make gains. But what we find this year is that about 43% of the shopping expected to be in store, about 37% online, and about 20% are undecided. My guess is much of that undecided probably goes the way of online. Consumers are really looking for that safety. They’re looking for convenience. And most of them are looking for the opportunity to buy online and return to store. That’s up pretty substantially year over year. Pick up in-store is another expectation that consumers [have]. It’s almost become table stakes. It will be interesting to see as we go in through the season if that holds.

Kate: In the past with back-to-school, price, product, and convenience were always the top reasons for some of these destination. What we’re seeing now is a balancing of that with safety and security. There’s a view that, is it really worth it to make another stop anywhere? [If I’m at a] drug store or if I’m at a grocer, why not just pick up some of those school supplies or some of those cleaning supplies? Another stop on the journey may not make a lot of sense. So we are seeing an uptick in things like drug stores and supermarkets as a destination. But mass merchants are also really your one-stop-shopping destinations. That’s where you can get your apparel. You can get computers. You can get supplies. That’s tended to, for the last several years, really be the top destination. And this year is no different. But for online, the security and the safety element is certainly a factor for many of the parents that we surveyed.

Tanya: One of the other things you looked at was emerging technology and what people are using. What did you find there?

Rod: The cashierless stores [are] one people started to use and they’ve become a little more mainstream. It’s a new added category and we found quite a few folks that were going to use that. Shopping using a voice assistant doubled, actually more than doubled year over year. So that’s up to 14%, up from about 6% last year. Using buy buttons and social media, that’s up. Some VR and chat bot is also up. As people have gotten more comfortable with the technology over the last 90 days, they’ve started to use more of the things that make the shopping experience more convenient and makes their life easier. As a result, we’re seeing a little bit of an uptick there. We were waiting to see when something would happen. Unfortunately, it’s the lockdown that’s forced folks to move toward technology as a means to make life more convenient and more safe.

Tanya: Can we break down those technologies? Because I’m not sure I know exactly what you mean by all of them. When we’re saying cashierless stores, are you talking about stores that are completely cashierless? Or are you talking about more self-service kiosks in a traditional store?

Rod: We were thinking entirely cashierless. So if you think about Amazon Go and other types of cashless retail operations, that’s we’re talking about with that one in particular. Or it will be a matter of shouting to your device and having them help you source the things you’re looking for. A lot of social media organizations have added buy buttons to specific posts. And so we’re seeing those channels start to grow over time.

Kate: Overall, the percentage is still relatively low. But we’re seeing a big jump, and as Rod said, I think people are interacting with technology much more than they ever have. I know personally, I downloaded more apps in the last three months and use them for ordering my coffee or ordering takeout at restaurants, and with stores as well. Mobile payments continue to also rise a bit as well. In the past, there was a curiosity about it and people knew that it was a possibility with touchless payment, but this situation has forced a lot of our consumers to use technology in that buying process more than they ever have. I think some of this will stick. They used to use their phones just to look at directions to a store or look up reviews, but it’s becoming more and more part of the [shopping] process, which is an interesting dynamic that’s happened during this pandemic.

Tanya: So, Kate, that’s a great transition into my next question, which is what are the takeaways for retailers here?

Kate: It was always price, product, and convenience. [Now] consumers want to make sure that the retailers are balancing things like safety and security. Consumers are getting smarter about using technology that offers safe and convenient ways for them to shop, whether that’s in-store or online. We’ve seen a trend over the past couple of years trying to blend those two things, so we’re seeing a big uptick in things like buy online, pickup in store (BOPIS), or buy online, return in store (BORIS).

Being able to take your brick and mortar and your online and merge those things—some retailers have gotten very good at it. Some are still working to get there. [The pandemic] has really created more of a sense of urgency for retailers around getting there. It has accelerated their journey and maybe that is a good thing. Consumers know they have choices on where they want to shop and they want to make sure that they’re doing it in a place that’s safe and convenient.

Tanya: What are the biggest challenges that retailers face if they haven’t already transitioned to that hybrid model of being able to buy online pickup in person or by online return in person?

Kate: We’ve said the word uncertainty so many times, but we really just don’t know what the fall or winter is going to bring. Will there be another level of shutdown for retailers? The end may not be in sight yet. I do think that for those that haven’t quite figured out how to blend those two technologies, there could be a level of question on how they move forward.

Rod: There are two things that retailers have to do to be impactful. Number one, they have to make sure they have clear visibility of inventory. They need to know what’s on hand, where it sits, and their ability to promise that to the consumer.

The second thing is they have to reintroduce safe service in a different way. Think about the model over the last 10, 15, 20 years—we took service out of many retail formats, [such as] the ability to walk a product to the car, the ability to go pick up within the store. We’re finding, many of the players have introduced services that we haven’t seen in the last 10 or 15 years. They’re not new. We simply didn’t have labor to go do it. Being able to continue that now that they’ve set an expectation is going to be a real challenge, because their cost models are constrained in terms of where to put resources. And then you have to figure out what’s differentiated. That’s really important as we go through the next six months.

Tanya: Kate and Rod, thank you so much for bringing us all of this new data in this very uncertain time.

Rod and Kate: Happy to do it. Thanks for your time. Thank you.

Tanya: Rod Sides is the vice-chairman and leader of the Retail, Wholesale & Distribution practice at Deloitte and Kate Ferrara is the U.S. retail, wholesale, and distribution leader Deloitte’s Risk and Financial Advisory practice. They surveyed more than two thousand parents about back-to-school shopping.

Kate says she’s got a theory that some of that spend might be because parents just feel bad for their kids. The spring was rough and who knows what the fall is going to bring.

The annual back-to-school shopping survey is chock full of data—lots of graphics, lots of numbers. It’s a virtual playbook for retailers and you can find it all at deloitte.com/insights.

We’re on Twitter at @DeloitteInsight and you can find me at @tanyaott1.

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I’m Tanya Ott. Thanks for joining us and be well.

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