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Back-to-school season: The words conjure up flashbacks of colorful stacks of three-ring binders and fresh packs of #2 Ticonderoga pencils. But this year, the phrase takes on a new meaning for those entering a hybrid, virtual-, or home-learning school situation. Enter shiny laptops, headphone cords, and the scent of hand sanitizer.

As millions of students head back to school, they may not be experiencing the typical classroom or campus experience. Remote or hybrid learning is becoming the new normal for many, and it certainly is impacting the retailers that supply the season — but perhaps not in the way you might expect.

Coronavirus has shaken up consumer spending, as many families have struggled with layoffs and furloughs. Personal consumer expenditures (PCE) were down 34.6% from Q1 to Q2 alone. Even with an 8.5% rebound in household spending in May and an additional 5.6% growth in June, spending once spurred by government stimulus checks and extra unemployment benefits is slowing again. Additionally, some parents are postponing their shopping in the hopes that another stimulus check could be on the way. This decrease in shopping activity has negatively impacted some retailers’ bottom lines around the country, and this crucial sales season will be no different, even for many businesses that typically flourish in these months.

In fact, after a dip in back-to-school spending last year (down by about $2 billion from 2018), projections show this year’s spending will reach a new peak, topping more than $100 billion.

A surge in spend?

The growth in spending is fueled by both grade school and college-level students. According to the National Retail Foundation (NRF), the estimated spend for students in K-12 is expected to total $33.9 billion — that’s an average of nearly $790 per family. Add in $67.7 billion in college spending (think: electronics, dorm furnishings, clothing, and school supplies), at approximately $1,060 per family, and you’ve got a record-breaking back-to-school season.

The paradigm of this year’s back-to-school season has shifted greatly under the pressure of the pandemic. Although Deloitte’s 2020 Back to School survey reports 40% of parents plan to cut back on purchases for traditional back-to-school gear in favor of new digital resources, the NRF estimates spending for classic items like paper and pencils, as well as new wardrobe pieces, will remain in line with 2019 numbers.

The real changes this year are the additional necessities students require to make virtual learning in a home-schooling environment possible, like desks, chairs, laptops, and headphones. According to Deloitte, a new category of purchases — home and health — has added an extra $61 on average to almost two-thirds of customers’ spending. Average expenditure on electronic gadgets and digital subscriptions is also up 4% since last year. But, most notably, computers and hardware spending is up 38% since 2019 — and the big-box retailers that sell tech products may be in luck.

School shopping essentials? eCommerce and Convenience

Just as health and safety concerns will dictate the format of this school year, whether it be in socially-distanced classrooms or at-home environments, public health considerations are impacting shopping activities and practices for millions of families, too.

For those who prefer in-store, many are opting for a shopping experience closer to home and limiting themselves to the number of stores they visit, prompting supermarkets and drug stores to increasingly serve as school supply destinations. And, what comes as little surprise given the circumstances, online shopping will be a popular choice for more than half of K-12 shoppers and 43% of college shoppers. Money spent online will account for nearly 40% of total back-to-school dollars.

Historically, mass merchants have been the go-to for most back-to-school shoppers. This year, those with a strong eCommerce presence and “buy online, pick up in store” and “buy online, return to store” options will likely be the winners of this season. Expect that even with college dorm shopping down due to continued confusion surrounding back-to-campus policies, big-box retailers with these attributes (and access to tech products), like Target, Walmart, and BestBuy, may still see a windfall this season, even after a slow start.

The businesses that won’t be so lucky? Prominent clothing retailers that depend on the annual school wardrobe refresh, like American Eagle, The Gap, and Abercrombie & Fitch, to name a few. For a business like The Gap, which saw sales plummet 43% in its last quarterly report, the coming weeks are unlikely to paint a much prettier picture.

This record-breaking season is sure to feel different for both consumers and retailers. Stores that typically soar through August and September with back-to-school clothing sales are unlikely to thrive in a virtual education environment. But big-box merchandisers may pick up the slack, providing the ease and accessibility of both online and in-store, one-stop-shop experiences for all things tech, furniture, health, and (comfy) clothing: the must-have supplies for an uncertain school year ahead.

The opinions expressed here are not meant to be used as investing advice. For more information, visit our website.

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Headshot of Lindsey BellLindsey Bell is Ally’s Chief Investment Strategist, responsible for shaping the company’s point of view on investing and the global markets. She is also President of Ally Invest Advisors, responsible for its robo advisory offerings. Lindsey has a broad background in finance, with experience on the buy-side and sell-side, in research and in investment banking and has held roles at JPMorgan, Deutsche Bank, Jefferies, and CFRA Research.

Lindsey holds a passion for teaching individuals how to become successful long-term investors. She is a contributor at CNBC, and frequently shares her insights with various publications including the Wall Street Journal, Barron’s, MarketWatch, BusinessInsider, etc. She also serves on the board of Better Investing, a non-profit organization focused on investment education.