Headline Verdana Bold 2019 Back-to-School Shopping Getting ready for the first day of school July 20192 Contents Key findings 3 Back-to-school market size 4 Consumer spending trends 9 Back-to-school timing 19 Digital engagement 22 Retail type and formats 273 Back-to-school spend expected to remain relatively flat (+1.8%), as online spend increases Total back-to-school spending is expected to reach $27.8B or $519 per student, up slightly from $510 in 2018 The electronic gadgets category is expected to grow by $800M (+29% over 2018), while the computers and hardware category is expected to decline by $600M (-16% below last year) Households plan to spend 56% of their budget in-store and 29% online with the remaining 15% up for grabs with undecided shoppers; online has grown from 22% to 29% since 2016 Compared to last year, electronic gadgets represent the only category in which online sales are expected to grow at the expense of in-store shopping (an increase in nearly 20 percentage points) Mobile use is expected to increase this year (+7 percentage points in planned use), while desktops/laptops, and social are expected to decline. Newer tech (e.g., voice assisted, digital reality) has yet to gain traction for B2S Consumers are clear: Price, product, and convenience matter most Fundamentals matter in driving back-to-school purchases: Price is likely to be the predominant driver with sales/discounts (69%) and competitive prices (57%) as the top attributes driving purchase decisions Mass merchants retain their spot as the number one shopping location (88% plan to visit), with online only, dollar stores, specialty retailers, and off-price rounding out the top five 31% of consumers plan to donate additional school supplies for those in need, with a projected value of $51 Similar to 2018, higher-income shoppers are more likely to visit department stores, home electronics, and specialty apparel, while lower-income shoppers are more likely to visit price-based formats (e.g., mass market, dollar stores) Back-to-school shopping peaks mid-summer 60% of shoppers are likely to start shopping approximately 4-6 weeks before school starts; however, these shoppers expect to spend less than very early or late starters Shopping is expected to peak in late July and early August, accounting for 62%, or 17.3B of all spending Deloittes 2019 back-to-school survey: key findings4 Back-to-school market size5 $519 average back-to-school spend per student (+1.8% YoY growth from $510 in 2018) Back-to-school (B2S)* shopping season spend, which accounts for 50%+ of annual school-related purchases, expected to remain relatively flat compared with last year 29 million households* 54 million children* $27.8 billion in projected spending # 50%+ annual school-related spending during B2S season * Back-to-school shopping season includes school-related shopping from July to September, ahead of the Fall 2019 academic calendar * Number of households with school-going (K-12 grades) children in the US Source: US Current Population Survey 2018 * Number of children enrolled in K-12 grades in the US Source: US Current Population Survey 2018 # Percentage of childs annual school-related products that will likely be purchased during back-to-school shopping season Source: Deloitte survey Deloitte calculations on back-to-school market spend ($27.8 billion) Source: Deloitte survey and US Current Population Survey 20186 Clothing and accessories category is expected to maintain the majority share of spend; the largest increase is expected in electronic gadgets like mobile phones and wearables Estimated market spend by category - 2019 Source: Deloitte calculations on back-to-school market spend ($27.8 billion) Source: Deloitte survey and US Current Population Survey 2018 Note: Sample size (N) = 1,200 *Electronic gadgets include cell phones/smart phones, tablet/e-reader, and wearable devices, voice and mobile data plans, digital subscription School supplies $6.1B Clothing and accessories $15.0B $27.8B est. market size Computers and hardware $3.1B Electronic gadgets* $3.6B7 Consistent with last year, clothing and accessories has high expected demand and spend; the largest spend per category is expected from electronic gadgets Source: Deloitte survey Note: Sample size (N) = 1,200 *Electronic gadgets include cell phones/smart phones, tablet/e-reader, and wearable devices, voice and mobile data plans, digital subscription Average spend includes only respondents who will purchase the above mentioned category or item Category Share of total B2S spend* Average category spend % of shoppers purchasing Key category findings Clothing and accessories 54% $290 97% Represents the majority of back-to-school shopping with both high demand and planned category spend School supplies 22% $117 98% While almost all shoppers expect to purchase supplies, it is the smallest average spend Electronic gadgets 13% $305 22% Despite lower demand, this category has the highest average spend for those who purchase Computers and hardware 11% $286 20% Fewer shoppers are planning to shop this category, and those who do are spending less than in previous years 2019 B2S: Planned spend by category8 Back-to-school shoppers planned spend shows a shift from computers and hardware to electronics gadgets from 2018 to 2019 Source: Deloitte calculations on back-to-school market spend ($27.8 billion) Source: Deloitte survey and US Current Population Survey 2018 Note: Sample size (N) = 1,200 +2.6 percentage point increase increase in number of consumers planning to purchase wearable technology -2.4 percentage point decrease decrease in number of consumers planning to purchase computers +$41 increase in average dollar amount spent on electronic gadgets spend Electronic gadgets: increase in planned spending Computers and hardware: decrease in planned spending -$13 decline in average dollar amount spent on computers and hardware spend +$800M increase (+29% over 2018) in expected spend on electronic gadgets in 2019 -$600M decrease (-16% decline from 2018) in expected spend on computers and hardware in 20199 Consumer spending trends10 Price is the most important consideration when choosing where to shop for B2S season, followed closely by product and convenience 7% 14% 25% 31% 41% 46% 40% 47% 48% 27% 57% 69% Retailer recommended by my child/childrens school Retailer reputation Shopping experience Everything under one-roof/one-website Free shipping Store location Carries brands/styles I want to purchase Product quality Carries items on my school shopping list Price matching Competitive prices Sales/price discounts Most important considerations when selecting a retailer (Top 3 in each theme # ) Question: “What are the most important considerations when selecting a retailer for back-to-school shopping?”; #- Multi-response question Sample size (N) = 1,200 Product (81%*) Price (88%*) Convenience (80%*) Experience/Brand (38%*) * - % of shoppers who selected at least one option in each theme11 Expectations of retailers Lower prices, more deals, and coupons Bundled items and cheaper options Sales tax holidays Inventory to match local school lists Wider variety of styles and sizes Keep items in-stock all summer Everything in one section Provide school-specific and class- specific lists and bundles Easy checkouts to avoid crowded lines Expectations of schools Accept cheaper products/off-brand Donation drive to support underprivileged students Provide a specific shopping list early in the process Help parents avoid returns and waste Work with retailers to create pre- configured kits Sell products directly from schools or parent-teacher organization Fundamentals with B2S purchase behavior: Price, product, and convenience are analogous to reading, writing, and arithmetic Convenience Price Product “If I have to search more than 10 seconds I move on to another store” “Have kits already put together either at the store or at the school, I just want to walk up and buy it” “Offer good pricing and clear ads and discounts” Sample size (N) = 1,20012 Parents planning to buy pre-configured school kits Plan to buy 21% Do not plan to buy 32% School or PTA do not offer kits 47% While consumers expressed a desire for more convenient bundles for back-to-school shopping, only one-fifth of shoppers plan to buy “pre-configured” kits Plan to take advantage of pre-configured “kits” of school supplies offered by childs school or parent-teacher association 32% 30% 29% 21% 2016 2017 2018 2019 Question: “What are the most important considerations when selecting a retailer for back-to-school shopping?”; #- Multi-response question Note: Sample size (N) = 1,200 2019 plan for pre-configured school kits13 Most back-to-school spending will continue to occur in-store; more shopping is likely to shift online from those who were undecided about channel 56% 57% 57% 56% 22% 21% 23% 29% 22% 22% 20% 15% 2016 2017 2018 2019 Instore Online Undecided (In-store or Online) B2S spend share by channel ? $15.7 Billion $8.1 Billion $4.0 Billion In-store Online Undecided Contribution to total B2S spend Question “Please indicate the % of the budgeted amount you expect to spend online or in-store or undecided” Note: Sample size (N) = 1,20014 Online shopping is expected to see its largest increases in the electronic gadgets category, while in-store shopping continues to dominate school supplies and clothing 37% 41% 62% 62% 50% 45% 23% 23% 13% 14% 15% 15% Electronic gadgets Computers and hardware School supplies Clothing and accessories In-Store Online Undecided (in-store or online) Key findings Compared to 2018, electronic gadgets was the only category where online sales are expected to grow at the expense of in- store sales For all other categories, online sales will grow as a result of declining undecided spend *Electronic gadgets include cell phones/smart phones, tablet/e-reader, and wearable devices, voice and mobile data plans, digital subscription Sample size for each category - Only respondents who will purchase at least one item from the specific category B2S spend by category and channel15 63% 58% 57% 45% 42% Sales/price discounts Free shipping Competitive prices Product quality Carries items on my school shopping list Sales and discounts top the list regardless of channel; online shoppers note free shipping and in-store shoppers view store location as top considerations Predominantly online shoppers 70% 60% 53% 53% 49% Sales/price discounts Competitive prices Carries items on my school shopping list Store location Product quality Predominantly in-store shoppers Predominantly Online shoppers With 51% or more of B2S spend via online channel (n=185); Predominantly Instore shoppers With 51% or more of B2S spend via instore channel (n=742) Question: “What are the most important considerations when selecting a retailer for back-to-school shopping?”; #- Multi-response question, top 5 shown Top considerations when selecting a retailer for B2S shopping #16 23% 31% 34% 46% 31% 77% 69% 66% 54% 69% Clothing and accessories Electronic gadgets School supplies Computers and hardware Overall No/slight child(ren) influence Moderate/high child(ren) influence Children will likely influence approximately $20B in back-to-school spend (70% of total), with the largest influence coming from clothing and accessories $11.5B $3.5B $2.5B $1.1B $4.0B $2.1B $19.7B $8.1B Extent of childs influence on parents back-to-school shopping Source: Deloitte survey Note: Sample size (includes only respondents who will purchase the above mentioned category or item) *Total planned B2S spend by category that would be influenced by children $1.7B $1.4B Childs influence*17 Plans to donate 31% No plans to donate 69% It takes a village; 3 in 10 shoppers plan to donate additional school supplies for an average of $50 for those who donate $51* Average spend on school supplies for donations Question (1): “Are you planning to buy any additional school supplies to donate during back-to-school shopping?” (N=1,200) *Question (2): “How much are you likely to spend on the additional school supplies to donate?” - Sample size (includes only respondents who plan to donate) (n = 371) Plans to donate additional school supplies18 Compared to previous years, fewer shoppers are concerned about data breaches at their retail destinations Shopper concern about shopping at retailers that have experienced a data breach Source: Deloitte survey: “Please indicate your level of agreement with the following statements:” (% Agree or Somewhat Agree) Note: Sample size (N) = 1,200 52% 62% 55% 48% 45% 2015 2016 2017 2018 201919 Back-to-school timing20 B2S timing is expected to be consistent with last year, peaking in early August; 90% of shoppers plan to be active in late-July and early-August comprising 62% of all spend B2S shopping periods by traffic and total spend 10% 27% 58% 64% 36% 10% Earlier than July First 2 weeks in July Last 2 weeks in July First 2 weeks in August Last 2 weeks in August September $1.7B $3.8B $7.8B $9.5B $4.4B $0.6B $ B Total B2S spend (out of $27.8B) during noted period % of active B2S shoppers during noted period Question: “Out of $_ you plan to spend on back-to-school shopping, how much do you plan to spend during the following periods?” Note: Sample size (N) = 1,20021 7% 30% 30% 18% 7% 7% 2 weeks or less 4 weeks 6 weeks 8 weeks 10 weeks 12 weeks+ 60% of shoppers are likely to start shopping approximately 46 weeks before school starts; however, these shoppers expect to spend less than very early or late starters Share of back-to-school shoppers by lead time (Gap between start of shopping to start of school) Source: Deloitte survey * Percentages may not total 100% due to rounding Note: Sample size (N) = 1,200; “When are you likely to begin your B2S shopping?” $889 $443 $493 $500 $529 $605 Share of shoppers by lead time* Avg. B2S spend22 Digital engagement23 Mobile usage is expected to be on the rise, while other technologies may have reached a plateau in usage for back-to-school shopping 51% 49% 53% 60% 59% 57% 49% 42% 32% 27% 23% 19% 2016 2017 2018 2019 Smartphone for shopping Desktop/Laptop for shopping Social media sites to assist in shopping* B2S shoppers planning to use each technology platform (20162019) Source: Deloitte survey Note: Sample size for each year 2016 (N = 1,194), 2017 (N = 1,200), 2018 (N = 1,200), 2019 (N = 1200) *Sample size (shoppers who use at least one digital device) in each year 2016 (n = 951), 2017 (n = 978), 2018 (n = 985), 2019 (n=1,009)24 60% of back-to-school shoppers plan to use mobile during their shopping journey; mobile and desktop/laptop users are as likely to use their device to make a purchase Digital device/platform % of total shoppers Top 5 uses by device/platform # Mobile Desktop/ Laptop Socia