Retailers Having Back To School Blues

With 55.8 million kids enrolled in public and private schools this fall, retailers can anticipate their usual brief stint of shoppers. But given lackluster consumer spending and a 9.4 percent unemployment rate, it is no surprise analysts at industry research firm IBISWorld expect back-to-school spending to decline by 3.4 percent – from the $20.42 billion generated in 2008.

In probing their back-to-school cost breakdown, the Los Angeles-based firm divided the following four categories into what it considered to be typical school-related expenses: electronics, traditional supplies, footwear and clothing.

“Parents will inevitably put more thought and less dollars into their back-to-school shopping strategies,” said George Van Horn, senior analyst at IBISWorld. “In particular, dollar-variety stores can expect to see a greater wave of traffic since parents are doing everything they can to save an extra buck”.  In fact, IBISWorld approximates 21.3 percent of sales from the $47 billion discount-retailer industry to come from school and office supplies alone.

The fastest growing category, electronic school supplies, will see a slight decline of 1.8 percent, down to $5.12 billion. Parents on average will spend $91.69 per child on electronic equipment this year, a fairly significant leap from the $43.36 average observed in 2005. Items such as calculators and personal laptops are must-haves in today’s learning environment, and IBISWorld predicts that by 2016, this sector will become the number one back-to-school spending category – overtaking the core area of clothing, as the learning environment becomes more technologically focused.

The biggest decline this year comes from the clothes category, expected to plunge 5.4 percent. For each child enrolled in school this year, sporting the latest trends in clothes and accessories will cost parents $136.60 on average.

And for the 1.23 million kids that will be home-schooled this year, IBISWorld found that while parents may be saving on certain expenses like clothes and shoes, educating a child at home escalates costs in other areas. In particular, parents incur the hefty price of purchasing the latest teaching tools, textbooks, and learning equipment – typically covered by public and private schools.

“Back-to-school spending is a necessary and justifiable expenditure,’” said Van Horn. “Retailers have driven down overall prices in order to entice consumers, so price-conscious parents won’t need to significantly cutback, because they will get a lot more out of their dollar this year.”

About IBISWorld, Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every U.S. industry.  With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions.  Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide.  For more information visit www.ibisworld.com or call 1-800-330-3772.

Euro Retail Sales Also Taking a Hit

According to the Bloomberg Euro-Zone Retail Purchasing Managers’ Index,  retail business conditions in Europe continued to deteriorate in June, with sales, employment, purchasing of stock and margins all falling compared with May.
When compared to May, retail sales fell in all of the three largest euro countries:

 -Germany experienced the steepest drop in monthly sales of the three, and was also the only country to record a sharper rate of decline. The index fell for a second successive month from 46.3 to 46.0, signaling the largest monthly drop in sales since March and the thirteenth successive decline. The average decline for Q2 as a whole was the smallest since the second quarter of last year.
-Sales fell in France for the fifth successive month. The rate of deterioration slowed to near-stagnation to register the smallest monthly decline over this period and the best performance of the three countries. The index rose from 48.3 to 49.4. For Q2 as a whole, the decline was the weakest recorded over the past three quarters.
-Italy saw sales drop for the twenty-eighth consecutive month. The index rose from 46.5 to 47.0, registering the smallest monthly decline since October 2007. The rate of contraction has moderated since the record pace seen last November, meaning the average monthly drop in sales during Q2 was the smallest since Q2 2007.

Euro area retail sales were down from June 2008. The year-on-year sales index rose from 38.7 in May to 42.7. This upward movement pointed to an easing in the rate of decline from the severe pace seen one month earlier. Sales fell from a year ago in all three countries, led by Italy, which was also the only country to see an acceleration in the rate of decline. Germany reported the weakest overall year-on-year drop.

Will Consumers Drink Through the Global Downturn?

With global unemployment tipped to rise above 10 percent during the year, and consumer confidence slumping across all developed and most developing markets, many people are wondering whether any industry will be spared. Alcohol production has been touted as one group of industries which maybe recession proof, but IBISWorld analysis suggests otherwise. Global Spirits Manufacturing is the only alcohol industry expected to grow during 2009.

Global Sprits Manufacturing is expected to fare best, as momentum from previous years pushes industry revenue up by 2.5 percent during 2009 – compared to 12.8 percent growth in 2008. Consumers in China, a key growth market, are expected to be less affected than the global average. Chinese consumers will continue to spend more on spirits, resulting in an increase in Chinese Distilled Alcohol Manufacturing of another 11.9 percent. This will be the main driver of global industry revenue growth with consumers in developed markets expected to curtail their spending on spirits.

Global Sprits Manufacturing is expected to fare best, as momentum from previous years pushes industry revenue up by 2.5 percent during 2009 – compared to 12.8 percent growth in 2008. Consumers in China, a key growth market, are expected to be less affected than the global average. Chinese consumers will continue to spend more on spirits, resulting in an increase in Chinese Distilled Alcohol Manufacturing of another 11.9 percent. This will be the main driver of global industry revenue growth with consumers in developed markets expected to curtail their spending on spirits.

Global Wine Manufacturing relies heavily on international trade, which accounts for 43.3 percent of industry revenue. Major importers include the USA, UK and Germany – all of which have been hit hard by the global downturn. IBISWorld estimates that U.S. Wine imports will slump by 4.9 percent during the year, whilce major exporting regions such as the EU and Australia will have significantly lower demand for their wine. One wine region which has benefited from the downturn is Argentina, experiencing a surge in exports to the U.S. and a rise of 36.9 percent so far in 2009. As demand in key importing markets falls, global industry revenue will slide by 3.4 percent to $59.52 billion.

The new super brewer in Global Beer Manufacturing, Anheuser-Busch InBev, will find times tough in its first year of operation. Global Beer Manufacturing Revenue is expected to fall by 3.6 percent during the year. While some consumers in developed markets will trade down from spirits towards beer, many more consumers will be trading down from their premium brew towards more standard offerings.

Global Alcohol Manufacturing industries are expected to also suffer through this global downturn. Tough times may drive some consumers to drink – it’s just unfortunate for producers that they will be choosing cheaper beverages, while others may choose to abstain all together.

Video Games Not Recession Proof With Female Demographic

Photo by VinnyPrime

Companies like Ubisoft are trying to get a piece of the female demographic with games like Fashion Designer, Movie Star and Babyz, but they may not be putting all their eggs in one basket.

Demand from the female demographic is expected to slow according to industry research firm IBISWorld, and for this reason gaming companies may refocus on their loyal, most important demographic – young male gamers.

Reasons:

• The recession is hurting female spending on games more than male spending. Male gamers are more inclined to consider gaming as a ‘compulsory’ expense than women, for whom it is unequivocally a luxury.

• The popularity of communal games such as Guitar Hero, SingStar and the Wii console’s offerings have been far more popular than strictly female-oriented games.

These factors will all combine to slow growth in female gaming. By 2013, IBISWorld expects female gamers to represent around 41 percent of all gamers.

Retailers Get Rotten Eggs this Easter

 

Photo by polska1

The Easter Bunny will have less in its basket this year as holiday expenditure is expected to decline eight percent, according to industry research firm IBISWorld. Total sales from Easter clothing, candy, flowers, decorations, food and greeting cards are expected to fall from $14.8 billion in 2008 to $13.6 in 2009.

Holiday gift giving will take a hit because many households are continuing to tighten purse strings due to the financial climate. Candy sales in particular are estimated to reach only $1.77 billion, down by 10.2 percent from Easter 2008. Interestingly, the forecast for candy sales could have been much worse had it not been for the holiday’s calendar date.

“Easter falls on April 12, compared to March 23 of last year, so candy producers and marketers have 20 additional days to merchandise their products and entice the public to spend,” explained George Van Horn, senior analyst with IBISWorld.  ”This will cushion some of the inevitable blow on spending.”

Businesses still expected to perform well this Easter are supermarkets. This industry will experience a 3.5 percent rise in food sales as families prepare their holiday meals at home, rather than dining out. Though these meals will be on a budget, the nation will spend about $4.6 billion on food this Easter.