Back-to-school season in the UK is dominated by BNPL

By Puja Sharma

As the Summer holidays come to an end, families are preparing to return to schools and offices, and retailers are in the midst of the key back-to-school shopping season in the UK. According to Mastercard SpendingPulse, which measures in-store and online retail sales across all forms of payment, total retail sales are expected to grow year-over-year – with both rising prices and consumer demand contributing factors.

Looking at the primary back-to-school period, year-over-year sales growth is expected to be particularly strong in the UK, compared to other markets in Europe, up 9.6% year-over-year and ahead of France (4.6%) and Germany (2.8%). The first two weekends in September are expected to see the sharpest growth, with spending on lodging, including hotels, and restaurants set to have the biggest increase in the UK at this time last year (6.7% and 5.9% respectively)

This spending season will be defined by choice; whilst in-store shopping will regain momentum with a 14.5% year-over-year increase, online retail is expected to decline 6.1% over the same period, as people return to in-person shopping. However, this is still significantly above pre-pandemic levels, up 27.9% since the same period in 2019. Notably, retailers are expected to offer promotions across channels as they compete for consumer purchasing power.

‘With rising prices and resilient demand, we are seeing retail spending increase in this key back-to-school period. This time of year is a critical bellwether of the fortitude of the consumer. Mastercard SpendingPulse indicates that back-to-school retail sales will particularly be driven by in-store purchases in the UK, supporting the recovery of the high street’, said Natalia Lechmanova, Senior Economist, Europe, Mastercard. ‘As inflation continues to run high, mindful shoppers are also prioritizing experiences like restaurants and travel, as they pull back spending on other goods like housewares.’

Surge in BNPL

At a time when inflation and rising interest rates are stretching household budgets, consumers are reassessing and making tough decisions about their purchases. Retailers face a highly competitive marketplace where change is constant.

More than one-third of consumers (37%) have already or plan to use Buy Now Pay Later (BNPL) loans for their back-to-school purchases, according to research from TransUnion’s retail business. BNPL loans allow consumers to make purchases with deferred or no-interest installment loans.

Shoppers prefer “tap to pay” and curbside pickup

According to TransUnion’s research, nearly 60% of consumers use “tap to pay” at checkout (such as Apple Pay or Google Pay). It is faster for consumers to use such a service than to swipe or insert their debit or credit cards. Of the 41% who don’t use “tap to pay,” 55% say it isn’t more convenient than using a debit or credit card, and 25% say they don’t trust it.

Six in ten (60%) consumers indicated they use a curbside pickup, with 40% of that group using it often or always. The vast majority (78%) use the curbside pickup to avoid crowds, while nearly half do so either because it is convenient when running errands with their kids or to get their items faster. The survey also found that consumers feel that curbside pickup significantly improves their shopping experience. With back-to-school in full swing, the survey showed consumers to assess if and how their school-related shopping habits changed this year.

Key findings

• More than half of the survey respondents said they expected to spend more or considerably more on back-to-school shopping this year
• Nearly 40% planned to substitute less expensive items
• Roughly 40% of shoppers said they’d use BNPL services to purchase back-to-school supplies compared to just 2% of consumers responding to TransUnion’s 2021 Consumer Holiday Shopping survey
• Nearly 60% of consumers use “tap to pay” at checkout (such as Apple Pay or Google Pay). which is faster for consumers