Retailers of back-to-school clothing, shoes and accessories may be in for a tough season as parents search for cost savings in the face of high gas and food prices, according to Ernst & Young.
“Family incomes are rising, but slower than food, gas and even home renovation prices, so that just leaves less of the pie for discretionary products,” said Daniel Baer, the company’s Canadian retail and wholesale industry leader.
Particularly hard hit will be stores that consumers do not strongly associate with value pricing. Others that have traditionally tread on a mantra of giving customers a bang for their buck should emerge with better back-to-school numbers.
“In times when people are looking for value and spending less, the warehouse clubs and the Wal-Marts of the world certainly benefit,” said Baer.
Spending on adult fashions might also be affected, as parents who in the past might have tacked on to their kids’ bill a pair of shoes or a shirt for themselves will be less inclined to do so.
By contrast to the discretionary items situation, Ernst & Young does not expect to see a drop in computer and home electronic sales, given the continued strong Statistics Canada figures seen in those categories so far this year.
The retailers that are most likely to weather a poor economic climate are those that find the right balance between cutting back and spending in the right areas.
“Good retailers do make cutbacks and do become more conservative in their planning, but those who innovate … come out of an economic downturn that much stronger and that much further ahead of their competition.”
That innovation typically comes in the form of sound technology investments, Baer said. This includes supply chain systems that provide better information and warehouse logistics software “so you can turn over your product more quickly using less people.”
Ernst & Young also advises retailers to use lighter packaging to reduce the weight of shipments, which will in turn save on the amount of fuel required to transport merchandise.