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Back-to-School Spending Looks Set to Rise (and Fall) This Year

Daniel B. Kline, The Motley Fool

While it may pain you to start thinking about back-to-school shopping in mid-July -- a time when it feels more appropriate to focus one's attention on pools, beaches, barbecues, and the like -- it's really not too soon. In many Southern states, classes resume in mid-August (less than a month from now), and college students may return to campus even earlier.

For parents and students, that means it's about time to open up their wallets for school supplies and dorm room needs, and a new study from the National Retail Federation (NRF) predicts that this year will bring record back-to-school spending.

"Consumers are in a strong position given the nation's growing economy, and we see this reflected in what they say they will spend on back-to-class items this year," said NRF CEO Matthew Shay in a press release.

A school bus is on the road.

The new school year will be here sooner than you might think. Image source: Getty Images.

How big will it be?

Families with students in grades K-12 said they expect to spend an average of $696.70, a 1.7% increase from $684.79 last year. This number tops the prior record of $688.62 set in 2012.

However, while per-family spending may reach record levels, fewer families in this year's 7,660-person survey pool said they have kids in those grades compared to 2018. That suggests that while per-family spending are on course to break records, overall back-to-school sales for K-12 students will drop. The forecast is for $26.2 billion in spending, down from $27.5 billion in 2018.

Families with college students also plan to spend more -- an average of $976.78, a 3.7% increase from $942.17 last year. That's also a record -- topping 2017, when that demographic spent an average of $969.88. But similarly, fewer of the families surveyed reported having college-aged children than did last year. The NRF forecasts that overall back-to-school spending will drop to $54.5 billion, down from last year's record $55.3 billion.

What does it mean?

It's still fairly early, and retailers will be stepping up their game to compete for deal-savvy consumers. Prime Day, Amazon's big summer sales event, which took place on Monday and Tuesday of this week, likely kick-started the back-to-school shopping season as hundreds of retailers held copycat sales.

"Back-to-class shoppers still have the bulk of their shopping to do and are waiting to see what the best deals and promotions will be at a variety of different retailers," Prosper Insights Executive Vice President of Strategy Phil Rist said in the press release. "The survey found 89% of both K-12 and college shoppers still had half or more of their purchases left to complete. Of those, 49% were waiting for the best deals for items on their lists."

That means that plenty of opportunity still exists for retailers to win pieces of this big --but not as big as last year -- sales pie. Essentially, this is a game of retail chicken.

Retailers know that parents will need at least some of the year's school supplies on the first day, and they can try to hold the line on price cuts until consumers start to feel like they have no choice. Conversely, shoppers can opt to take their dollars to the chains that offer the best deals the soonest, or opt to wait for even deeper discounts later in the season (which may never come).

In reality, retailers will probably blink first due to intense competition, but shoppers can make things easier on their budgets by doing their homework. Make a list, check prices, and know what the items you need should cost. That way, if a deal comes, you'll be ready to pounce -- even if that risks buying too soon to catch the steepest sales, and leaving a few dollars on the table.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.