Summer is halfway over, and parents and students are already looking forward to — and shopping for — the next school year.
In fact, back-to-school spending is expected to reach an unparalleled $41.5 billion, up from $36.9 billion last year. Back-to-college spending is expected to hit $94 billion, about $20 billion more than last year’s record.
What or who is driving this record-breaking back-to-class shopping season? According to the latest consumer research from GfK and NRF, it’s Generation Alpha and Generation Z.
“There are two audiences we wanted to talk about today,” GfK Consumer Life Vice President Rachel Bonsignore says on this episode of Retail Gets Real. “One of them is actually still too young to be in our survey, but everyone is already starting to talk about them. And that’s Gen Alpha.”
Check out NRF's latest Insights and take a deep dive into the 2023 back-to-class season.
GfK roughly defines Generation A as those in the three-to-12 age group, she says: “Prime school age.”
Generation Z, meanwhile, is in the college-student age range. “They will soon be or already are coming into their own in terms of purchasing power,” she says.
Retailers can learn a lot about Gen A’s purchasing trends through their millennial parents, Bonsignore says. “Gen Alpha parents are more likely than average to be concerned about all sorts of financial issues that affect them personally. Things like housing costs, their credit rating, their level of debt, but also in larger matters that really affect the marketplace as a whole, like fears of recession or economic polarization.”
In contrast, Gen Z is less concerned than the average American about economic matters. “They’ve grown up in a really unstable couple of decades and they’re really used to a lot of these issues,” she says. “They don’t feel that they’re necessarily yet in the workforce or financially independent, so they don’t think it affects them as much.”
Generation Z is more concerned about societal issues like race relations, gender inequality and climate change rather than economic issues, Bonsignore says.
“It was just such a dramatic difference, how much lower than average college students were on economic concerns and how much higher than average they were on social worries,” she says about the latest research. “We know this is a socially conscious group, but the data was very striking in just the divergence of those things compared to your average American.”
Despite economic and social concerns, both groups are still shopping, even if that means cutting back or making trade-offs in certain purchase categories, Bonsignore says. “People still do really love to spend. They love to consume, especially at certain points in the year where their brains are trained to pay more attention to sales and promotions and products they’ve been keeping their eye on.”
Listen to the full episode to learn more about the back-to-class shopping season, including the lingering pandemic effect and the different motivations driving millennial and Gen Z shoppers. For more data and insights on this year’s back-to-class shopping season, check out NRF’s Back-to-School headquarters.
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Episode transcript, edited for clarity.
Bill Thorne: Welcome to Retail Gets Real where we hear from retail's most fascinating leaders about the industry that impacts everyone everywhere, every day. I'm Bill Thorne from the National Retail Federation. And on today's episode we're going to be talking with Rachel Bonsignore. She's the Vice President of GfK Consumer Life at the research firm, GfK. We're going to talk to Rachel about a new report from GfK and NRF about what's driving back to school shopping this season, how parents and younger consumers are shopping, and how consumer behavior is evolving. My colleague Katherine Cullen talked with Rachel in July at NRF Nexus. Katherine, take it away.
Katherine Cullen: Thanks so much, Bill. Rachel, welcome back to Retail Gets Real. It's always great to have you on. And I am excited because this time we're talking about data that we got to work on together. But before we dive into that, would you just tell everyone listening in, a little bit about GfK and what you do there?
Rachel Bonsignore: Yep, absolutely. GfK is a global market research firm and my team, GfK Consumer Life, is our consumer trends arm. We conduct the longest running and most robust consumer trends survey of its kind. This is our 50th anniversary serving in the U.S. and we're now at 26 years globally. And what our research really does is help us deliver the full voice of the consumer to brands and retailers. This helps them do work that's culturally relevant, it helps them anticipate future disruptions or opportunities and really determine who they want to be as a brand, as the world evolves around them.
Katherine Cullen: It's a really interesting data set and we always enjoy seeing the perspective and color that you put on the consumer and where they're at, which is why it's such a great fit for NRF'S data, where we track what consumers spend around major holidays and other events like back-to-school, which we're in the middle of right now. NRF actually just released our back-to-school spending forecast. We are expecting back-to-school and college shoppers to spend a combined $135.5 billion, which is a record. It is up from about $110 billion last year. So a strong season as families focus on essentials that they will need for the upcoming school year. Of course, that's a lot of money. There's a lot of consumers shopping. We wanted to spend this time and using some of the data that you all have, kind of digging into that a little bit more and understanding some of the key consumer segments who might be driving some of this shopping. So with that intro, could you talk a little bit about who you are focusing on right now and some of the key consumer groups that we should be thinking about who might be playing a role in this a back-to-school season?
Rachel Bonsignore: Yeah, absolutely. So I think there's two audiences we wanted to talk about today that are really relevant here. One of them is actually all still too young to be in our survey, but everyone is already starting to talk about them and that's Gen Alpha. We're currently roughly defining them as being in the three to 12 age group. So prime school age, prime school, supply age. Obviously they're too young to be surveyed, but because it's already such a hot topic, we wanted to start keeping track on them now and how they evolve. Currently, we are really starting to learn a lot about them through their parents, most of whom are millennials. The other group we want to talk about is sort of that college student age that is a squarely Gen Z group. Many of Gen Z are still students. They will soon or already be coming to into their own in terms of purchasing power. And as we know from many years of us working together and all of our collective research that Gen Z as a consumer group, as a group of Americans, are really quite different from their millennial elders. So it's important to understand what sort of shopper they're going to be.
Katherine Cullen: Yeah, it feels like we're talking about these generations at an earlier and earlier point. And it's really fascinating for me because I fall firmly into the segment of this, of this study — I'm not a Gen Z'er. I'm a parent of Gen Alpha and I will tell you, if you ever want to survey, I have two <laugh> who are very opinionated. So happy to share their thoughts. But I think that is a defining characteristic of these younger generations, they're very engaged as consumers and free with their opinions and thoughts. And they form them from a younger age. But sidebar my own experiences here and talk more generally. You know, maybe focusing a little bit first on that younger segment because they are who we tend to think about first when we think about back-to-school. I know you mentioned you're focusing more on the parents of Gen Alpha, who we know are getting input from their kids and buying decisions. Our own data shows that many parents of Gen Alpha say that their kids are spending some of their own money on back-to-school shopping. They're certainly making decisions on what brands they are looking for, what styles, what colors— what did your data show that we can learn about how this younger generation through their parents might be shaping up as consumers?
Rachel Bonsignore: I think one thing that's inevitable, really unavoidable, is the impact of financial pressures that their parents are facing right now. Millennials, as we know from — also then this Gen Alpha group growing — they are the generation still most likely to be heading a household right now. And they have a lot of financial obligations, not just to their children, but also to things like student loans, their mortgages, other costs of housing and things like that. Because of that extra pressure, we do see, despite millennials historically being quite bullish and quite confident, that they are actually, Gen Alpha parents, are more likely than average to be concerned about all sorts of financial issues that affect them personally. So things like housing costs, their credit rating, their level of debt, but also in larger matters that really affect the marketplace as a whole, like the fears of recession or economic polarization.
So because of these concerns, we've seen a lot of cost-saving measures in the past year, really much more common among Gen Alpha parents than the average American shopper. Out of 17 cutbacks we asked about, they indexed higher on all but two, that were pretty low to begin with. So really a very pronounced financial pressure that they're feeling. But at the same time there's things they get excited about and there's categories that will always be a little more appealing, for that millennial group, and that's really consistent with who they are. We see them more likely than average to say that having the latest tech is an indication of status. When we asked them more directly about their own children in this age group of three to 12, 87% said their kids have sort of their own versions of these items of at least a tablet, a smartphone, a TV or a video game console. So you could have five-year-olds with their own video game systems or whatever, it's really just for their use, it's just in their room. I think that is something that you really can't underestimate when it comes to purchasing power and desires, especially as the school season starts.
Katherine Cullen: Yeah, we are seeing that in our data where, for back-to-school shoppers in particular, a lot of the growth in spending is being driven by electronics. More people are purchasing them for the school year and they're spending more. And to your point, it's tablets, it's smartphones, of course calculators are still used. Though we'll see what the future of those are, <laugh>, how that evolves. But we're seeing it play out and in real time, this focus on electronics, that it's an entertainment component but also a learning tool that is increasingly important and kids are getting their own, as you pointed out.
Rachel Bonsignore: I mean these are children who had to do Zoom kindergarten and first grade and learn how to read using these digital tools. So they're kind of used to it. And you want to get your second grader their own tablet, so in case they need to use it for learning or other functional things, that it makes a lot of sense.
Katherine Cullen: I know we talked a little bit about the idea of the financial pressures. I see from our own data that we're seeing people really shop at a variety of destinations for back-to-school. We've seen a jump up in discount, certainly a lot of attention right now on resale and thrifting. And again, you do hypothesize as these children come up, see how their parents are shopping, see where they're shopping, this idea of looking for value, you've got to think that's going to make an impact.
Rachel Bonsignore: I think so. Another sort of legacy of the pandemic is that there's so much more intimate time that these children spent with their parents, going everywhere together and doing every sort of activity. So they're probably picking up on a lot more of their concerns or the way they shop or anything like that. There was a lot of close time between those two groups.
Katherine Cullen: This is bringing a lot of flashbacks.
Rachel Bonsignore: That part of bad memory. <laugh>
Katherine Cullen: A lot of good too <laugh> and a lot. Yes, a lot of flashbacks. A lot of people are remembering some specific moments right now. Could you talk a little bit, when you talk about values, what might be inspiring this generation, what we're seeing in through their parents, where they might be finding inspiration or are going for information? We know certainly social media both for them and Gen Z and I'm sure peers as well, coming to bear, but any thoughts on where they might be getting input and what might be influencing them?
Rachel Bonsignore: I do think parent networks play, like, a really big role. I think it's just part of millennials’ nature, majority of these parents being millennials, to be really socially connected and make their own kind of community of parents’ networks through Facebook and other places. So personal recommendations or even hand-me-downs or things like that are really big. I really do think a lot of it comes from social networks, either more personal, local or digital communities that they're connected with. In addition to social media, that's obviously, you can't underestimate the impact of, like, Pinterest on the millennial parent. But it comes from a lot of different kind of social digital sources.
Katherine Cullen: I think that's something I've been thinking about a little bit is that, if you look at surveys, whether it's your surveys, surveys NRF has done, of where people go for inspiration, the top one does tend to be my peers, my family members. But I think the thing that has shifted is maybe the format that you're interacting with those peers. Maybe your peers are your followers and friends on social media platforms, people you're interacting with there, your digital community as well as people in real life. And just the shape and way you're getting those recommendations and influences is changing, but the core is you're looking to your peers.
Rachel Bonsignore: Yep.
Katherine Cullen: To know what to buy.
Rachel Bonsignore: Absolutely.
Katherine Cullen: And what's cool.
Rachel Bonsignore: Absolutely.
Katherine Cullen: Shifting gears a little bit to Gen Z, which I know … generation, obviously everyone's watching, talking about a lot, they're moving into their twenties, but still many of them are still in high school and college. So what are you seeing there? I think we have a little bit more direct data on how they're buying and shopping and feeling, but what's sort of setting them apart right now?
Rachel Bonsignore: Yeah, I mean it was really interesting. So we decided to look at the tighter subset of Gen Z college students roughly in, like, 17-to-22 age range. What really jumped out at us in a very different way than the Gen Alpha parents is that they are significantly less concerned than the average American about all sorts of economic matters. So recession, economic inequality, future retirement funds, obviously that last one is very far out for them. So that makes a lot of sense. They just are for, I would say, probably a variety of reasons. One is that they've grown up in a really unstable couple of decades and they're really used to a lot of these issues. They don't feel that they're necessarily yet in the workforce or financially independent, so they don't think it affects them as much. There's some social concerns that supersede it, but what really that winds up playing out as is they're just cutting back on less to keep up with things.
So they actually index lower than average on all sorts of things in terms of cutting back on in the last 12 months. There's only a couple of items where they're more likely than average to cut back, paid streaming services, products, subscriptions, beauty and cosmetics, hobbies, toys and games. But other than that, they really are still spending whatever money they do have. We also see them a little more likely than average to be borrowing money, most likely from their parents or other kind of adults or sources in their lives. So those are some, like a real, I think would say a real divergence, compared to the Gen Alpha parents.
Katherine Cullen: I thought that was really fascinating, and kind of a little bit more openness to take on debt and things like that was very interesting to me. But to your point, they may not have as many expenses. They may have other sort of sources to help, supplement their purchases, but back-to-college spending is a huge area. It actually well exceeds, it's about double what we see for spending for back-to-school and our data is showing people just feel they need more this year, whether it's they didn't live on campus, they lived at home last year, the last couple years, they're moving out this year, or they're starting school, maybe they deferred it for a while. We're seeing a lot of demand in those areas. It's hard to talk about back-to-school without thinking ahead a little bit to holiday, which is the other major spending season for retail. Is there anything that you think retailers or brands should be thinking about when it comes to these consumers and thinking about connecting with them? Not just in back-to-school, but down the road in holiday?
Rachel Bonsignore: A couple of things we've been talking about a lot lately is we kicked off both of these audiences really talking about financial pressures that people are facing. It goes without saying, right? You can't really ignore that. It's hard to avoid that people are going to be making difficult trade-offs as prices rise and certain things become less affordable. We really did see that price sensitivity rose dramatically for many groups in the last two years. It used to be that millennials were by far less price sensitive than any other audience. Now the generations are almost completely aligned on this sentiment being really high. Really similar with income levels too. There's a lot more convergence there as well. We've been talking a lot just here at Nexus about how the affluent are worried and struggling.
They certainly have further to fall <laugh> and more flexibility to go back and forth, but you can't really ignore that. I think it's important to remember what's going on there. But the interesting part of it is, at the same time, people still do really love to spend, they love to consume, especially, at certain points in the year where their sort of brains are trained to pay more attention to sales and promotions and products they've been keeping their eye on. But what's really critical is because the world and the economy around us is changing so much, consumer priorities and strategies I think will keep shifting pretty dramatically. They might start to cut back on out-of-home entertainment for a couple of months to be able to save up for other things and then they might cut back on more material purchases. They might be trading down. Interestingly, last year we saw in reaction to whatever prices were rising at the time, people still weren't trading down to like store brands. Now they are, we actually saw a big increase from year-over-year. So really staying vigilant about which coping mechanisms are being used and what brand benefits and value propositions are top of mind is going to be important. Really keeping an eye on your target consumer.
Katherine Cullen: I think that idea that everyone, regardless of income level to your point, is looking for value. Now what value is may be different based on different consumers, but everyone's sort of thinking about how do I get the best value for me? What are ways I can reconfigure my budget to prioritize what's important, whether right now, back-to-school, later on, family celebrations and things like that. So I agree, I think we're going to continue seeing that. Now was there anything that surprised you out of the findings?
Rachel Bonsignore: It's a little bit of a divergence, but I think it's sort of interesting. I talked a little bit upfront, for Gen Alpha parents about their concern about economic polarization. We asked about a few different kinds of polarization in this country. As there are many for Gen Alpha parents, they're sort of equally worried about division when it comes to the economy as well as politics. Whereas for just the general population political division is by far what people are more worried about. So you do see the economy really affecting them so much. When you put it in those terms, it's really interesting, and I alluded to this briefly earlier, but it was just such a dramatic difference how much lower than average college students were on economic concerns and how much higher than average they were on social worries. So climate change, gender inequality, race relations, like big picture societal issues. We know this is a socially conscious group, but the data was very striking in just the divergence of those things compared to your average American.
Katherine Cullen: Mm-hmm <affirmative>. That is really interesting. There's a lot on people's minds right now and we're actually seeing some of our data showing that with all, everything on people's minds, they're actually a little bit more inclined to live in the moment because it feels like there's a lot going on, a lot of uncertainty and even a lot outside of their control. I think you see some of that in your data as well.
Well, we've obviously loved collaborating with you on this piece Rachel, and for those listening, we have a co-branded report with GfK that we're putting out and it really pulls together the strengths of their data and I feel ours as well. But now shifting to some more fun topics, Rachel, you've been a frequent guest on RGR. Could you talk a little bit about your career path, what you love about what you do and how you got here?
Rachel Bonsignore: Yeah, I got here through a very random series of events. I was a publicist for many years who then became a researcher for publicists for many more years. Doing surveys to specifically generate media coverage and headlines and then discovered consumer trends, nearly eight years ago. That's what I've been doing ever since. It really is, for me, the perfect mix of creativity and reflection about society and culture and just straight math <laugh> and analytical tools and skills that I've built over the years. One thing I really love about my role is the ability to use our trends data, particularly because we do have so many decades of history to gain perspective and context on what's going on in the world today. It's a little bit of therapy for processing current events or disruptions to the world around us.
It's sort of a fun, interesting challenge whenever there's a big thing. Like the first few months of COVID or when Brexit happened or whatever, for our clients to call us up and say, how can your data help us explain how we got here? And you realize how some trends are very cyclical and how we learn similar lessons over and over again and you can feel a little more grounded in the reality of consumer reactions and feelings. It just helps you understand the world around you a lot better.
Katherine Cullen: I think that's the best explanation of a market research and researcher's job I've ever heard. I'm going to be stealing that.
Rachel Bonsignore: Oh, thank you.
Katherine Cullen: Just as we close out, because we're here at Nexus, what excites you most right now about the future of retail, that you're seeing?
Rachel Bonsignore: It's very basic, but I just really love how much we're going back in-store and reinvigorating that environment. We've seen a lot in our data that's led by Gen Z. Gen Z really likes going to stores. They want that connection. We see that they are not willing to cut back on a lot of stuff. So there's a lot of new ways that experiences can be more inclusive to them, more seamless, more inspiring, and technology is just a great input to make it mirror the great experiences we have online or in mixed settings to make it more engaging and more useful and productive. So really, I love physical interactions and community within retail and store and I'm just glad that people are investing in it so much.
Katherine Cullen: Yeah. And my own personal question, we're talking about Gen Alpha. When are we going to start talking about Gen Beta?
Rachel Bonsignore: Oh my gosh. Well, <laugh>, probably not too far ahead <laugh>, I think. Well the thing that's so interesting about generations, and there's been a lot of talk in the research community about it lately is, generations are going to keep getting tighter and smaller because the world is moving so fast. There's so many massive world events that can define the beginning and end of a generation we won't really know for a while. I wouldn't say it's premature, but it's definitely anticipatory to put a full label on it. But this is a good starting point. Certainly the generation after that. So they will be the children mostly of Gen Z, which is <laugh> interesting to think about. I mean the oldest Gen Z is in their mid-twenties right now or mid to early twenties, so it's not totally impossible. I think it'll be interesting because Gen Z has really shed a lot of traditional boundaries and markers of things. They're just a lot more fluid in terms of their life stages and their approach to the world and breaking down social structures. I think hopefully their children will inherit a bit of that freedom and agency.
Katherine Cullen: What I'm hearing is next year at Nexus, we're going to be talking about this.
Rachel Bonsignore: I'll get that ready.
Katherine Cullen: So well, just to close out, we have a lot of college students who listen to Retail Gets Real. What advice would you give to someone just starting their career?
Rachel Bonsignore: Try a lot of things. I tell that to mentees and people I manage and all of that stuff, you really will not know what works for you unless you actually do something and see how you feel about it, see what you like about it, take that piece, move on to the next thing, build it all together. A lot of people I've seen who are in the research industry came here through very circuitous, unpredictable paths. So you don't have to be a statistics major <laugh> and do very specific things. You can come at it from a lot of different ways because it really is a field that benefits from different perspectives. But regardless of what career path you're considering, I really think you just have to try a lot of stuff and really learn as much as you can about it and really reflect on what it means to you.
Katherine Cullen: That's great advice. Well, Rachel, it's been a pleasure talking with you. Thank you so much for joining us today. Thank you for partnering with us on this research.
Rachel Bonsignore: Yep, my pleasure. Thank you for having me.
Katherine Cullen: Back to you, Bill.
Bill Thorne: Thanks Katherine, and thank you all for listening to another episode of Retail Gets Real. You can find more information about this episode and our latest back to school research at nrf.com back-to-school. I'm Bill Thorne, this is Retail Gets Real. Thanks again for listening. Until next time.