Americans plan to spend big on tech for back to school: ICSC CEO

Yahoo Finance’s Brian Sozzi and Alexis Christoforous discuss back to school shopping with Tom McGee, ICSC CEO.

Video Transcript

ALEXIS CHRISOFOROUS: We're now in the heart of the back-to-school shopping season. And even though heading back to the classroom is going to look pretty different this fall, Americans are planning to spend big nonetheless. A new survey from the International Council of Shopping Centers shows we're going to spend more than $1,000 on supplies and other back-to-school expenses. That's up from about $900 just a year ago.

Here to talk about it is Tom McGee. He is CEO of the International Council of Shopping Centers. Tom, good to see you again. Before we get to that survey, I'd love to get your thoughts on news about Amazon wanting to buy up some of JC Penney and Sears locations at malls across the country that are owned by Simon Property, and turn those into fulfillment centers, which I guess would help with that sort of last leg of delivery, getting those products to people's homes quicker. What are your thoughts on that?

TOM MCGEE: Well, I think if you, you know, look at the pandemic over the course of the last five months or so, as we kind of lived through this crisis, I think what you've seen is a real acceleration of a lot of trends that were in place prior to the pandemic. Chief among them is convergence, just the convergence of the physical and digital world. And when you think of things-- and as you appropriately said, the last mile of delivery-- you've really seen an acceleration of things like curbside pickup, and click and collect, and of course delivery, which has been important through this crisis.

And so I think it makes logical sense that you'd have an acceleration of that kind of trend. I mean, the specifics of the transactions, you'd have to ask the companies themselves. But I think, if you think about just convergence, and quite frankly, even if you look at what Walmart and Target have done as they leveraged their physical stores, and you know, they're delivering from stores, and having curbside pickup, et cetera, I think it makes a lot of sense given the trends that have been in place and have accelerated over the course of the last five months or so.

I mean, there's-- there's no doubt that customers have expected a certain efficiency in their shopping experience. And certainly safety is front and center. And I think all of this plays into that-- that reported item as well as a lot of other things that are taking place in the industry.

BRIAN SOZZI: Tom, if that's the case, is Amazon good for the mall? And then, secondarily, do they save many malls in the country?

TOM MCGEE: You know, I think-- you know, time will tell how all this plays out, right. It's very difficult when you're in the midst of something like this to make long-term predictions. Because as we-- as we all have experienced a lot of things that have happened that we couldn't have foreseen happening.

That being said, I think that-- look, I think that certainly that will be used as a fulfillment center to-- to help the last mile of delivery, at least that's what's being reported. But I don't think you should, you know, exclude the-- that the chance that people actually go and pick up goods from those centers as well, a la what's happening in some of the large retail stores like a target and a Walmart. And so that would drive traffic to the malls as well.

You know, Amazon has been a big player in physical retail. I mean, we obviously know Amazon for its e-commerce platform. But let's not forget they acquired Whole Foods. Let's not forget the launch of the Amazon Go store. Let's not forget that they're launching supermarkets. And so I think that we'll see how this plays out in their long-term retail strategy. But I'm not surprised by something like this happening. Because I think-- I think consumers have desired this need for efficiency and effectiveness in the shopping experience.

ALEXIS CHRISOFOROUS: Yeah. And Amazon certainly has deep pockets to see this through. Tom, I want to get to this survey, though. You surveyed people about what they're going to be buying in the back-to-school season, how much they plan to spend. It looks like we're going to be spending more than we did last year. What are people spending on?

TOM MCGEE: Yeah, this is a very un-- unconventional year for sure. And despite a lot of uncertainty that's in the minds of consumers and parents, our expectation is for them to spend more, and not surprisingly where kids are going to be, you know, using their home as their classroom in many respects. A priority around technology, technology tools, whether there is PCs, whether that's other kind of connectivity kind of capabilities. And furniture-- you know, setting up a-- your home to be kind of a classroom.

And so while you'll still see spend on apparel and those traditional type of back-to-school items, as we move towards a very unconventional year, towards more of a hybrid model or a complete online learning experience, you're going to see a lot more spend on technology, a lot more spent on furniture, things like that, that enable you-- the home to be used as a classroom.

BRIAN SOZZI: Tom, earlier on, we were talking about the outlook for denim. What is the outlook for denim? Obviously it's a key back-to-school selling item.

TOM MCGEE: You know, I-- I don't know. I'm-- I'm wearing jeans right now if that helps. But I can't tell you specifically on that. Certainly I think that it's hard-- we're in the midst of something that is so unique. It's hard to know what the outlook is for a particular subsector of the apparel industry.

I do think-- look, I think retail and the economy is at a very tenuous situation right now. You know, broad, big picture, I think it's really important for the government to lean in and come forward with some type of relief package, to-- for the Democrats and the Republicans to come together. We really believe that there needs to be a continuation of a PPP-type program, but something even bigger than what was implemented before, something like the Small Business Comeback Act that was recently introduced or the RESTART Act that was recently introduced, both on a bipartisan basis.

I think the economy is really at a very vulnerable state. Retail is at the front, you know, lines of that. We see that in all the consumer surveys that we do, that the optimism of the consumer today is less than it was two weeks ago, and certainly less than it was a month ago. And big picture, I think the government needs to step in and really help backstop the economy as a whole but particularly retail and consumer-related industries.

ALEXIS CHRISOFOROUS: Tom, in terms of what it is we're buying, are electronics outpacing clothing during this back-to-school shopping season?

TOM MCGEE: Yeah, electronics will be the number-one item this back-to-school season. And that's obviously unique, I think, given the environment that we're in. I mean, it speaks to, really, an historic period of time in our nation's history but certainly in the back-to-school and schooling aspect of our-- of our life. Yeah, you know, electronics and furniture are really important. And if you just think, intuitively, that makes a lot of sense. If you're going to be, you know, having your child educate from home, doing what we're doing, but with their teacher and a host of their classmates, I think that premium on technology-- and connectivity, right, the importance of Wi-Fi connection and stability of that, and home-network-type capabilities are really important, particularly if you have two working parents at the same time, all accessing that same Wi-Fi network.

ALEXIS CHRISOFOROUS: Yeah. A rejiggering of priorities, for sure. Tom McGee, CEO of International Council of Shopping Centers. Thanks so much. Good to see you.

TOM MCGEE: Yeah, thank you for having me.