Consumer financial concerns are likely to weigh on the back-to-school market this year, making carefully targeted promotions and markdowns especially important for retailers seeking to capitalize on the key selling period, according to Revionics, a company focused on AI pricing optimization.
“Consumers will be looking to economize as much as possible this BTS (back to school) season and will be very budget conscious when making purchasing decisions,” says Matt Pavich, senior director of strategy and innovation at Revionics. “One positive aspect for retailers, however, is that BTS remains one of the retail events with very high commitment from shoppers. Most parents will do whatever it takes to give their children the resources they need to be successful. In some cases, even a worried consumer may look to cut back elsewhere and still spend normal amounts this back-to-school season.”
Although consumers will continue to prioritize their children, the unsettled economic environment and the role of changing tariff proposals will have the attention of seasonal shoppers, according to Pavich.
“Across all retail segments, tariffs loom large for suppliers, retailers and shoppers alike,” Pavich said. “In addition to the challenges retailers face from rising costs, there is also evidence that some of the larger, big-ticket electronics items that often are purchased during BTS may have been purchased in advance in anticipation of rising prices later in the year. While tariffs will drive margin and cost pressure for retailers, retailers can leverage analytics and pricing AI tools to better negotiate cost increases with their suppliers. Gone are the days of just accepting cost increases and passing them on directly to consumers.”
In the conditions as they are, well-orchestrated promotions can be instrumental in driving purchasing, Pavich noted.
“As with all holidays, promotions play a major role in whether or not a retailer will be successful,” Pavich said. “This is even more true at a time when consumers are increasingly concerned about their own personal finances and the direction of the economy. A lot of profit and operational efforts are wasted on ineffective promotions. Retailers need to maximize their focus on the promotions that drive the best impact on the products consumers care most about.”
The promotional equation for back-to-the-classroom products has its own particularities that retailers should keep in mind.
“One other key promotional consideration is that students will often have a list of items to purchase for BTS and the decision to buy one brand often leads to zero sales for similar products,” Pavich said. “As such, retailers should be very cognizant of the indirect impacts of promotions, including cannibalization, affinity and stock-up effects, to have a holistic perspective on how their promotions will actually perform. Advanced AI pricing and promotional technologies can help solve for some of these complexities.”
As with holiday occasions, retailers looking to win sales from students and their parents this summer should recognize that “having a savvy markdown strategy is critical to success,” Pavich continued. “The classic retail error is waiting too long to begin taking markdowns on products that consumers have already abandoned. The other common mistake is applying a one-size-fits-all approach to marking down BTS items at the end of the season. BTS is a highly regional event with school start dates varying greatly from state to state and district to district. The ability to have a nuanced, localized, data-informed markdown strategy in place for BTS can be a game changer for retailers while driving better value finds for consumers.”
