The back-to-school market is becoming increasingly ruthless as retailers slash prices in a bid to protect overall kidswear sales.
Which is more expensive: a five-minute single journey on the London Underground, or a complete school uniform? The answer is that at £4, both cost the same.
Each year, the back-to-school price battle becomes ever more competitive, with retailers slashing the prices of their school uniforms and unveiling new, deeper promotions.
This year is no exception. Last week, George at Asda unveiled what it claimed to be the cheapest-ever school uniform at just £4 across all age groups – a reduction of more than 50% on the previous year’s price of £9.96.
George’s offer undercuts Marks & Spencer’s £6.50 uniform by a minimum of £2.50. However, M&S’s entry price only applies to the three- to six-year-old age group, while George’s £4 price is for all ages – another first in the market.
Tesco’s cheapest uniform starts at £4.25, while other retailers, including Sainsbury’s Tu and Woolworths, have launched heavy promotions across their back-to-school offers in a bid to keep pace with their rivals.
But with prices so low and promotions so deep, can the back-to-school market be a real money driver, or is there another reason behind the ever-increasing competition?
“The back-to-school market forms an important part of the kidswear market as a whole,” explains Maureen Hinton, senior analyst at research firm Verdict, which will publish its first comprehensive report on the back-to-school market in September. “All kids go to school so they all need uniforms, so it forms a big part of their wardrobes. But also, if retailers can win parents over on their back-to-school products, they may well win them over on the rest of their kidswear offer too.”
George at Asda managing director Anthony Thompson admits that some of the retailer’s back-to-school products are loss leaders, but insists that as a whole the back-to-school category is profitable for the supermarket.
“A retailer’s back-to-school business is an important barometer for the whole of its kidswear category,” says Thompson. “George is the number one kidswear retailer by volume and it is important for us to protect those credentials. It is the same for Marks & Spencer – kidswear is an important market for them and the weight of their campaign shows that they too want to protect their credentials.”
According to Verdict’s 2007 report on the kidswear market, George’s share of the kidswear market by value grew from 6.6% in 2002 to 8.5% in 2007, while M&S’s fell from 5.7% to 3.8% during the same period. George is second only to Next in the sector.
But according to some, this obsession with protecting market share could have damaging effects on both the back-to-school market, which according to research company TNS WorldPanel Fashion is worth £502 million, and the kidswear sector as a whole.
One value boss says George has “destroyed” the back-to-school market and believes that there is now very little money to be made from it. “The market is so competitive that there is almost no money in it anymore,” he says. “By driving the prices down so much, the category has become all about price and not about quality. It’s a typical Wal-Mart [Asda’s owner] strategy – kill off the competition so that you can own the market and do whatever you like.”
Even the independent back-to-school sector, which sells uniforms with logos and crests for specific schools, is feeling the strain from the high street. While it does not compete directly with the likes of George and M&S, the sector is being pressured to drive down its prices in order to reduce the price gap between its offer and that of the high street.
Philip Linz, owner of eight-store Midlands-based schoolwear independent Clive Mark Schoolwear, and an executive committee member of the Schoolwear Association, which promotes the benefits of school-specific uniforms, says that while trading in his stores is in line with last year, the picture is mixed for the rest of the sector.
“I’m not overly concerned by these high street offers, but they do put an overall downward pressure on the independent sector in terms of price,” he explains. “We feel that we shouldn’t let the gap between us and them get any wider, yet our suppliers are raising their prices, making it difficult for us.”
In April, National Schoolwear Centres, a nationwide chain of school uniform shops with its head office in Norwich, went into receivership. Administrator Begbies Traynor has since sold its three company-owned shops to individual parties, while 50 franchise stores were unaffected by the receivership.
Linz says that prices at his stores have stayed the same over the past four years and that the independent sector should play on its quality credentials to differentiate itself from the rest of the high street.
“The industry as a whole is giving the consumer a choice,” he explains. “But the issue is that of quality. George’s sweatshirt at £1.75 is good for a sweatshirt worth £1.75, but it wouldn’t equate to the quality of our sweatshirts.”
Quality is an issue that has led analysts to question the strategy behind M&S’s price-driven offer across its clothing range as a whole. They partly blame the retailer’s lack of focus on fashionability and quality for the profit warning it issued in June.
Verdict’s Hinton agrees that quality plays a key role as a differentiator in the back-to-school market, but warns that independent retailers are in a precarious situation.
“The back-to-school category plays to those with the biggest budgets, who can produce big advertising campaigns and lower their prices, therefore the smaller operators suffer,” she says. “But children’s clothing is more susceptible to wear and tear, so quality is actually quite important and this is where M&S should be winning. M&S should be comparing products and saying ‘in our tests, our school uniform lasts longer’, for example. I think their adverts do appeal to their key market – the uniforms look like they are of good quality.”
George, M&S and Tesco have all launched press campaigns, with Asda also unveiling a TV advertising campaign across all major channels. And the bigger they are, the more publicity these campaigns attract, proving to be a key driver in footfall.
The value boss believes that George’s strategy is a headline grabber that will work. “Back-to-school shopping is a horrible experience for parents and children, and the more kids you have, the worse it is. Now that the quality of the product is down, the experience is even worse, so an offer like George’s could attract new customers who have children,” he says.
“If a supermarket can get customers into their stores because of something other than food, then it is likely that those customers will also do their weekly food shop there as a result. It’s not quite the same for M&S as it doesn’t sell food in the same way as a supermarket, but M&S is having to respond to market conditions in an attempt to maintain share.”
As Thompson puts its: “Back to school is a footfall driver, full stop. If you’re serious about kidswear, you’ve got to be serious about back to school.”