BACK-TO-SCHOOL REPORT
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- Bonnie Kennedy
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1 2016 B A C K- T O - S C H O O L D I G I TA L I N S I G H T S
2 CONTENTS METHODOLOGY... 3 SURVEY RESPONDENT HIGHLIGHTS ) Back-to-School Shopping Timeline and the August Peak ) Consumer Spending How Much They re Spending ) Consumer Purchases What They re Buying ) Purchase Influencers Why They re Purchasing ) Across Screens Where They re Shopping ) 2016 Predictions...10 SOURCES:....11
3 As summer winds down and students relish their last few days of freedom, retailers are in the thick of a critical shopping period. Back to school connects parents, who are searching for the apparel, accessories and school supplies endorsed by their kids, with the retailers that are competing to introduce them to the right products and best deals to inspire action. As we hit the pinnacle of backto-school shopping, the reality that there are no do-overs or re-takes for back-to-school campaigns will have savvy marketers revisiting their strategies to ensure they are on track to make the grade. Rakuten Marketing Digital Insights has put together a study guide to help marketers maximize the results of their back-to-school campaigns. The research detailed in this report empowers digital marketers to reinforce their back-to-school campaigns with impactful, cross-screen strategies to reach both online and offline consumers during influential shopping moments. Highlights include: This year, advertisers plan to allocate more ad dollars to mobile than desktop. 60% of consumers expect to browse and shop for back-to-school products from a mobile device. It s estimated that only 68% of sales will take place on desktop this year, a 9% YoY decrease likely due to increased adoption of mobile shopping and purchasing. Interestingly, the research also uncovers disparities between the intent of back-to-school shoppers and the strategies advertisers are using to engage them. It also reveals instances in which the intentions consumers express are different from the actions they take. Applying these revelations will help marketers avoid performance pitfalls as we approach the peak of this shopping season. 3
4 METHODOLOGY In May 2016, Rakuten Marketing Digital Insights (RMDI) commissioned a survey of more than 400 U.S. digital marketers to better understand their plans for the 2016 back-to-school shopping season. We also surveyed over 1,200 parents with children entering elementary, middle, high and post-secondary U.S. schools in the fall of In parallel, RMDI analyzed aggregate Q performance data across Rakuten Marketing client verticals affected by back-to-school shopping. Both our internal data and survey data represent a diversity of client size, based on revenue. ADVERTISER DEMOGRAPHICS $ 100M- $ 999M 10 % $ 1B+ 20 % $ 0- $ 999K 34 % Apparel & Accessories Beauty & Health Consumer Electronics (computer, phone, etc.) Office Products Book Supplies $ 1M- $ 99M 36 % Travel Other 0 20 % 40 % 60 % 80 % 100 % WEST 26 % MID WEST 40 % SOUTH NORTH EAST 30 % 26 % Amount of Revenue Industry Vertical Geographic Location CONSUMER DEMOGRAPHICS Female 67 % Male 33 % $ 50,687 WEST 18 % MID WEST 28 % SOUTH NORTH EAST 22 % 32 % Respondent Gender Median Income Geographic Location 4
5 SURVEY RESPONDENT HIGHLIGHTS U.S. parents with elementary-school students made up the majority of survey respondents at 66%. Many of these same parents also have children attending other higher education institutions. 38% of those parents surveyed have at least one child attending high school. More than 55% of advertisers had director-level titles or higher. 25% of advertiser respondents were from companies with more than 10,000 employees, the second-largest group in the survey. RESPONDENT HIGHLIGHTS 1200 Households with Children by School-Type Elementary School Middle School High School Post Secondary School % 10, % 1,000 9, % % % 0 No Children One Child Two Children Three or More Children Number of Employees 1) BACK-TO-SCHOOL SHOPPING TIMELINE AND THE AUGUST PEAK August is the peak month for back-to-school shopping. The National Retail Federation (NRF) reported that by August 9, 2015, only 50% of parents had completed their shopping and 20% hadn t even started. Rakuten Marketing data reflects this trend, showing consumer spending ramping up the first week of August. Parents may have high hopes for beating the back-to-school rush each summer, but marketers still have time to evaluate and strengthen their campaigns to maximize the peak August shopping period, as it continues to surpass June and July across all back-to-school retail verticals. 5
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7 2) CONSUMER SPENDING HOW MUCH THEY RE SPENDING A Look-back on Back-to-School Spend Rakuten Marketing commerce data indicates that retailers experienced an 18% increase in year-over-year revenue from back-to-school shopping, with growth seen across channel strategies including: 12% increase in same-store affiliate orders. 45% increase in same-store paid search revenue. 15.3% increase in same-store display revenue. When asked how much they d spent on back-to-school shopping in 2015, surveyed parents responded with a median amount of $500, while $14.3% spent $750 or more. CONSUMER SPEND IN 2015 $0 $249 $250 $499 $500 $749 $750 $999 $
8 Preparing for 2016 This year, it s expected that e-commerce retail sales for the back-to-school season will climb to $65.42 billion in the U.S., a 2.6% year-over-year increase, equating to an additional $8.68 billion more in revenue generated from back to school. However, surveyed parents don t anticipate spending more this year than last. Among those that do plan to spend more, 85% of this group is comprised of parents with more than one child in either middle or high school not surprising as costs tend to increase as children reach higher grades. Of those parents with only one child, nearly 56% expect their back-to-school spending to remain unchanged or to be less this year. While the majority of parents surveyed indicated that their back-to-school spending will remain flat or decline, digital marketers were more bullish. Nearly 54% of surveyed advertisers revealed that they believe consumer spending will increase year over year, with 12% believing consumers will spend considerably more. Market predictions and advertisers both agree spending will increase in 2016 and consumers have indicated it won t. So, why the disconnect? Here are some possible scenarios: Wishful thinking: Everybody wants to spend less, and perhaps this desire to save money has revealed itself as a plan to do so. But when the time comes, parents may end up opening their wallets to the latest trends and ever-growing lists of required school materials. Market estimates & advertisers are wrong: Being an election year, loaded with a fair amount of uncertainty and discomfort, perhaps shoppers this year will, in fact, be more cost-conscious with their back-to-school shopping, and advertiser predictions preceded the actualization of potential political and socio-economic uncertainties afoot. Everyone is right and wrong at the same time: It may be the case that the majority of consumers shopping for back to school will spend less; however, the minority who spend more may overspend enough to still drive a year-over-year increase in revenue for retailers. 8
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10 3) CONSUMER PURCHASES WHAT THEY RE BUYING A Look-back on What Consumers Bought In 2015, more consumers (55%) planned to purchase apparel than any other back-to-school product category, outnumbering even books and supplies, which captured 50% of the consumer vote. When we looked at Rakuten Marketing display data for Q3 2015, we found that same-store client revenue for apparel increased 27%, while that of consumer electronics increased 52%. Additionally, the average increase in same-store client revenue increased 27% across client verticals relevant to back to school, indicating that, while apparel still represents a large portion of back-to-school shopping, other verticals are gaining share of wallet. Preparing for 2016 This year, consumers intend to spend 43% of their overall back-to-school budget on apparel, with books and supplies accounting for 26%. Those surveyed allocated only 13% of their budget to consumer electronics; however, there are fewer items to purchase in this category. Although a lower percentage than apparel and supplies, consumer electronics is still a fairly sizable portion of parents budgets. We expect to see increases in budget allocation for the consumer electronics category this year, while we predict apparel and supplies will decrease their BUDGET ALLOCATION Health & Beauty 9 % Transportation 7 % Books/ Supplies 26 % Apparel & Accessories 43 % Purchase by Vertical Other 2 % Consumer Electronics 13 % percentage of share of wallet. 10
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12 4) PURCHASE INFLUENCERS WHY THEY RE PURCHASING Price vs. Brand Armed with their shopping lists in hand, parents diligently cross off item after item to amass a giant collection of back-to-school supplies each year. So, it wasn t surprising that 45% of surveyed parents ranked required for school as the leading influence of their purchase decisions. We also noticed shoppers are price conscious at this time of the year, especially as the cost of shopping for multiple schoolchildren adds up, but marketing campaigns aren t fully in sync with conservative spending. Parents rated price as five-times more impactful on their purchase decisions than brand names. Nearly half (48%) of advertisers responded that they would position their back-to-school promotions based on either price or brand. 30% of advertisers indicated they will lead by promoting brands, rather than competing on price. INFLUENCERS CONSUMER INFLUENCERS Top 5 Influencers ADVERTISER POSITIONING Top 5 Strategies 1. Required for School 1. Brand 2. Price 2. Price 3. Convenience 3. Customer Experience 4. Brand 4. Trendy 5. Customer Experience 5. Convenience Effective Ad Channels The theme of contrasts continues, as we examine how advertisers expect to reach consumers with digital advertising. In our survey, consumers ranked ad formats by the level of influence each have on purchase behavior. More than half of consumer respondents ranked social ads as one of the 12
13 least effective formats for influencing purchase decisions. Yet advertisers surveyed emphatically declared that they intend to spend more on social advertising (19.3% total) than any other primary digital advertising channel. Is the consumer accurately assessing their primary influencers, and are advertisers making the right decisions to go big on social this year? Rakuten Marketing commerce data demonstrates that social ads are highly effective in influencing purchase decisions, more so than traditional display and search ads. Social generated a 56% yearover-year increase in conversions in Q One possible reason consumers rank social ad influence so low could be due to the likelihood that these native ad formats are upper-funnel touchpoints, as opposed to the last touch point prior to purchase. Regardless of the reason, as brands continue to see strong returns from social strategies, they will continue to invest in this quickly evolving channel. MOST IMPORTANT PURCHASE INFLUENCERS 1. Partner 2. Friend 3. Coupon 4. Television 5. Online Ad 6. Social Media Ad 7. Retailer 8. Social Influencer 9. Search 5) ACROSS SCREENS WHERE THEY RE SHOPPING In August 2015, IBM reported that 75% of e-commerce sales were driven by conversions on desktop and 25% on mobile devices. Although mobile conversions accounted for only a quarter of the total, mobile represented 49% of back-to-school e-commerce traffic, proving (once again) that mobile is a critical piece of the shopping experience and influential on the path to purchase. Surveyed parents further validated mobile s role as 59% revealed that they plan to use mobile devices to shop or browse for back-to-school items, while a majority (85%) noted they will continue to purchase 13
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15 in store. There is a disparity between how moms and dads intend to shop, and among surveyed parents, men were 1.2x more likely to make a back-to-school purchase on a mobile device than women. While desktop continues to dominate in converting back-to-school shoppers, mobile s influence in driving consumers to purchase is without question and cannot be ignored. Because such a high percentage of back-to-school shoppers plan to purchase in store, yet browse online, consumer webrooming can become a significant challenge for marketers. When we asked advertisers how they planned to address the in-store webrooming phenomenon, 33% indicated they would employ price matching strategies, followed by 28% planning to run limited-time in-store promotions. Advertisers should consider implementing strong online-to-offline (O2O) strategies and hyperlocal targeting to reach consumers when in close proximity to their stores to have maximum influence on target audiences as they are making important purchase decisions. 6) 2016 PREDICTIONS Geopolitical Uncertainty Not Enough to Slow Back-to-School Spending With the impact of the U.S. presidential race and Brexit on the global economy, consumers are going to be cautious maybe even a little scared during this period of upheaval. Despite uncertainty and trepidation among U.S. consumers, we believe that spending will increase as predicted for back to school. In fact, research conducted by the National Bureau of Economic Research in 2015 found that elections have historically had little impact on how consumers actually spend their money. Social Advertising Will Impact Back-to-School Shopping More Than Ever Consumers are now spending more than 43 minutes on social networks each day, exclusive of video. When you include YouTube in this mix, consumers are spending one of every four minutes of their online time on social media. Additionally, as social messaging apps, such as Facebook messenger, 15
16 allow consumers to interact directly with a brand and make in-app purchases, marketers will be able to create one-to-one advertising experiences with consumers in exciting new ways. With Facebook messenger recently topping 1 billion users, we expect Facebook to move quickly on monetizing the app through advertisements. Online-to-Offline Strategies Will Be Critical Not only will social media and content influencers dominate the back-to-school market trends, O2O purchasing will become a forerunner. As previously stated, 59% of surveyed parents plan to use mobile devices to shop or browse for back-to-school items, while a majority (85%) will continue to purchase in-store. Advertisers need to revolutionize their O2O options to cater to the on-the-go consumer that engages with these influencers across devices and channels, tying together strategies for measurement and insight into O2O behaviors. Consumers will continue to make back-to-school purchases in store and advertisers need to know how their digital strategies play a role in this path to purchase. Mobile Conversions Will Increase Vastly improved cross-device consumer identification and targeting combined with better visibility into the consumer journey resulting from advanced attribution and analytics capabilities are allowing marketers to look more holistically at their marketing budgets and the touchpoints in the consumer journey that lead to conversions. Armed with this more cohesive and complete view of consumers, advertisers will understand and invest in reaching targeted audiences across screens, specifically on mobile devices, which should result in an increase in spend on mobile advertising in Stay tuned for our Digital Insights post back-to-school analysis where we will issue a report card assessing how accurate our predictions were for this critical shopping season. 16
17 SOURCES: Back-to-School Shoppers Slowly Tackling Lists This Summer, Aug 19, Retail ecommerce back-to-school season sales (Billions), emarketer, Jun 2016 Market Track, Shopper Insight Survey: Back-to-School 2015, Sept 9, 2015 IBM Digital Analytics benchmark as cited in press release, Sept 2, 2015 Government Economic Policy, Sentiments, and Consumption, Atif Mian, Amir Sufi, & Nasim Khoshkhou, NBER Working Paper No , July 2015, Social networks: time spent per day (Minutes), emarketer, Apr CONTACT US Rakuten Marketing
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