2020 Deloitte back-to-school surveyLearning to grow amidst uncertaintyJuly 2020

Contents3456101423Executive summaryCheat sheetKey findingsCOVID-19 impactsAnxiety running highConsumer spending trendsCategory spend shifting to technologyDigital engagementOnline platforms acceleratingConsumer preferencesNeighborhood formats trendingCopyright 2020 Deloitte Development LLC. All rights reserved. 2

INTRODUCTIONExecutive summaryIn the previous 12 years that Deloitte has covered the back-to-schoolseason, nothing has caused disruption to families, schools, andretailers like COVID-19.This spring, the forced closure of thousands of schools, impacting 53Mstudents in K-12 grades, turned parents into educators and facilitatorsof remote learning overnight. Many had to purchase school supplies,furniture, or technology to support the new reality of homeschooling. Only one-half of parents were satisfied with the educationprovided, and many were concerned their students aren’t prepared forthe next grade.The back-to-school season normally represents a clear transition in thecalendar as summer shifts to autumn; this year it marks a season ofuncertainty. As of early June, 60% of parents did not know what formatschools would use for the start of the school year. And teachers arealso unresolved, with an almost equal split between those that itbelieve it would be safe to return to work and those that believe it isunsafe.1 All of this uncertainty is making it difficult for parents to planfor what school supplies will be needed and when they should bepurchased.So what does this mean for the back-to-school selling season?Will parents’ resources be reallocated to help students catch up? Will ecommerce see a surge of back-to-school purchases asconsumers’ concerns about safety persist? Or will higherunemployment rates and lack of certainty in the economic outlookcause people to cut back on spending altogether? Rodney R. SidesFor retailers, the goal should be to stay nimble to address students’changing needs, especially as tech and virtual learning platforms willlikely continue to grow as states prepare for futuredisruptions. Retailers should also consider that 75% of parents areworried about the health and safety of themselves and theirfamilies. Putting them at ease by offering convenient, safe ways topurchase may go a long way.Stephen RogersFor further details on back-to-school shopping trends, please browseour additional findings in the slides below.At the same time, conventional shopping behavior across all sectors isbeing altered by COVID-19, as only about half 2 of consumers feel safegoing to the store, and over one-third of parents are concerned aboutmaking upcoming financial payments. This is pushing consumers tobalance typical purchase drivers such as price, product, andconvenience with safety and security.Vice chairman & US leaderRetail & DistributionDeloitte [email protected] directorConsumer Industry CenterDeloitte Services [email protected] FurmanRetail sector specialistRetail & DistributionDeloitte Services [email protected] SkellyResearch leaderRetail, Wholesale & DistributionConsumer Industry CenterDeloitte Services [email protected]: (1) Previously unpublished findings from the June 13, 2020 Deloitte State of the Consumer Tracker; (2) Deloitte, Deloitte State of theConsumer Tracker, from May 18, 2020.Copyright 2020 Deloitte Development LLC. All rights reserved. 3

DELOITTE’S 2020 BACK-TO-SCHOOL SURVEYCheat sheet Anxietyrunning highCategoryspend shiftingDigital engagementacceleratingNeighborhoodformats trendingCOVID-19 has madeshoppers concerned fortheir health, financesand the education oftheir children, alteringtraditional back-toschool (BTS) behaviorOverall spend remainsrelatively flat YoY, butparents are planning toshift spend toward techto address the newrealities of schoolingAs consumers seek out safeshopping options, onlinespend and low-contact formatssuch as BOPIS are expectedto accelerateMass merchants are stilltop destinations but maylose some ground togrocers and drugstores asCOVID-19 is causingconsumers to shop closerto homeCopyright 2020 Deloitte Development LLC. All rights reserved. 4

DELOITTE’S 2020 BACK-TO-SCHOOL SURVEYKey findingsAnxiety running highDigital engagement accelerating Parents were not impressed with schooling this spring and only 43% feltthe education prepared children for the next grade Parents expect to spend 37% of their budget online, up from 29% in2019, as health concerns are top of mind 66% of parents are anxious about sending their kids to school this fallbecause of COVID-19 Parents are seeking contactless shopping with nearly one-half ofshoppers seeking out BOPIS (buy online pick up in store) options (from36% in 2019) As 76% of respondents are concerned about health and 38% aboutfinances, consumers are seeking out affordable, safe ways to shop 64% plan to shop for BTS from their personal computers (up from 42%in 2019) as reduced mobility slows mobile purchases While most “next-generation” shopping is slow to get off the ground, 14%of shoppers planned to use voice assistants, up from 6% in 2019Category spend shiftingConsumer preferences: Neighborhood formats trending Total BTS spending is expected to reach 28.1B or 529 per student,relatively flat from 2019 81% of shoppers expect to shop at mass merchants for BTS, adecrease from 88% in 2019, as COVID-19 has many shopping at retailformats closer to home 40% of parents expect to buy fewer traditional school supplies astechnology more prevalent in class (vs. 30% in 2019) Technology spending up 28%, offsetting a reduction in apparel (down17% YoY) and traditional BTS items (down 18% YoY) Concern that students falling behind causing 51% of parents to increasespend on virtual learning tools Despite the uncertainty around when and how schools will open,customers are sticking with their typical timing patterns—80% plan toshop during late July–early August Children’s influence on computers and hardware purchases rises to69% from 54% in 2019, as educational trends become more ingrainedwith technologyCopyright 2020 Deloitte Development LLC. All rights reserved. 5

COVID-19 impactsAnxiety running highCOVID-19 has elevated parents’ anxieties aroundhealth, finance, and the quality of education thatstudents received this spring. These concerns willlikely shift the way consumers approach BTSshopping—specifically around what and how theywill purchase.

The education students received this spring didn’t impress parents; formats with a human touchfaired better, but concerns linger if students are prepared for the next grade92%School closureParents who had theirchildren’s schools closedfor two months or more56%Overall satisfactionParents satisfied withthe learning resources43%Academic readinessfor next gradeParents who agree thatremote learning makeschildren academicallyready for the next gradeLearning resources during school closures (Percentage of parents)57%67%54%56%32%29%27%73%79%11%Digital learning content Live streaming of classesNondigital learningE-learning platforms run Online tutors for one-onprovided by schoolpackets and assignments by private companiesone sessionsprovided by schoolXX%Satisfaction level among parents whosechildren used the specific resource% of parents whose children usedthe specific resource Lower-income households most likely to use nondigital resources Higher-income households most likely to use more personalizedresources: live streaming and online tutorsQuestion: How did your children’s school provide education while the school was closed because of COVID-19 outbreak? (multiresponse question; hence, totals may not equal 100%).Note: N 1,163.Copyright 2020 Deloitte Development LLC. All rights reserved. 7

As parents gear up to send students back to school this fall, anxiety is running high asshoppers are preoccupied with financial and health concernsHealth vs. financial well-beingHigh66%5%33%LowFinancial concern2Highly concerned aboutfinances, minimallyconcerned about healthHighly concerned abouthealth and finances43%19%Minimally concerned abouthealth and financesLowof parents are anxiousabout sending children back toschool due to COVID-19 Health concern1Highly concerned about health,less concerned about financesHigh76% of shoppers indicated high health concernBTS shoppers who are concerned about their healthare safety focused, likely to shop online; they seekretailers taking COVID-19 precautions38% of shoppers indicated high financial concernLower income shoppers are even more worried thanthe average, and are concerned about ability to makeschool related paymentsQuestion: To what extent do you agree or disagree with the following statements? (1) I’m concerned about my family’s health, andmy own. (2) I’m concerned I will not be able to make upcoming payments (e.g., rent, mortgage, auto, credit card).Note: N 1,200.Copyright 2020 Deloitte Development LLC. All rights reserved. 8

Uncertainty is running high as many parents are unsure of how, when, and in what formatschool will take place this fallLack of communication creating uncertaintyFormatHow will schools delivereducation?1TimingWill COVID-19 delaystart dates?2SafetyWhat precautions willschools take to keepstudents safe?360%Unsure26%Unsure43%No schoolcommunicationQuestions: (1) How will your children’s school start this year?; (2) When will the school start for your child/children this year?; (3) Whatprecautions are being implemented by your children’s school because of COVID-19?Note: N 1,200.Copyright 2020 Deloitte Development LLC. All rights reserved. 9

Consumerspending trendsCategory spend shifting totechnologyAs consumers deal with ambiguity around howschooling will look in the upcoming year, they areshifting purchases in anticipation of a new realitywhere students will likely rely more on technology.

Digital acceleration fueling growth in tech products at the expense of schoolsupplies and clothingEstimated market spend by category (2017–2020) 26.8B 27.3B 3.8 B 3.7 B 2.9 B 5.4 B 27.8B 3.1 B 2.8 B 3.6 B 5.9 B 6.1 B 28.1B 2.0 B 4.0 BTechnology products: 28% YoY growth(2019–2020) 4.6 B48% purchased online 5.0 B 14.7 B 15.0 B 14.9 B 12.5 BTraditional products:-17% YoY growth(2019–2020)33% purchased online2017Clothing and accessories2018School supplies2019Electronic gadgetsComputer and hardware2020Personal hygiene products and desk/tables (newly added)Notes: N 1,200. All figures are given in US dollar.Source: Deloitte calculations on BTS market spend based on annual consumer survey projections and revised US current population surveys.Copyright 2020 Deloitte Development LLC. All rights reserved. 11

Increase in tech product purchases were not enough to outweigh the decline intraditional BTS items; addition of home/health products* increases overall spend by 2%National average spend 529 492( 2% YoY)(total with new category)(-5% YoY)(comparable categories)Average spend in each categoryShare of customers spending in each categoryAverage spendYoY change(percentage)% Customers spendingYoY change(percentage points)Clothing and accessories 261-10%90%-7 p.p.School supplies 102-13%92%-6 p.p.Computers and hardware 395 38%22% 2 p.p.Electronic gadgets and subscriptions 316 4%24% 2 p.p.Home/health(new COVID-19 category) 61NA63%NACategoryNotes: Average spend includes only respondents who will purchase the above-mentioned category or item. All currency values are in US dollar.* Newly added categoryCopyright 2020 Deloitte Development LLC. All rights reserved. 12

Parents are looking to invest in digital resources to supplement school education in theface of uncertainty about what school will look like next yearDigital learning resources to enhance the education experience2Digital substitution on the rise140%35%31%32%Subscribe to e-learning platforms40%Enroll for online course37%30%Buy digital devices for children201620172018201932%Online tutors for one-on-one sessions14%Buy licenses for educational tools13%2020Questions: (1) To what extent do you agree or disagree with the following statements? “Compared to a year ago, I’m buying fewer traditional school suppliesbecause my child is using more digital technologies in and out of the classroom” (percentage agree/strongly agree, N 1,200); (2) How do you plan to spendon virtual/online learning resources for your children this year? (multi-response question; hence, the total may not equal 100%, N 614).Copyright 2020 Deloitte Development LLC. All rights reserved. 13

DigitalengagementOnline platforms acceleratingConcern for health and safety is accelerating theonline spend as customers seek out contactlessexperiences such as delivery, curbside pick-up, andBOPIS.

As one-half of customers still feel unsafe1 going into stores, online purchases gain sharefrom in-store formats, while in-store also loses share to consumers who are undecidedContribution to overallBTS spendBTS spend: Share by channelIn-store70%60%56%57%57% ine 10.4Billion20192020 5.5BillionUndecided (in-store or online)Question: What percentage of the budgeted amount do you expect to spend online or in-store or undecided?Notes: N 1,200. All currency values are given in US dollar.Source: (1) Deloitte State of the Consumer Tracker: “Only 48% of US consumers feel safe going to a store.”Copyright 2020 Deloitte Development LLC. All rights reserved. 15

As consumers shift to contactless formats, the role of the store continues to evolve andtakes on new importance for the final-mile experience26%of BTS shoppersplan to use BOPISmore frequently1Shoppers preferring retailer with:Buy online,return to store2Buy online,pick-up instore353%(44% in 2019)47%(36% in 2019)Questions: (1) Which of the following do you plan to do in the near term for your BTS shoppi