Perc Pineda, PhD
Chief Economist, PLASTICS
According to the National Retail Federation (NRF), 23% of back-to-school shoppers start at least two months in advance. As the 2024-2025 school year approaches, back-to-school shopping begins in earnest, some of which will have been recorded in July retail sales. Aside from school supplies, a back-to-school shopping cart would typically include electronics, clothing, shoes, textbooks, and dormitory furnishings with plastics and plastic products playing a vital role. The sales performance at retailers where this merchandise can be purchased showed positive, albeit modest monthly growth.
July’s advanced retail sales report shows a 1.0% month-over-month (M/M) increase and 2.7% year-over-year (Y/Y) growth in retail and food services sales. The key driver was a 4.0% rise in motor vehicle sales. Non-store retailers, primarily online shopping, saw the largest Y/Y increase at 6.7%. Additionally:
Significant back-to-school spending
In July, the NRF released its annual Back-to-Class survey, projecting total back-to-school spending to reach $39 billion, with average household spending at $875—down 4.9% and 1.7% from last year, respectively, but still significantly higher than the four years since 2019. Back-to-college spending is also expected to hit $87 billion, with $1,365 per household. Given the heavy reliance on plastics for these items, such a spending trend could increase demand for the plastics industry, affecting new orders, production, and shipments.
Given that back-to-school merchandise contains plastics and plastic products, growth in retail sales would be positive for domestic plastics production and plastics imports. Although it may seem tempting to link an increase in back-to-school spending estimates directly to increased plastics production, such extrapolation would be misleading for three main reasons.
Production lead times and channels of distribution matter
First, back-to-school supplies involve various materials, manufacturing processes, and sourcing lead times. Retailer lead times—from booking orders to warehouse delivery—vary across online and physical stores. Online retailers could require inventory at their warehouses for between 45-90 days and up to 120 days to account for customs or shipping port of entry for imported merchandise.* Brick-and-mortar stores may require additional lead time for display and merchandising. Producers must align their production and delivery schedules with retailers’ deadlines. Positive back-to-school retail numbers in July likely reflected earlier plastics shipments.
Second, inventory levels are crucial. Retailers’ inventory-to-sales ratios can influence whether sales growth translates into new orders for wholesalers or suppliers. Similarly, if suppliers already have inventory, they will prioritize moving those products before replenishing based on their shipment forecasts. For instance, U.S. manufacturers’ finished goods inventories across all manufacturing sectors grew from $245.9 billion in May 2020 to $300.3 billion in October 2022. In the plastics and rubber products sector, inventories rose from a low of $11.6 billion in August 2020 to a high of $15.5 billion in August 2022. From these peaks, the average monthly changes in inventories through June of this year were -0.1% and -0.2%, respectively, indicating a higher likelihood that shipments, including those related to back-to-school merchandise, were sourced from existing inventory rather than new production.
Third, product development and trends matter. While not all back-to-school merchandise requires yearly updates, processors offering new sustainable production methods, such as those featuring recycled materials, could stand out in the market.
In summary, as the 2024-2025 school year approaches, back-to-school spending remains robust, despite being slightly lower than last year, and underscores the ongoing demand for key categories like electronics, clothing, and dorm supplies—many of which rely on plastics. While sales figures show modest growth, the impact on the plastics industry is nuanced, influenced by factors such as production lead times, inventory levels, and product innovation. The industry’s ability to efficiently meet demand will be crucial in navigating these dynamics. Overall, the increase in back-to-school retail sales has a net positive effect on plastics processing.
*The U.S. Census advanced monthly retail sales combine electronic and appliance stores.
*Kurt Kurzawa, Senior Director of Sustainability and Packaging at PLASTICS.
