Stores lure back-to-school shoppers with special offers and buy now, pay later plans

NEW YORK (AP) — Mass retailers across the U.S. are offering customers computers, clothing and other school supplies at bargain prices. To seal the deal, they are marketing “buy now, pay later” offers that let customers spread the cost of returning to school in style.

The strategies to safeguard sales are being unveiled to get consumers, especially those with lower incomes, to spend money during retail's second-busiest period after the winter holidays, retailers and analysts said. Various forecasts predict back-to-school sales this year will be about the same or lower than last year.

Even though inflation has dropped, the cost of groceries, rent and other necessities is still much higher than it was before the coronavirus pandemic. High interest rates have made it more expensive to carry a credit card balance. Savvy shoppers from all income brackets are willing to buy secondhand items and purchase store brands and brands, which are typically cheaper than nationally advertised brands.

“Inflation is the main factor that determines the change in my expenses,” said Jasleen Reyes, 43, a mother of three who works as a hotel manager and lives in New York City's Harlem neighborhood. “It used to not be so bad. Now I have to watch every dollar.”

For Reyes, that means keeping an eye out for more discounts, especially when it comes to sneakers and jeans for her kids. She also planned to use a buy now, pay later (BNPL) plan to buy a laptop for her 24-year-old son, a college student, and school uniforms for one of her teenage daughters.

Reyes estimates she will spend $3,200 to $3,400 on school supplies this year, about $1,500 more than last year, mostly because of the laptop. She uses credit cards, but prefers the BNPL four-payment option because it spreads her costs over two months interest-free, rather than adding them to a monthly bill that would accrue interest if she couldn't pay off the balance immediately.

Unlike gift-giving holidays like Christmas and Valentine's Day, the back-to-school season is dominated by spending on essentials like classroom supplies and replacing clothes and shoes that children have outgrown.

But like the winter holidays, the back-to-school shopping season is starting earlier and earlier. One reason for that is Amazon's Prime Day. Competitors hoping to capitalize on some of the online giant's momentum have helped make July a good month for discounts.

Target, for example, offered 20 school supplies, including notebooks and colored pencils, that cost less than $20 together. The discount retailer moved the sale last year from the first week of July to the third week of June.

As school heads back to normal, more people are turning to buy now, pay later services. According to data from Adobe Analytics, $6.75 billion worth of online purchases were made through BNPL services in the U.S. in June, up 14.3% from the same month last year.

Many shoppers appreciate the flexibility of the buy now, pay later payment method, but consumer advocates have expressed concern that the increasing popularity of this payment method could indicate financial stress and ultimately push Americans deeper into debt.

BNPL company Afterpay said millennials made the majority of back-to-school-related purchases on the platform from April to June, followed by Gen Xers. Spending on back-to-school products increased across “accessories, apparel, electronics, footwear and home furnishings,” a company spokesperson said.

Afterpay data from May, June and July shows a 65% year-on-year increase in backpack sales through the company's payment system, while sales of flashcards and electronic tablets rose by more than 50%. Sales of “school shorts,” “school skirts” and low-top sneakers purchased through Afterpay increased by more than 100%.

The National Retail Federation predicts that back-to-school sales will reach $38.8 billion this year, the second-highest since the association began tracking data in 2007. The record still stands at $41.5 billion from last year.

“Households are struggling with inflation right now,” said Jack Kleinhentz, the association's chief economist, at a press conference last week. “Even as things improve, they have to set priorities. They have to be more selective.”

Professional services and consulting firm Deloitte estimates back-to-school spending will reach $31.3 billion, essentially unchanged from $31.9 billion a year ago.

Back-to-school shopping contributed to the record sales Amazon reported during its 10th Prime Day on July 16 and 17. Spending on products such as backpacks, lunch boxes and stationery rose sharply, according to Adobe. The technology company does not adjust its analytics data for inflation, but said new demand, not higher prices, fueled the biggest increase in consumer spending this year.

Chummy Tees, an online T-shirt seller based in Sonora, Calif., has seen more deals compared to last year, said founder Josh Neuman. He said the buying spree began in late June; last year, business picked up in mid-July and intensified in August, Neuman said.

“It seems that parents always want to be one step ahead to get the best deals and make sure their children are well prepared for the first day,” he said.

According to co-founder Amanda Zuckerman, online dorm supplies retailer Dormify offers something for all budgets.

This season, Dormify has put together two different packages, one for large customers and one for those on a budget. The 16-piece deluxe package starts at $329, while the “core” package starts at $199 and includes 27 items.

The retailer has also lowered entry-level prices on some items. Comforters, for example, start at $69, down $30 from a year ago.

Zuckerman said spending for the college-back course, which normally begins in late May, began this month. She believes the delayed spending was due to delays and glitches in the approval process for the Free Application for Federal Student Aid after an updated version of the student aid form was released.

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