Author: My Office News

World Bank issues loan conditions for SA

By Antony Sguazzin for Bloomberg

World Bank officials have told South Africa’s government it will need to reduce its wage bill to secure a loan and that it doesn’t want the money to be used to bail out insolvent state companies, a person familiar with the situation said.

Those demands have stalled negotiations on the loan that began in April, the person said, asking not to be identified because the content of the discussions have not been made public. Earlier this year, the South African government said it was seeking $2 billion from the bank, but later said the World Bank had $900 million available.

A World Bank spokesperson said the bank was not seeking to impose conditions around aid to state companies or trimming the wage bill, and that the $2-billion figure was incorrect. The spokesperson also said the bank hasn’t lent any other money to South Africa this year. Earlier this year, the government said it expected $50 million in virus-related funding from the lender.

In an earlier response, the World Bank said it could not comment aside from confirming that talks are ongoing. South Africa’s National Treasury didn’t respond to requests for comment.

South Africa this year has turned to multilateral lenders for the first time since the end of apartheid, overcoming political opposition from within the ruling party, as it tries to kick-start an economy forecast to contract the most in nine decades. Finance Minister Tito Mboweni is expected to outline plans to fund a revival in output when he presents the medium-term budget on Wednesday and is under pressure to earmark more money to bail out state companies.

So far the country has borrowed $1-billion from the New Development Bank, the lending arm of the BRICS group of nations, $4.3 billion from the International Monetary Fund and R5-billion rand ($310-million) from the African Development Bank.

All of those were deemed as emergency loans to combat the immediate impact of the coronavirus outbreak. An additional World Bank loan would be a standard borrowing facility and therefore could carry more conditions.

South Africa’s state-owned companies, ranging from the national power utility to the state arms firm, are surviving on government bailouts and straining national finances. A recent pledge by the South African cabinet to support the insolvent national airline has attracted criticism from opposition parties who say it is unviable.

South Africa is making an attempt to cut its wage bill. In April it reneged on an agreement to raise pay for the more than 1.2 million workers, saying it couldn’t afford it. That decision has been challenged legally by labor unions.

In August South African President Cyril Ramaphosa said the country had rejected the initial conditions it would have need to have accepted to access the funds, without giving more detail.

Any conditions could be difficult to enforce because loans and the proceeds of bond sales are not ring-fenced and are pooled in South Africa’s National Revenue Fund.

The only major loan by the World Bank to a South African state entity, a $3.75 billion loan extended to Eskom Holdings SOC Ltd to help it build its Medupi coal-fired power plant, has run into complications, with the utility wanting the World Bank to waive a condition that stipulates that it must install equipment to reduce sulfur dioxide pollution. The flue-gas desulfurization equipment would cost 42 billion rand, Eskom has said.

Cell C shuts down towers

By Barbara Friedman for EWN

Cell C is reportedly shutting down its network.

However, tech guru Brendon Peterson says it is a little more complicated than that.

Cell C’s statement did not say it was shutting down its network, he notes.

That seems to be where the confusion has come in.

“I know there have been quite a few bits and pieces of news out there saying Cell C is shutting down, but I was able to chat to them directly to get a better understanding of what is going on,” says Peterson.

In fact, Cell C will no longer be operating its own physical infrastructure such as the cellphone towers, and will instead be leasing the equipment from MTN.

So if you are a Cell C customer, you are still going to have service. It is still going to say Cell C. It is just not going to be routed through Cell C towers but rather through MTN towers. That’s it.

How will this benefit Cell C?

Cell C will be freed up from the costly maintenance and repair of towers, says Peterson, which will save money.

Customers will still be able to buy Cell C data and airtime as usual as well as update contracts.

None of that is going to change. And I double-checked with Cell C as that was the biggest concern everyone has got.

Cell C asked for a right of reply following this interview and spoke to Lester Kiewit on Wednesday.

 

By Londiwe Buthelezi for News24

One of South Africa’s new banking challengers, African Bank has joined a long list of companies who have to let go of their staff because of Covid-19.

African Bank announced on Tuesday that it has started retrenchment consultation processes with the banking sector union, Sasbo. The bank anticipated that the Section 189A consultations will affect 1 269 of its 3 728 employees.

The bank said it anticipates a job loss ratio of approximately 25% of those number affected meaning that ultimately around 317 people or 8% of its staff members may be out of jobs at the end of these consultations.

“The Covid-19 outbreak and the associated protracted lockdown intensified the dire state of the economy. Given the financial pressure faced by our customers the bank has recorded a reduction in sales as well as collections, which has created excess capacity across the different business units,” wrote the bank in a statement on Tuesday afternoon.

The bank had just entered the transactional banking space in 2019, trying to diversify its revenue streams beyond investments and loans that it was traditionally known for.

But the state of its lending book took the limelight away from the new venture in this year’s interim results when the bank announced that it had already experienced a 25% reduction in debt collections.

But on Tuesday, African Bank said the automation of its businesses processes also played a role in considering retrenchments. The gradual automating of certain tasks and customers increased usage of digital by customers had led to staff redundancies. In 2019, African Bank CEO, Basani Maluleke said the bank was training an army of 29 data analysts who would join the bank earlier this year and help it accelerate its digital banking game.

But African Bank was still adamant that there will always be a space to grow brick-and-mortar branches as it opened a new branch in Sandton City at the time.

However, on Tuesday, African Bank said the Covid-19 impact and the redundancies created by digitisation have made it imperative to restructure its operations and hence enter into consultations which may lead to the loss of jobs.

“We have been deliberate in reducing costs in all areas of our business. The undertaking of a consultation process with our employees is the last resort to further reduce costs. Our intention throughout the process will be to consider appropriate measures to avoid and minimise potential job terminations,” said Maluleke in the statement.

She added that the bank’s services to customers will not be affected by the retrenchments.

 

shop-sa holds online AGM

shop-sa held its AGM via Zoom on 28 October 2020, due to the effects of the Covid-19 pandemic.

Chairman Hans Servas opened the meeting with a welcome, apologies and confirmation of last year’s minutes.

He outlined the achievements of the association during the challenging Covid-19 and Level 5 lockdown that ensued. The stationery industry was hard-hit until Level 3, as it was not classified as “essential”.

Achievements in this period included:

  • How to access UIF funding
  • Solidarity funding
  • Labour matters
  • Short-time
  • No work, no pay
  • Retrenchments
  • An attempt to lobby Government to change stationery to an essential category
  • The first Industry Survey in June, dealing with the effects of Covid-19
  • An in-depth Webinar hosted in conjunction with Labour Net to answer questions, of which there were many
  • On-going up-dates on the do’s and don’ts during the different levels were published

Finances of shop-sa also took strain, with reduced income; a large drop in advertising revenue versus increased expenses; a potential SARS debt as well as the writing off of unpaid Membership fees resulted in funds dropping accordingly.

This year’s OPI report was put on hold due to to the effects of Covid-19 on the statistics acquired by OPI. When the revised report is available, it will be disseminated in a Webinar format.

The board remains as last year.

Ryan Bidgood of Office National offered to sit in on a few board meetings to bring a fresh perspective to the Association.

Rob Matthews of IT-Online outlined the growth of the shop-sa publications – My Office News, My Tech News and shop-sa Trade News.

The meeting was closed and guest speaker David Shapiro took the floor to discuss the impact of Covid-19 on the world economy and the markets.

 

Is a second hard lockdown looming?

Murmurs of a second “hard” lockdown started last week, and grew louder over the weekend after KwaZulu-Natal Premier Sihle Zikalala said at a press conference that “looking at the statistics around us, we can now safely say that we are definitely going back into a hard lockdown – if there is no urgent and drastic change in behaviour.

“Let me make this clear: a second wave of Covid-19 will be stronger and deadlier, not only in terms of taking human lives, it could deal our economy a major blow,” Zikalala said.

Zikalala was talking about the increasing infection rate in KwaZulu-Natal, but he was backed up by statements from Free State health spokesperson Mondli Mvambi, and Mangaung metro spokesperson Qondile Khedama.

Last week, Minister of Health Dr Zweli Mkhize and his wife both tested positive for Covid-19, and he reiterated his call for preventative hygiene measures and social distancing.

As Europe and the US both battle with a second wave, South Africans have started paying closer attention to the number of cases.

Minister Mkize said at a recent press conference that “our epidemiological reports are showing that in the country, over the last seven days there has been an increase of 9.1% in new cases. Similarly, over the last 14 days, there has been an increase of 10.7%.”

He said that in the last seven days, there was a marked increase in the number of new cases in the Western Cape. The province recorded a 42% increase in new infections, and that the government’s terminology defines this significant spike in new cases as a “resurgence”.

However, President Cyril Ramaphosa on Tuesday addressed the rumours during a question-and-answer session between the president and the National Council of Provinces.

He said that rumours that the country will be placed under another hard lockdown were untrue.

“I don’t want people to be alarmed. That is simply not true. If it gets there, I will advise the nation.”

Consumers lose again in Eskom-NERSA clash

Source: OUTA 

Eskom’s urgent application filed recently to recover one of the R23bn bailouts in 2021 is understandable but it is harsh news for struggling consumers and businesses.

There is no way to win in this situation.

It’s the latest move in the legal battles between the inept regulator, NERSA, and the utility struggling with unsustainable debt.

In July 2020, the high court ruled that NERSA was wrong to consider the R69bn government bailout to Eskom (R23bn a year for Eskom’s 2019/20, 2020/21 and 2021/22 financial years) as revenue instead of as an equity injection, and that this resulted in a significantly lower Eskom electricity price increase allowed for these years. The court ordered this to be added back to the electricity price.

We note that NERSA conceded and acknowledged that it erred in this regard in the court proceedings leading up to the judgment against it. We further note that the judge ordered the error be rectified through appropriate tariff increases during the 2021/22, 2022/23 and 2023/24 financial years.

NERSA was subsequently granted leave to appeal, not in respect of its self-acknowledged error, but to challenge the judge’s authority to prescribe the manner and timing of electricity price increases to rectify NERSA’s mistake. NERSA believes it should have the right to decide how much the prices should increase and over what period in refunding Eskom, taking into account the effect on customers and the economy. NERSA’s appeal – which is still pending – effectively suspended the court order.

Eskom’s interdict this week calls for R23bn – one year’s bailout – to be loaded onto the 2021 price (the allowable revenue), so that it does not lose another year of this. It will add about 10% to the price increase from April 2021, in addition to the 5.22% already granted. In terms of the court order, it will increase the price from the already approved 116.72c/kWh to 128.24c/kWh.

OUTA believes that NERSA has demonstrated a serious lack of competence and judgment in its misappropriation of R69bn as revenue instead of equity in making the Multi-Year Price Determination (MYPD) for the 2019/20, 2020/21 and 2021/22 financial years. While this has a negative impact of Eskom’s cash flow and sustainability, we also believe that the application of Eskom’s tariff increases following the court’s ruling in their favour will be a blow to an already over-burdened South African consumer and the economy as a whole.

The past decade of NERSA’s lack of leadership and political meddling has failed to hold Eskom’s past leadership to account for the utility’s soaring costs, borrowings and false asset revaluations. This is now playing out in very technical and costly court challenges that are having negative consequences on both Eskom and the public at large.

OUTA believes that NERSA may be wasting more time by opposing Eskom’s interdict to have one of the three R23bn bailouts loaded onto the 2021 price, as this may lead to more bailout requests from Eskom to prevent it defaulting on its loans.

Eskom effectively lost the R23bn a year for 2019/20 and 2020/21, due to NERSA’s ruling. OUTA believes this ship has sailed and that this situation provides NERSA and Eskom with an opportunity to reach a compromise on writing off at least part of the outstanding R46bn, in a way that takes into account the interests of Eskom, customers, taxpayers and the economy.

Negligent taxpayers could face jail-time in SA

Source: Supermarket & Retailer

With Government’s draft response being released in the Parliamentary Debate on 13 October 2020, non-compliant taxpayers, be it intentionally or negligently, may soon be facing some serious jail-time.

The draft response proposes a strict, no nonsense approach from the South African Revenue Service (SARS) when it comes to the taxpayer’s compliance, shifting the burden of proof to fall more heavily on the taxpayer than ever before.

SARS-Treasury team-up

Under the current tax regime, a key element of any offence is that it is committed “willfully and without just cause” by the taxpayer, with negligence resulting in a mere wrap on the knuckles in most instances.

The July 2020 Draft TALAB (Tax Administration Laws Amendment Bill) proposes to change this entirely, by the removal of the term “willfully” from the legislation, taking away one more line of defense to taxpayers across the country. This proposed amendment was met with fierce resistance by tax practitioners and taxpayers alike, opposing the opening of this particular can of worms.

In last week’s proceedings, National Treasury and SARS took the opportunity to shoot their shot, proposing this amendment to the Standing Committee on Finance.

Although some leniencies were permitted, the two authorities held their ground on the need for a change in law, more specifically the standards used to measure taxpayers’ behaviour, to enable easier convictions for tax related offences.

Enabling legislative amendments

Although the proposed amendments will have no impact on the existing sanctions for non-compliance, they will widen the net for SARS to catch taxpayers off-guard, and impose these sanctions, for what could be something as simple as a typographical error when completing a return, or any of the other 100 mistakes which may be committed due to human error, which may be viewed as negligent on the part of the taxpayer.

It must be noted that “intent” was not entirely done away with, but rather drawn in to permit more severe sanctions in this instance as these acts are borderline tax evasion, where the “intent” is to defraud SARS.

Strategically speaking, this is a bold yet brilliant move from the SARS-Treasury team, as the inclusion of “negligence”, and retaining of “intent” allows the non-compliance net to be cast wide enough to catch even the smallest fish.

The split

The existing offences are proposed to be split into two categories, being that which requires “intent”, where the heavier burden of proof falls on SARS, and that which either “intent” or “negligence” will suffice, shifting the weight of the burden more on to the taxpayer than ever before.

The existing sanctions, including some serious jail-time and/or a financial fatality in the form of a fine, will remain unchanged, with the case-appropriate sanction being left to the discretion of either SARS (for minor offences) or the National Prosecuting Authority (“NPA”) (in the instance of more severe offences).

First-mover advantage

In order to protect yourself from SARS, it remains the best strategy that you always ensure compliance. Where you find yourself on the wrong side of SARS, there is a first mover advantage in seeking the appropriate tax advisory, ensuring the necessary steps are taken to protect both yourself and your bank balance from paying the price for what could be the smallest of mistakes.

However, where things do go wrong, SARS must be engaged legally, and we generally find them utmost agreeable where a correct tax strategy is followed.

As a rule of thumb, any and all correspondence received from SARS should be immediately addressed, by a qualified tax specialist or tax attorney, which will not only serve to safeguard the taxpayer against SARS implementing collection measures, but also being specialists in their own right, the taxpayer will be correctly advised on the most appropriate solution to ensure their tax compliance.

 

Disposable income has halved in South Africa

Source: Supermarket & Retailer

In a presentation ahead of finance minister Tito Mboweni’s Medium-Term Budget Policy Statement (MTBPS) next week, the PBO said that household consumption also dropped markedly by 49.8% in the second quarter of 2020, following a marginal increase of 0.2% in the first quarter.

The sharp decline reflected reduced outlays on all categories of goods, the PBO said. “Spending on durable and semi-durable goods contracted the most because most were classified as non-essential during the lockdown.

“Overall, consumer spending by households contracted by 7.5% from the first half of 2019 to the first half of 2020.”

The PBO said that this decline was consistent with the decline in both consumer confidence and credit extension to households.

This aligns with data from payments clearing house BankservAfrica which shows that the last few months have seen massive disruptions to the country’s average take-home pay, as a number of payments were either suspended, terminated or adjusted.

The average take-home pay in August was R14,008 in nominal terms and R11,893 in real terms. However, it is unlikely that the real average take-home pay will continue on this positive trend as the next two months had a relatively high average real take-home pay in 2019.

“A more meaningful indication of the real salary trend in South Africa at present is the average real take-home pay for the first eight months of 2019, which was R12,200 per month, indicating that the August 2020 number is nearly 2.5% lower than the same reporting period in 2019,” said economist Mike Schüssler.

Debt

The PBO’s presentation also shows that there has been a decrease in household debt in the second quarter of 2020 – its first decline since the third quarter of 2002

The ratio of household debt to disposable income increased significantly from 73.6% in the first quarter of 2020 to 85.3% in the second quarter.

“The quarter-to-quarter decline in nominal disposable income exceeded the decline in household debt.

“The outstanding balances of most categories of credit extended to households decreased during the national lockdown.

“This decline in credit extension was probably due to socioeconomic uncertainty about household saving and spending patterns.”

Data from the National Credit Regulator (NCR) from March 2020 to June 2020 shows that the number of credit agreements entered into decreased by 47.73% quarter-on-quarter from 3.93 million to 2.05 million.

In terms of credit granted for the quarter ended June 2020:

  • The value of new mortgages granted decreased by R25.95 billion (66.65%) quarter-on-quarter and by R27.20 billion (67.69%) year-on-year;
  • Secured credit which is dominated by vehicle finance, decreased by R18.57 billion (47.51%) quarter-on-quarter, and by R20.69 billion (50.22%) year-on-year;
  • Credit facilities decreased by R9.71 billion (50.53%) quarter-on-quarter and by R11.60 billion (54.97%) year-on-year;
  • Unsecured credit decreased by R15.10 billion (59.64%) quarter-on-quarter and by R18.42 billion (64.32%) year-on-year.
  • Meanwhile, credit bureaus held records for 26.96 million credit-active consumers, which showed a decrease of 3.69% when compared to the 27.99 million in the previous quarter.
  • Consumers classified in good standing decreased by 559,318 to 16.96 million consumers.

“This amounts to 62.90% of the total number of credit-active consumers, a decrease of 3.19% quarter-on-quarter and 3.65% year-on-year. The number of credit-active accounts decreased from 85.99 million to 85.23 million in the quarter ended June 2020.”

 

By Mpho Lakaje for EWN

On the evening of 23 March, South Africans gathered around their television sets to listen to arguably the most important announcement of this year. At the time, the nation was on edge. The rate of COVID-19 infections was accelerating here at home and the rest of the world. Very little was known about the virus other than the fact that it was ruthless to senior citizens and people with comorbidities. Italy, one of the hardest hit countries in Europe, became a point of reference. Although there were 340 000 reported cases worldwide at the time, compared to over 40 million today, it all looked scary. Nobody knew what was going to happen next. The South African government decided to take action.

“The National Coronavirus Command Council has decided to enforce a nationwide lockdown for 21 days with effect from midnight on Thursday 26 March. This is a decisive measure to save millions of South Africans from infection and save the lives of hundreds of thousands of people,” President Cyril Ramaphosa said that Monday night as his government imposed a lockdown on the country.

This strategy appeared sensible, especially as the country looked to buy itself time to prepare for the inevitable spread of the coronavirus. But a prolonged lockdown came at a heavy price. In the months that followed, businesses were bludgeoned. A staggering 2.2 million South Africans lost their jobs. Unemployment now stands at over 30%. Government admitted “the punch in the gut was severe”.

But even in our darkest hour, there was a glimmer of hope. The pandemic became a blessing to some sectors of the economy.

“I think the use of internet and the use of digital technology during COVID because of a lack of movement, obviously surged upwards. I think in the last quarter, if you look at the Statistsa release in the last quarter alone, telecoms was one of the growing sectors in COVID and in the [contraction] time, when everyone else was contracting up to 90% in terms of business activity and output,” says Nthabiseng Moleko, PhD graduate in development finance at the University of Stellenbosch Business School.

Johannesburg businessperson Donald Valoyi can attest to this. As companies were downsizing or shutting their doors, his grocery delivery service, Zulzi, experienced a different reality. It grew at a pace he never predicted.

“Our orders increased 500 times immediately and that means we had to increase capacity. We had to bring in more drivers. It was very difficult because it was during lockdown. Now you have to get guys who are brave to come and work for you. So yah, I think it was challenging. That type of growth comes with a lot of pain,” he told Eyewitness News.

Valoyi started Zulzi in 2013. He says: “We were just an e-commerce platform. We were selling books online to students.” But the business morphed over time. It offered anything from pharmaceutical products and alcohol to fast food. Today, it’s an inspiring company that focuses on delivering groceries. As a customer, you send a list of your grocery items to Zulzi, through an app or website. Your order will be received at the company’s call centre, before it’s sent to someone who will do all the shopping on your behalf. The shopper will then give your groceries to a driver, who will deliver to your doorstep.

“We cover all the major cities. If you talk about Pretoria, Durban, Cape Town and Jo’burg, we are there. We have about 45 guys who work in the office. So, this includes software engineers, the marketing team, the guys who run logistics and the customer service team. Then we have personal shoppers. We are sitting at around 250 shoppers currently. We have about 300 independent drivers at the moment. It’s an Uber-type model. Obviously that number always changes depending on how much demand we have at any given time,” says the former FNB employee. “COVID was very good for online businesses actually. Any business that’s online really took off. Everywhere I look worldwide, groceries were doing well. Valuations for the start-ups shot up,” he says.

Another entrepreneur who’s been smiling from ear to ear in recent months is Graham Wallington. He runs WildEarth, a media company that broadcasts live safaris. The company has a group of camera operators who capture images out in the wild. Those visuals are then sent to television sets, computers and mobile devices around the world, through a control room in Johannesburg. At the same time, safari guides interact with viewers in real time. “All we’re doing is, we’re just watching the unscripted process of nature unfolding, and I think that the majority of our viewers come to have this experience oftentimes because they are stuck, maybe because they are not well, maybe they are depressed, maybe they are lonely, or maybe because they are locked down and can’t access nature easily. What WildEarth offers is a way for people to feel like they are transported into the wild,” says Graham.

The concept is innovative and has become a massive hit in the coronavirus era. “Our global traffic increased five-fold between March and April 2020. Also, we saw an increase 15-fold in our South African audience during March and April 2020,” he says. The growth he is referring to hasn’t turned into financial returns yet, but it increased WildEarth’s valuation.

“I think these are businesses that are going to last because there has been a shift in the way we work. When you are talking about, for example safaris, the way we work has changed. Certainly the way we have fun has to change. The way we relax has to change”, says economist Xhanti Payi.

Developments in the local digital economy are not surprising though. A StatsSA report released earlier this year shows that over 36 million South Africans out of 59 million now use the internet. Most people consume content on mobile devices. This means the ground is fertile for innovative digital businesses or companies with a strong online presence.

“We were always moving into a relatively more online society, more online purchases. Whether we are talking about our food, we are talking about our clothes, that’s where we were going. But I guess it was accelerated even for people like me who were not particularly keen on that sort of thing. Now we are sort of there,” Payi says.

But as our nation looks to recover from the scourge of COVID-19, are we capitalising on the strength of digital businesses? President Cyril Ramaphosa recently announced an economic recovery plan with bold promises. He said his government would create 800 000 job opportunities in the coming years. The plan covered many sectors including forestry, energy, construction and farming. But he said very little about developing start-ups, particularly in the ICT space. Although he spoke of supporting 5,000 young entrepreneurs in passing, few details were given on the plans to help them.

Business experts Nthabiseng Moleko and Mark Swilling say we need to think differently. The two academics from the University of Stellenbosch Business School and the Centre for Complex Systems in Transition respectively, argue in great detail, through a document they released a few weeks ago that, “continuing on the current path, reliant on mainstream economic thinking and use of existing micro-economic solutions, is unlikely to deliver different outcomes in the future”.

 

By Bryan Pearson for The Wise Marketer 

Back to-school season is upon us, and parents are learning a lot about the science of prediction. The shifting sentiments that come with it should cause retailers to exercise new actions when it comes to building the right customer experiences.

For one thing, exactly where and when will school start? Nearly 70% of parents do not intend to begin school shopping until three weeks before classes are scheduled to start, because they don’t know what to expect, according to research by the National Retail Federation (NRF).

Not that they won’t spend when they feel ready. The NRF survey indicates parents of pre-K to high school students will spend more on back-to-school items this year – nearly $790 on average compared with $697 in 2019. That adds up to $33.9 billion, from $26.2 billion in 2019.

However, this doesn’t necessarily mean all retailers will record a seasonal sales gain, though it could present a fresh opportunity for certain retail sectors. An exploration of some of the research results regarding school spending reveals why.

2+2 adds up differently across households 
Because states and communities are enforcing varying guidelines on schooling, a single retailer can find it is marketing to dozens of sharply different needs. These six findings speak to those anticipated needs, which some retailers are already acing.

  1. Uncertainty’s learning curve – as of mid-July, more than half of parents had not finished their back-to-school shopping because they don’t know what to expect. This is why 68% are waiting until three weeks before school starts to even start. Many retailers and brands are offering competitive promotions, but the ones that show they understand the turmoil behind the shopping trip will stand out. Backpack brand JanSport is proving it identifies with the stress factor through a campaign called “Lighten the Load,” which promotes mental health wellness among young people managing in the pandemic.
  2. The price of being a teacher – it’s likely a lot of spending on back-to-school supplies is shifting from teachers to parents as more kids learn from home. Indeed, parents expect to spend about $10.4 billion just online for back-to-school supplies, up 28.4% from last year’s $8.1 billion, according to the 2020 Deloitte back-to-school survey. The NRF survey indicates spending for basics such as pencils, paper and other supplies will climb to $131 from $117 (up 13%). Retailers could benefit by sharing with parents what they know about how teachers shop.Staples, Amazon AMZN +0.9% and Walmart WMT +0.2% are among retailers marketing pencils, Sharpies and notepads in bulk, for example. Or retailers can learn from Bags in Bulk, which sells a complete 45-piece school supply kit.
  3. Big-ticket items compute – computers will be a big contributor to back-to-school spending this year – 63% of parents plan to buy laptops and other electronics, the NRF survey shows. (Of parents who expect their kids to learn at home, 72% plan to buy computers and home furnishings.) A computer purchase often requires research, and retailers that provide that service will probably click with shoppers. Best Buy BBY +0.6%’s online Student Hub helps customers shop “new tech for a new way to school,” with an online questionnaire – which includes “what’s your style?” questions – to determine needs and preferences before offering suggestions.
  4. The pandemic is adding to traditions – untraditional purchases, such as safety supplies (masks, sanitisers and gloves), also are nabbing part of the traditional back-to-school budget. Nearly 90% of parents will purchase safety products, according to a PayPal -0.4%PYPL survey, and 59% will invest in remote learning technology. Ace Hardware, not a traditional destination for back-to-school shopping, is taking advantage with push emails that promote “health and safety essentials” (masks, gloves, disinfectants) and a $5 coupon. It also is sending tips on setting up, and cleaning, a home classroom.
  5. Home-schooling changes fashion – apparel spending is predicted to decline – by 10% year-over-year based on Deloitte’s survey, though the NRF projects a more modest 2% decline. Parents may spend more, however, if they see clothing ideas that anticipate any environment. Macy’s M +3.1% is kicking off the shopping season with the upbeat campaign, “No matter how we school, let’s be ready,” which offers clothing and accessory suggestions so customers can “be ready” in ways that matter now – from “for any kind of classroom,” to “with max confidence” to “for every chill and study sesh.”
  6. Stores will be history – not completely, but the accelerated shift toward e-commerce, launched in the spring, will continue. More than half of parents (55%) told the NRF they plan to shop online, compared with 49% in 2019. Just 36% of shoppers plan to visit discount stores, compared with 50% in 2019, and 37% expect to go to department stores, from 53% a year ago. Retailers that want to entice back-to-school shoppers into the stores must find ways to make the experience unique and helpful. There’s a reason Amazon Prime AMZN +0.9% in March counted 118 million members (compared with 109 million a year before). Its “ready for school” site covers all the categories, including snacks and cable modems, in one click.

New schooling means new calculations
This school year will be a case study in perseverance – and creativity – for every party involved, from the brands that make the goods retailers sell to the students who use them. So far, many in the retail industry have proven they can adapt quickly.

Those that make history will likely be the ones that see the schooling challenge through the eyes of parents and students, to encompass all concerns from safety to job security to style, rather than through corporate performance measures.

It’s a pretty simple lesson, and it hasn’t changed in generations: if shoppers feel they are cared for, they will come.

 

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