Part of going back-to-school (B2S) means getting the high-tech gear and accessories that are needed for the classroom, dorm, and downtime. But over the past few years, we're seeing shifts in the market. People are more than ever shopping at big boxes and online. And new types of devices are seeing growth while others are on the decline.
How are retailers coping with the changing ways?
It's about finding out what new categories appeal to students, and how to capitalize on them.
Back to B2S 2013
Ernst & Young projected at the end of July 2013 that the B2S season would see 4% spending growth over the year prior. NPD Canada reports that the overall growth figure was actually 2%, and there was a slight decline in revenue sales.
In the IT sector, notebooks represented 39% of the total revenue, though revenue was still down by 6%. Tablets, which many believe to be a bright spot this year, represented 18% of total revenue, and enjoyed 16% revenue growth. Unit sales were also up by a healthy 40%.
Desktop sales were, not surprisingly, down 3% in revenue and 7% in units. But it's important to note, says Darrel Ryce, Director, Technology & Entertainment at NPD Canada, that desktops represented 7% of revenues from IT products, and 65% of PC products.
Other typical B2S product categories performed relatively well, including printers, printing consumables, memory, hard drives, and networking devices. Tablet and notebook sales may be down, but the sale of accessories for them is on the rise.
While no one with whom we spoke was expecting astronomical growth in B2S sales for the 2014 season, all were optimistic that figures would at least be in line with 2013.
Darrel Ryce, Director, Technology & Entertainment, NPD Canada: "Manufacturers and retailers should...always be prepared with supplementary ways of boosting their sales."
Ashley Colette
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"I expect that it's going to be stronger than previous years, [though] not mind-blowingly so," says Kyle Duszynski, Vice President, Brand Management at Curve Distribution, a distributor in Calgary, AB. "We are," he adds using careful wording, "cautiously optimistic that we're going to see some growth over last year."
David Chung, Product Manager for Laptop Bags & Accessories at Targus Canada, agrees that numbers will likely be flat, or show a slight increase but "nothing dramatic." Mini Saluja, Director of Product Marketing, Toshiba of Canada Ltd., also anticipates a steady market this year.
"B2S is our most wonderful time of the year," muses Pete Gibel, Vice President, Divisional Merchandising, Staples Canada. "We have B2S, then Christmas, which is like another Christmas. But B2S is the biggest.
"It really comes down to categories," he continues. "There will be specific categories that will be up, and those are the ones we have to be really good at. And the ones that are down, you can't dedicate as much assortment as before to them."
Pete Gibel, Vice President, Divisional Merchandising, Staples Canada: "We have to solve students' pain points. [Our] category managers try to get into the minds of students. If they have kids, they talk to them and watch how they're using products."
A Shift in Computing
When we think B2S, the product that immediately comes to mind, especially for high school and post-secondary students, is the computer. But the numbers still seem relatively grim for this sector. IDC forecasts that worldwide PC shipments will fall by 6% this year.
Even the tablet market is being usurped by more compact devices: that burgeoning category we call "phablets," characterized by smartphone/tablet hybrids with large screens (5" and up), and cellular wireless capabilities. In the past year, the phablet share of smartphone shipments has more than doubled, from 4.3% in the first quarter of 2013 to 10.5% in the first quarter of this year, representing 30.1 million units shipped.
Tom Mainelli, Program Vice President, Devices and Displays at IDC, points to the rise of phablets as "causing many people to second-guess tablet purchases as the larger screens on these phones are often adequate for tasks once reserved for tablets."
IDC has lowered its worldwide forecast for the tablet category this year to 245 million units, down from 260.9 million, representing 12.1% year-over-year growth. To put this in perspective, growth in the category last year was 51.8%.
The research firm attributes this to maturation as well: consumers have purchased high-cost tablets already, and are holding on to them longer than expected. And when they do upgrade, they are likely passing on the old one to a friend or family member, or, it's worth adding, selling it used.
Convertibles like Toshiba's Satellite P50W that can morph into tablet, stand, tent, or clamshell mode are helping to spark interest among the student crowd that's looking for a versatile but capable all-in-one device.
There's a silver lining. IDC expects that the market will rebound, and shift back to those larger-screen devices. In fact, Jitesh Ubrani, Research Analyst, Worldwide Quarterly Tablet Tracker at IDC, says that the share for Windows-based devices is expected to double between now and 2018."
With desktops, while the increased need for mobility is tipping the scale in favour of the small form factors, The NPD Group's recent Battle of the Screens study says Canadians aged 18-24 are reporting an increased preference for desktops. The top reason is gaming, an important leisure activity among students, but also for household productivity, which was up 8%, and listening to music, managing and editing photos, and work productivity, all up 7%. All of these tasks make it critical to have a reliable and feature-rich computer in the home for students who are still residing there. And with an increased interest in desktops comes the opportunity to bolster peripheral device sales, like high-speed routers.
Retailers and manufacturers need to be careful, though. The average family only owns one desktop computer, and 34% of Canadians say they keep that PC for more than five years. Brand loyalty is absent in this category, which means even when the upgrade cycle arrives, the purchase may not necessarily go into the same pocket.
At $59.99, the Skullcandy FIX in-ear headphones (distributed by Hitfar) should hit a sweet spot for students.
The phasing out of Windows XP is also pushing a new upgrade cycle among PC users. And interesting devices like lightweight, convertible computers, the MacBook Air, and Chromebooks, may help fuel interest among the youth crowd.
Saluja feels that the convertible or detachable market will play a big role this year for students. "They're seeing the benefit in ‘I have my tablet, but when I need a keyboard, and need to do work, I have something that can do both.'" Toshiba has responded with more such models in its lineup this year, including entry, mid, and high-level. The sweet spot will average around $699-$799, says Saluja. "People are willing to pay a bit more when it isn't just a tablet." And, Saluja adds, some are willing to pay more for a device that's thinner and lighter, valuing that over other features, like an optical drive. Educational institutions are also finding value in purchasing Chromebooks for in-class use, because they're easy for IT departments to manage since everything resides in the cloud.
"Manufacturers and retailers should remain conscious of how profitable these devices are and should always be prepared with supplementary ways of boosting their sales," says Ryce.
Supplementary Sales
What can make up those supplementary sales? There are categories emerging among the student crowd that may help vendors and retailers cope with the shifting computing market.
"We have to solve students' pain points," says Gibel. "[Our] category managers try to get into the minds of students. If they have kids, they talk to them and watch how they're using products." Gibel is banking on categories like tablets, mobile accessories, backpacks, and headphones to perform well at Staples.
At under $200 and available unlocked, without a contract, the Motorola E and G may attract the attention of parents looking for a first phone for their kids, and students on a budget.
NPD Canada's Ryce notes that during last year's B2S season, headphone revenue grew 7%. And it's expected to grow this year, too. Not only are kids using headphones to relax during off hours or the commute to school, but they can also help tune out noise in study hall, or a small dorm room.
Apple's recent acquisition of Beats headphones, just in time for the B2S season, may have some vendors squirming about the intensified competition. But Duszynski feels that not every student has $200 to spend on a pair of headphones. On the other hand, Bobby Revai, President of NVU Electronics Inc., a distributor in Toronto, ON, on other hand, believes that higher-priced headphones aren't entirely off the table: parents seem willing to spend more money on their kids. "They will buy a $300 pair of headphones for their 14-year-old."
While the headphone craze of 2010/11/12 is finally starting to level off, Duszynski assures that B2S has been, and will be, strong for this category for Curve, specifically for the Wicked Audio line the company distributes. "It's a youth brand that fits in perfectly with the 14-25 crowd."
Curve will be offering buy one, get one promotions with some retail partners. The company's research shows that most consumers own more than one pair: earbuds for working out and over ear for commuting and at-home listening, for example. They're also being sold as a fashion play. "We want [students] to have a colour for every day of the week and a style for every use."
Wayne Mayall, Director, Jam Industries-Erikson Consumer-American Audio and Video: "The quality of audio you get [with portable Bluetooth] compared to where the market started at $179 and $199 is pretty appealing to students, and that's a big part of our customer base."
Wayne Mayall, Director, Jam Industries-Erikson Consumer-American Audio and Video, which distributes headphone lines like Harman and AKG, agrees that it's a tougher market for headphones, but that the business remains healthy. "Back in 2011 and 2012, when headphones were all the hype, there were a lot of brands in the space and sales were getting spread out. But now, the business is still growing, but it's just with the audio brands."
Most of Erikson's brands are step-ups, says Mayall. In terms of volume, its successes are typically in the $99-$149 price range.
Hitfar Concepts Ltd., a distributor in Burnaby, BC, will be focusing in this category on products like the Skullcandy FIX in-ear headphones that are designed to fit securely within the ear canal, and come with a three-button mic for controlling an iOS device. And at $59.99, the price should hit a sweet spot for students.
Portable audio device accessories were up 17% last year, reports Ryce, while portable speakers were up 6%. Both categories are expected to perform well this season, particularly Bluetooth wireless speakers.
Mayall says Bluetooth audio has been going strong for Erikson since the middle of last year, and continues to get stronger. He predicts the sweet spot among students will be in the $99 range, citing JBL's Flip, which has been well received in both Canada and the U.S. at that price point. "The quality of audio you get compared to where the market started at $179 and $199 is pretty appealing to students, and that's a big part of our customer base."
"We saw a rise in Bluetooth speakers last year," confirms Revai. "Students were eating them up." But, he adds, the market is so saturated now, that it will be that much harder to get a hold of the consumers' dollars.
Portable chargers are expected to be hot this B2s season, and companies like Powerocks (distributed by Hitfar) are aiming to stand out with devices like the 6,000 mAh Rose Stone charge pack ($59.99), which has dual USBs for charging up to two 2.1 Amp devices at once should they run out of juice.
Smartphones are essential for secondary and post-secondary students. Now that the new Wireless Code limits contracts to two years, many students may be ripe for an upgrade. Plus hot new and affordable devices like the Moto E and 4G LTE Moto G may convince parents to buy younger students their first smartphone. But for most, the opportunities will lie on the accessories side. The challenge here will be to keep an eye on new devices, especially from Apple and Samsung, and changes in form factor and design.
Portable chargers aren't a new category, but they're seeing strong growth.
"Young people are the heaviest users [of mobile devices]," says Revai. "They are the ones who are going to need it the most."
Duszynski, agrees. "They're on-the-go, and may not be able to get to a charger for quite an extended period of time." He feels this category is still far from reaching its potential. "Consumer awareness is just really starting to take off."
Mayall expects a decent growth curve for the category, noting that Erikson just finalized an exclusive relationship with myCharge for its line of portable backup batteries and chargers.
Powerocks (distributed by Hitfar) is gaining a lot of attention on the portable charging side with models like the Rose Stone ($59.99), a 6,000 mAh chargepack that has dual 2.1 Amp USB ports for charging up to two tablets (or smartphones) simultaneously; and the Flash Magicstick ($49.99), which resembles a tube of lipstick, and combines a 3,000 mAh portable charger and LED flashlight in one. It comes in five colours, and can recharge a device 1-2 times. Each comes with a felt carrying bag so students can neatly carry them and the required cables in their backpacks.
At $99, JBL's Flip offers stellar audio quality, and fits into a sweet spot of price for students, who are gobbling up Bluetooth speakers like hotcakes.
Another burgeoning area is video-related accessories. Students are primary adopters of social media, and the driving force behind trends like selfies and Instagram videos, which means devices that allow for 360-degree, panorama, and time-lapse videos, and even selfie sticks, will strike a chord. While a lot of the new product in this category will launch too late for B2S, the category is perfectly-suited to the young, student crowd.
Bags and cases are needed by students of all ages, and often upgraded. Targus Canada is anticipating healthy sales for its laptop backpacks and tablet cases. David Chung, Product Manager for Laptop Cases & Accessories, says the company is trying to focus on more entry-level price points. For example, it has launched, for the first time, a $39.99 backpack, the Strata. "We've never done that before," he says, "but the economy is not as wealthy as before. This is to capture the younger audience." Targus' typical average selling price is around $59.99-$69.99.
While Chung says $100 backpacks are still selling, it's no longer the sweet spot. "Price will be key."
The company, traditionally known for functional, basic black cases, is also looking to ramp up its focus on fashion. The Strata will come in grey, purple, and blue.
Targus is also offering cases for Chromebooks, including one that allows for working on the computer without having to remove it.
For the first time, Targus is launching a backpack, the Strata, at a $40 price point to appeal to students, along with new colours: it will come in grey, purple, and blue.
"We're expanding our offering to some newer devices," says Philip Palmer, Product Manager, Tablet Cases & Accessories at Targus Canada. "In the past, we were really focused on iPad and iPad mini. Now we signed on to the Samsung mobile accessory partnership program, and we'll have our first range of cases launching in Canada in July/August, right in the B2S timeframe." There will also be a case for the Microsoft Surface 2, and a universal tablet case.
Staples is appealing to students' eco-sensibilities by partnering with the Me To We charitable initiative to offer a diverse line of products for which a portion of the purchase goes toward various initiatives that help children in need. For example, buy a Me To We water bottle, visit a Website and enter your special purchase code, and you'll see where in the world your purchase helped the organization to purify water. There are some tech accessories in the mix, including cases for the iPhone and tablets.
"I think it's going to be a fabulous line," says Gibel. "Kids care about eco-friendliness."
Me To We accessories, including tablet and smartphone cases, are available at Staples, with proceeds that go towards kids in need. Visit trackyourimpact.com, enter a unique product code, and you can see exactly where your purchase helped.
What About Wearables?
The jury is still out on wearables. Product delays lead many to believe that the category is more likely to take off around Christmas. But there are models in market now that may catch the eyes of students, from a productivity and health-consciousness perspective.
"We're beefing up our assortment," says Gibel. "We're doing a reflow and will have a dedicated four-foot section for wearables. We think it's going to be a good category."
Curve signed on to distribute the LifeTrak line of wearables, and Duszynski says this category, along with portable power, are two big focuses for the company. While some of the more sophisticated wearables can run upwards of $200-$300, there are lots of options on the fitness side that sell for well under $100.
"I think that's within reach for a lot of people," he says.
"The post-secondary market is important," he adds. "They are early adopters, and jump on new technology as it comes out. They are willing to spend on their electronics."
Off-beat products like the Veho VMS-005-LCD 1,200x standalone microscope can offer unique opportunities for independents. Science students can use it along with a smartphone to view subject closeups; there's a time-lapse feature for taking pics at different intervals, or connect it to a TV or projector for in-class use.
See You Online
So we have some insight on what students will be buying this season. But there's still the issue of where they'll be buying it.
The elephant in the room is the World Wide Web, which has limitless inventory, hot pricing, and in most cases, next-day delivery. It's the Catch 22 of retail: refuse to participate, and you miss the lucrative boat. Play in that space, and it hurts the bricks-and-mortar model.
The ideal scenario is for every retailer to adopt some form of multi- or omni-channel selling strategy, with an online store component, or at least an option that lets the customer order what he wants in store and have it shipped next day.
NVU Electronics has drop ship programs with some of its major resellers, including Best Buy, Future Shop, and Walmart.
"All of [the big box stores] offer it now," says Revai, "whether it's Best Buy, Future Shop, Staples, Toys R Us, Amazon, et cetera."
In the 2014 Internet Retailer Top 500 Guide for the U.S. market, Staples ranked third behind only Amazon and Apple and ahead of Walmart, thanks to its strength in both consumer and business sales, the latter of which also includes teachers and principals. Not surprisingly, Gibel predicts a double-digit increase in online sales this B2S season.
While they're on the higher end of the price scale ($329-$699), Denon's HEOS compact wireless speakers connect via Wi-Fi versus Bluetooth, which means they can stream tunes from other devices on the home network (or cloud services) while you control playback from a smartphone.
It's hard to compete with the nationals in this game. But that doesn't mean smaller chains and independents should bow out of B2B entirely. Seek out interesting products that can't be found anywhere else.
Revai, for example, points to the Veho VMS-005-LCD, a 1,200x standalone microscope NVU offers to independents; it isn't sold in big box retail. "The independents are focusing on unique items that they don't have to price match against the big boxes," he says. "There's a lot of margin to be made for the reseller, who doesn't have to compete with a big box selling for rock bottom pricing." Revai says dealers have responded positively to this strategy.
Since the wearables market is still new, there's an opportunity for the independent to capitalize on that category. "You need to explain to people what the products are all about, and the features and benefits," says Duszynski. "You don't get that in a mass environment. For the smaller CE guys and specialty stores, that's their advantage."
Mayall adds that smaller retailers can be more nimble, and SKU up and SKU down in the middle of the year a lot more easily than a national retailer might be able to, and approach seasons like B2S by adding SKU selections. "That will attract more customers than the alternative of not doing it," he advises.
Specialization can also help. Mayall has seen several new retailers over the past few years that serve as destinations for certain categories. With a headphones retailer, for example, customers can hear products from $99 up to $3,000, and it's always in stock. "[Retailers are] seeing a lot of success out of that."
Accessories like Belkin's Qode Thin Type keyboard case for the iPad Air allows students to maximize tablets they already own for school productivity tasks.
Outlook: Good
The same categories that showed growth last B2S season are expected to continue, while some new ones, like video accessories, wearables, and cases for the latest smartphones and tablets, will provide additional opportunities. And while no one in the industry is anticipating a huge rise in sales, everyone is confident that the numbers won't be sliding downward either.
"It's just that instead of using wall chargers and car chargers, [people are] using portable power," says Duszynski. "Instead of using laptops, they're using tablets. It's just a shift. Certain categories are losing at the expense of others. [But] people are using devices more than ever."
David Chung, Product Manager, Laptop Bags & Accessories, Targus Canada: "...The economy is not as wealthy as before. We're trying to launch something slightly below our average selling price."
Want to know more about how the Canadian parent/student shops? Check out the next page!
How Does the Canadian Parent/Student Shop?
There are 5.3 million families with kids in Canada, according to Google Canada's 2013 Back-to-School Insights. The average Canadian parent spends $488 during the season, says the Canadian Council of Social Development (July 2013), broken down by $325 in stores and $163 online.
Whether parents and students are actually shopping online or not, they are certainly using the Web as an integral part of the experience. A study conducted by VISA and Pollara in July of last year with 1,400 Canadians found that 79% look for deals online. In the U.S., Deloitte says that 66% of students use their phones to get pricing information, download discounts, coupons, or sale information (60%), or to get the store location (55%).
Naturally, the number of B2S shoppers going online is on the rise. Stateside, Deloitte pegs the 2013 numbers at 36%, which was up from just 24% in 2012. Online moved up 16 points to become the third most popular shopping destination for B2S.
If you think the kids themselves aren't armed with smartphones and scouring for deals, think again. comScore (March 2013) reports that 82% of kids aged 13-17 have smartphones, 88% of kids aged 18-24, and 67% of those 13 and older.
In terms of frequency, the VISA/Pollara study revealed that 58% of B2S shoppers go shopping at least three times, and 87% will showroom (the act of visiting a bricks-and-mortar store to check out a product, then buying it somewhere else for less online) at least once.
This year, cross-border shopping will be far less of an issue than in year's prior when the Canadian dollar was closer to par.
Google Insights for Search (July 2013) indicates that despite what many may think, the search for B2S gear continues long after school starts, though it is expectedly highest in August. So there's plenty of time to jump on board and capture sales.
The JBL Syncros E-40 BT Bluetooth headphones ($119.99) have a built-in mic for hands-free calling, plus ShareMe technology that allows the wearer to share music wirelessly with another ShareMe-equipped headphone.