Retailers Battle for Back-to-school Bonanza

The back-to-school season is upon us again and mothers and children swarm retail chains hunting for September 1 essentials. This year's star brands include Shrek, Bratz, Subliminal, Nike and Puma. Office supply retail chains Office Depot, Kravitz, Diunon and toy retailer Kfar Hashashuim invest substantial advertising budgets in the late summer season, since the NIS 400-450 million back-to-school market is a sizable portion of their annual sales turnover.

Diunon CEO Eitan Singer said back-to-school sales started relatively late this year. Other retailers disagree, saying the strongest market in school supplies always comes down to the last three weeks before school starts.

Office Depot marketing vice president Ofer Dauber said: "The ad campaigns are starting a week later than last year because of the day of the week school starts. Every year, most sales are in the last two weeks of the summer vacation. In 2003, September 1st fell on a Monday, the beginning of the week. This year it falls on a Wednesday which means we `gain' an extra shopping week."

It appears this year most of the retailers are focusing on the cost of the standard school supply package. Office Depot and Kravitz estimate the average expense at NIS 250 per child, while Diunon calculates the cost of preparing a child for the first day of school at NIS 400 and discount retailer Tzatzuim Hezi Hinam says it can outfit a schoolchild for NIS 250-330.

Kravitz marketing VP Menashe Zilka said the chain was seen as expensive for writing supplies and school bags, and is now focusing advertising on new populations, emphasizing the option of "smart" buys at Kravitz.

Zilka says good prices are no longer the aspiration of only the lower classes. He notes that middle class and top decile families now travel to the periphery to shop at discount food retailers such as Hezi Hinam.

He said Kravitz has adjusted itself to the market situation. "Instead of selling the most prestigious notebook at NIS 10, we're selling 3 notebooks for 10 shekels and the market is lapping it up".

Zilka hopes to change the strategic change into increased sales. He says the back-to-school market has shrunk 15 percent every year since 2002, but he nonetheless projects a 15 percent increase in sales for Kravitz this fall.

As in previous years, Kravitz will hold exhibitions in 30 malls, in addition to its 68 branches. Office Depot CEO Zachi Fishbein said Office Depot is much more focused on price this year than in the past. "We have a lot of private label products that will be 25 percent of our sales," he said. According to Dauber, "this year, with the recession still evident, Office Depot decided to focus on prices for all pockets while offering complete solutions for the needs of the student."

Office Depot notes the tension between the decision-making mothers and children during the back-to-school period. While mothers are interested in price, the children are focused on the brand name. Companies invest a great deal of money in leading brand identities and in buying school supplies from the leading brand suppliers.

Lafayette, for instance, gambled on the Subliminal brand, a bet that may not pay off. Singer said this year there is no single brand sweeping the market, which seems to be divided into about twenty popular brands.

The variety of brands is evident in the leading names noted by the different retailers. Office Depot reports success with Shrek, Spiderman, Bratz and Dragon Ball. Hezi Hinam noted YU-Ge-OH and Kravitz added Keds, Skechers and Outdoor. According to Zilka, the major hit of the past two years, the Spanish-language television series Rebeldeway, has seen its brand name drop substantially this year.

Singer attributes 40 percent of Diunon turnover to back-to-school sales. Fishbein says Office Depot sees 8 percent of the chain's sales on these products. Zilka said Kravitz's back-to-school sales account for 30 percent of its annual revenues.

Since so much of the chains sales stem from this two-month period, substantial advertising budgets are dedicated to the subject. Zilka said Kravitz invests about NIS 5 million in marketing for this period, about half its annual advertising budget. Office Depot invests 20 percent of its annual NIS 15 million ad budget on "back to school."

Diunon this year also signed an exclusivity agreement with department store chain New Hamashbir, a deal worth about NIS 6 million.