Back to school spending is 'economy insensitive' and set to grow, experts say

TORONTO – Retail experts are forecasting an increase in Canadian back-to-school spending this summer thanks in part to the low loonie and the new Canada Child Benefit.

Business consulting firm EY, formerly Ernst and Young, predicts that retailers will see a 4.5 per cent increase this year over 2015 sales as students stock up for another year in the classroom.

EY’s forecast is based on factors that include province-by-province employment numbers, housing markets and consumer spending habits over the past 12 to 18 months, said EY’s Daniel Baer in a recent interview.

EY also asked retailers across the country for their own sales trends and expectations.

Back to school is the second-biggest shopping season after Christmas, Baer said.

“What we’ve been seeing is stronger retail sales for a few reasons,” said Baer. “The Canadian economy has been relatively strong (and) there’s been some more government spending in terms of child-care benefits … putting money into the hands of families.”

This year, Prime Minister Justin Trudeau replaced existing child-care benefits with a program that will see the average family get $2,300 per year. The new Canada Child Benefit is expected to push tens of thousands of Canadian children above the poverty line, and could help stimulate the economy.

The weak loonie has also encouraged more Canadians to shop on this side of the border instead of going to the U.S. to stock up on supplies or buying from American online retailers, Baer said. And a number of Americans are travelling north to shop in order to take advantage of the exchange rate, too, giving a further shot in the arm to the Canadian economy.

EY doesn’t expect all provinces to reap the rewards of increased back-to-school spending.

The struggling oil-and-gas industry and rising unemployment in the Prairies point to lower spending, especially in Alberta, said Baer.

But Alan Middleton, a marketing professor at York University’s Schulich School of Business, said back-to-school spending is relatively immune to a weak economy.

“They may not get the top-of-the-line laptop … if (they are) under economic threat, but there’s still going to be a whole bunch of other stuff they’re (buying),” he said.

Electronics stores might see fewer people shopping for new tablets or laptops, but big-box retailers like Walmart will still sell the same number of essential items, said Middleton.

“Clothing, uniforms, paper, crayons, the whole caboodle is really quite economy-insensitive,” he said. “People have to buy them.”

Another factor that fuels back-to-school sales is the constant growth of the length of the season.

“If you go back a decade or a decade and a half, you probably didn’t really see anything happen until the last week in August,” said Middleton said. “Now you’re going to see it after the August holiday weekend.”

Stores use a marketing pitch of “don’t wait to get it, we have good deals now,” he added.

Retailers don’t want everyone to cram into their stores at the last minute because the crowds put off some shoppers, Middleton said.

“Whereas if some people buy some stuff early, the observation is they’re still buying even at the end (of the back-to-school season). So the total amount of buying builds up.”

Baer agreed that back-to-school promotions are starting earlier and ending later.

“You’re seeing a lot of promotions starting in July and going to the middle of September, even after school has started again.”