College spending can increase retail sales

People walk on the campus of the University of North Carolina Chapel Hill on June 29, 2023, in Chapel Hill, North Carolina.

Over the past few years, Alicia Browne has noticed a change in what college students haul out of cars on move-in days at the University of Alabama.

Along with pillows, comforters, and laptops, more students arrive with mini-fridges, headboards, Keurig coffeemakers, and even air purifiers. Some hire decorators who drop off linens, custom-made curtains, and other furniture or decor orders on a specific vendor delivery day that the university created.

“It [dorm spending] has grown over the last decade – but since Covid, I think it has exploded,” said Browne, the university’s director of housing administration for about 13 years.

The back-to-college spending bump could be one of the most significant sales opportunities for retailers this fall. College students and their families are expected to shell out a record amount this year: an average of about $1,367 per person, according to an annual survey conducted this summer by the National Retail Federation and market researcher Prosper Insights & Analytics. That figure has shot up by about 40% since 2019, according to the survey.

Browne chalks up the rising spending to the influence of TikTok videos and other social media posts that show off fancy dorms. She said some parents also want to splurge on children who lost years of milestones and typical socialization during the pandemic.

“There’s a definite sense from parents and families that their students missed out on things because of Covid, that there’s a need to perhaps help make up for missed experiences,” Browne said. “I do think part of that is trying to ensure their student is as comfortable as possible, as successful, that their start to school is going to be the best it possibly can be. And that involves their living situation and families are willing to pay for it.”

The back-to-college boom also creates a chance for retailers to attract and develop ties with a new generation of younger shoppers.

“You’re establishing a relationship at a very important and vulnerable age,” said Marshal Cohen, chief retail industry advisor for Circana, a market researcher formally known as IRI and The NPD Group. “A strong retailer will retain that relationship over time.”

This year, that spending and those closer ties could significantly help companies like Target, Walmart, Kohl’s, and others that have said more frugal shoppers are buying fewer big-ticket or discretionary items like clothing, electronics, and furniture. Those retailers will likely share some early insights about sales trends when they report earnings in the next couple of weeks.

Yet the back-to-college sales alone may not overcome retailers’ other challenges. Many companies, including Best Buy and Macy’s, expect sales to fall this fiscal year as higher-priced groceries pressure wallets and consumers spend on experiences again.

Some forecasts for the new school year aren’t as rosy as the NRF estimates. Consulting firm Deloitte predicted back-to-school spending for kindergarten through high school students will drop 10% year over year to $597 per student, as consumers focus on buying necessities and choose retailers with lower prices or more deals. It did not forecast back-to-college spending.

Households aren’t just expecting to spend more because of inflation, according to the NRF’s back-to-college data. Survey respondents also said they expect to buy more new merchandise and big-ticket items like electronics and furniture than they did last year.

A growing pie — and market share up for grabs

As college spending is poised to grow, retailers have another reason to vie for students’ dollars. This fall marks the first back-to-school season since Bed Bath & Beyond filed for bankruptcy and shuttered its stores, leaving behind market share for others to grab.

Along with its 20% off coupons, Bed Bath established a strong reputation for being a one-stop shop for college. It carried a lot of items that students needed, including “bed in a bag” sets that typically included a matching comforter, sheets, pillowcases, and sometimes pillow shams. Bed Bath also allowed families to buy items at their local store and pick them up at a location near their campus in another state or city.

Bed Bath & Beyond logo is seen on the shop in Williston, Vermont on June 19, 2023.

It is difficult to estimate how much college market share Bed Bath had in total. The company reported revenue of $1.44 billion in the quarter that ended last August. That total includes sales from other merchandise categories and its chains BuyBuy Baby and Harmon.

Those dollars may now go to retailers like Amazon, TJX-owned Home Goods, and Ikea.

Cristina Fernandez, a retail analyst for Telsey Advisory Group, said she expects Target to be one of the big winners of Bed Bath’s market share. She said Target could attract Bed Bath’s former customers because it carries student-friendly items from decor to toiletries and food, has similar locations to the defunct retailer’s former ones in the suburbs, and has plenty of stores nearby college campuses.

She said the NRF’s forecast seems high, but added families have been willing to splurge on students.

For example, she said, the pricey Pottery Barn Teen brand owned by Williams-Sonoma teamed up with LoveShackFancy, a New York City-based retailer known for frilly and floral designs that cater to shoppers at stores in the Hamptons and on Madison Ave.

Other retailers have also gotten creative to woo those college customers.

Williams-Sonoma’s namesake brand debuted a website landing page of kitchen items for students setting up their first apartment or a shared kitchen in a dorm.

Walmart and Target have featured a large mix of college-friendly items on their websites and social media pages, from fuzzy throw pillows to retro-inspired mini-fridges. Shipt, the Target-owned delivery service, and Walmart have both tried to attract more college students to their membership programs by offering a special discounted price.

Target has also worked with college-aged TikTok influencers on videos that show off dorm decor.

At The Container Store, shoppers will see some merchandise from Dormify, a direct-to-consumer retailer, at pop-up shops and online.

Dormify co-founder Amanda Zuckerman started the online retailer because of frustrations she had when shopping for her dorm decor at Bed Bath & Beyond.

Now, Zuckerman saidDormify is trying to turn Bed Bath’s closure into a business advantage. She said its average order value has risen 15% this year versus the same time last year.

She said the company’s growth has been fueled by college students who want uniquely decorated rooms that reflect their personalities. They have sprung for items that weren’t on shopping lists years ago, including temporary wallpaper, neon signs, and gadgets like matcha machines and makeup fridges.

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