Economics 101: Back-to-school spending buoyed by Gen Z’s habits

Back to school spending is estimated to increase 4.5 per cent in Canada this year on the back of lower gas prices, a stable but low Canadian dollar, some price inflation, enhanced Canada Child Benefits and – perhaps most importantly – the spending habits of Gen Z-ers, according to Ernst and Young.

The news comes at a time when summer school is only just wrapping up but for a season earmarked as the second most important selling time, it’s no surprise retailers are salivating.

“It is a critical season, especially in the apparel and supplies sectors and to a degree as well for technology for computers and clothing suppliers – overall it’s the second biggest shopping season,” Daniel Baer, a partner at EY and leader of the professional services firm’s national retail and consumer products segment.

According to EY, British Columbia is expected to lead retails sales with Ontario in close second. Quebec and the Atlantic provinces on the other hand are expected to mirror the national average while the prairies will see a weaker showing, falling below the national average but still increasing. Alberta isn’t expected to grow, predominantly as a result of the declining oil-sector-fueled recession and the tightening of wallets it has wrought.

Baer says the season has evolved in a number of ways.

“The season itself has gotten longer… I think that is true for most selling seasons,” he says adding that the traditional way of going to the store to buy binders and back-to-school clothing has become fragmented with retailers trying to sell to Generation Z, an ultra-connected, social spending focused demographic.

“The delivery options are much different,” says Baer. “People can do all that online or they can go online and pick up in-store.”

According to a recent study by EY of the discrepancies between millennials – often referred to as Gen Y – and Gen Z shows a demographic much more in-tune with how to navigate the retail sphere using technology.

Nearly half (49 per cent) of Gen Z shop online at least once a month, a relevant number in that the generation doesn’t yet have access to credit cards. And, they don’t spend much time with their sale safe compared to their millennial peers with only 47 per cent of Gen Z saying they speak with an associate before buying in-store versus 60 per cent of millennials.

They’re also a handful to advertise to, says Baer.

“The retailer will not get to this generation if they simply rely on traditional radio, television and newspaper advertising because by-and-large, they are more on YouTube than they are watching television,” he says.

Instead, they look to bloggers and shorter video ads.

“What used to be a 30-second ad might be an eight to 10 second ad today,” he says.

Social responsibility is also on the minds of Gen Z-ers going into the back-to-school shopping season, which could help boost the amount being spent to get those young’uns school-ready.

“They’ll look to where the product is being sourced and if they need to buy a pencil that’s being produced in Canada,” says Baer. “(And) they’re willing to pay a premium for locally-sourced.”