China's K-12 Back-to-School Season May Be an Overlooked Market

"School uniforms" is the excuse you hear most often, but clothes aren't the whole of back-to-school spending. For companies watching the youth market, this may be an underrated opportunity.

Just how big is the back-to-school market for schoolchildren? For a lot of people in the business, that is still a question to be worked out.

In the United States, the back-to-school season, from early July to mid-September, has become the second-biggest shopping season of the year. According to a report from the National Retail Federation and the research firm Prosper Insights & Analytics, measured by consumer spending, "back to school" beats Mother's Day and Valentine's Day, and trails only the winter pairing of Thanksgiving and Christmas.

For more than two months, "Back to School" copy is everywhere, and every kind of retailer joins in. Their enthusiasm matches Black Friday or Cyber Monday.

In China, the feeling is much fainter — online at JD.com and Taobao, and offline at Walmart and the department stores alike.

A few days ago the top slot on Taobao's homepage went to a liquor festival, and on JD.com the promotions for mooncakes and hairy crab were far more prominent. Pacific Department Store in Shanghai's Xujiahui was running an "Autumn Women's Festival," and Orient Department Store was covered in "Thanksgiving Season" discounts.

Brands aren't especially keen either. Not until August 26 did a vertical "Back to School" banner go up at the Muji flagship store on Huaihai Road in Shanghai. In the United States, by contrast, Old Navy, a GAP brand, and the tissue brand Kleenex each made a dedicated Back to School ad.

Total US back-to-school and back-to-college spending this year is expected to reach $75.8 billion, $27.3 billion of it from K-12 students. And K-12 spending is growing faster: over the past seven years, that figure has risen 55%.

In China, this may be an overlooked market.

"We have school uniforms"

It's the excuse you hear most often.

"My daughter doesn't ask for much when it comes to clothes — clean and tidy is enough. And on weekdays she's in her uniform anyway; she only wears her own clothes on weekends." That is what the father of Yu Xi, who starts her first year of high school this fall, told us. Plenty of parents say the same thing.

In the US it is exactly the reverse: clothing and accessories are the most important part of the back-to-school market. National Retail Federation figures show that over the past decade, households spent an average of about $200 on apparel, more than on electronics, sneakers or school supplies. It has always been the single biggest item in back-to-school shopping, at roughly 34.9%.

"Teens are increasingly using clothing as a form of self-expression," the National Retail Federation says in its report. The group has forecast back-to-school sales trends every year since 1996.

One point is worth stressing: about 90% of American middle and high school students wear no uniform, which is why the US has so many apparel brands aimed at teenagers — Abercrombie & Fitch (and its Hollister label), American Apparel, Aeropostale. All of them have lost some ground, but years of "Back to School" marketing still won them a place in shoppers' minds. In a 2015 survey by the marketing firm Tenet, Old Navy, A&F and Aeropostale were still rated, as of last year, the "Back to School brands" consumers knew and liked best.

Chinese middle and high school students wear uniforms Monday through Friday, and that really does hold spending back.

Look at it another way, though, and what a student spends on uniforms is not low at all.

The mother of Sun Yiting, who starts high school this fall, told us they paid 1,330 yuan for a year's worth of uniforms: two summer sets, two spring-autumn sets, one winter set and one formal set. That is roughly what an average American family spends on back-to-school clothes, about $200.

Who makes these poor-quality uniforms is hard to trace. Sun Yiting's mother showed us a group chat in which parents who had just collected their kids' new high school uniforms were comparing notes: "The front of the left leg is already pulling threads, and there's a small hole." "Mine is losing color and shedding fuzz, too."

According to a report in Bloomberg Businessweek, Youka (Beijing) Technology Co., Ltd. makes uniforms for close to a hundred schools, including the Second Affiliated High School of Beijing Normal University, with 2014 sales estimated at around 200 million yuan. It is one of the largest manufacturers in the uniform business, and it still holds less than 1% of the market.

Ministry of Education figures put China's 2015 enrollment at 43.1195 million middle school students and 40.3769 million high school students. Even at a conservative 500 yuan a head — spending varies by region; parents we spoke to in Changsha put uniforms at 300 to 500 yuan — that works out to more than 40 billion yuan.

That is a sizable market. It is just a gray one. Counted on its own, it is no smaller than what these families would spend on brand-name clothes.

"We have to take extra classes"

In theory, take away the five school days and students still have two-sevenths of the week when they don't have to wear a uniform. That market isn't small either.

In practice it doesn't work out that way. Students have little free time on weekends. Their weekends go to extra classes — tutoring of every kind, plus so-called interest classes. In short, another form of school.

Huang Jiaxi is in her third year of middle school in Changsha. To prepare for the high school entrance exam, she takes three tutoring classes on Saturdays (English, math and physics) and goes to her school's "enrichment classes" on Sundays. Besides math and physics tutoring, Sun Yiting studies Latin dance and takes piano lessons when there's time. Their weekends are packed, they get little time with friends their own age, and the hours left for wearing something of their own choosing shrink again.

Something more forbidding: students and parents both said time isn't the real problem. Money is.

In Sun Yiting's household, tutoring takes the biggest share: 8,000 to 10,000 yuan a semester for education outside school. "This is nothing — some one-on-one classes cost far more, 700 yuan a session," Sun Yiting's mother said. "Education is the number one expense in our family now."

To spare Huang Jiaxi the commute, her parents rented an apartment near the school and stay there with her, at 2,300 yuan a month. This semester, three outside classes alone came to more than 9,000 yuan. Tuition is waived at the middle school stage under compulsory education, but they still pay the school more than 1,000 yuan a semester for textbooks, "enrichment classes" and lunch.

This is very common. In a 2015 survey by iResearch of Shanghai families with children aged 7 to 18, 25.5% of respondents spent 1,000 to 2,000 yuan a month on educational products, and 23.9% spent more than 2,000 yuan a month. According to a survey of urban residents' saving and spending intentions by the China Economic Monitoring Center, education is the fastest-growing category of spending in Chinese urban households, rising about 20% a year on average. There is plenty more public data and survey work saying the same thing.

The near-two-month summer vacation, meanwhile, is treated as ideal tutoring time. So for any market outside education, things really are hard.

But according to the Pew Research Center's 2015 report "Parenting in America", at every income level sports are the extracurricular activity kids take part in most. On average, more than 73% of children do sports outside school, ahead of religious activities, arts training of various kinds, volunteering and tutoring, in that order. That also wears out American teenagers' clothes faster, which means more spending.

"You compete on grades, of course — and on shoes"

Still, this market doesn't leave everyone empty-handed.

Even if you write off clothing entirely: in US back-to-school spending, apparel is only 35%. Electronics come second at 30.3%, sneakers third at 18.8%, and school supplies fourth at 15.9% — which leaves the other 65% of the market open.

Sizing up each other's shoes is close to universal among middle and high schoolers. Apart from the uniform, shoes are the one place left to show some individuality, or, put plainly, to show off.

"You have to pick good-looking shoes, because you're going out where people see you," said Yan Shao, who's in her second year of middle school in Guangzhou.

Che Meihui, a high school senior in Shaoguan, Guangdong, prefers plain white sneakers and Vans in black, because both look good with her uniform. "Our uniform pants are red, so the shoes have to go with the pants."

Yuan, a high school junior in Wuhan who asked not to be named, talks about Nike with real heat. He likes Nike's air-cushion soles, and the product details come without a pause: "The LeBron 13, the Kobe 11, the KD 8 — they all look sharp."

Xiaoxuan, in Shenzhen, likes New Balance because the brand leads with jogging shoes and retro runners: the first are practical for her, the second are the look she wants.

Like many "mature," "independent" consumers, middle and high schoolers have their own opinions and preferences about brands. We contacted several market research firms, Euromonitor and Nielsen among them, and all said they had no research on teenagers' sneaker-brand preferences or on market share. In our own interviews, the international brands came up most: Nike, Adidas, New Balance.

In fact, quite a few companies go straight at the teen sneaker market.

Plenty of sportswear brands have shown interest in this age group.

Besides Nike Kids (for ages 6 to 12), Nike's adult lines cover teenage buyers too. To reach them, Nike has run a number of "campus" events — it titled the Shanghai middle school soccer league from 2011 to 2013, for instance. And in basketball, the market Nike cares about most, the NBA Athlete Tour held every summer is aimed at high school and college students. From David Robinson to LeBron James to Kobe Bryant, Nike has arranged for these top players to meet students directly on every China trip.

Adidas runs no shortage of campus events of its own. Last year it launched a national boys' high school 3-on-3 basketball tournament, and in 2010 and 2013 it was the title sponsor of the national high school basketball league. Its "big kids" line (ages 8 to 14) covers some middle schoolers as well.

Among domestic brands, Li-Ning has sponsored and titled middle and high school basketball and badminton competitions on and off since 2007, and Anta ran an ad last year called "Just Go Kick," widely read as made for teenagers.

Adidas is one of the few sportswear brands that ran a back-to-school promotion this year. But even with a "Gear Up for School" theme — discounts from August 19 to August 28 — you could barely tell. Apart from mobile ads, there was nothing about it on the official website or the Tmall store, and among the physical counters we visited, only a scattered few had put up "Gear Up for School" materials, which may come down to the distributors.

"Besides shoes, there's also…"

Retailers aren't entirely indifferent to back-to-school marketing. School supplies and electronics are two other big demand categories, after all.

Three of the rotating banners on Amazon's homepage use the "back to school" idea, selling books, school supplies and electronics such as the Kindle. JD.com pulled "back to school" up as a trending search term under its homepage search bar, and its "3C" electronics division, its books and media section and its "global shopping" section all ran matching promotions.

Wang Fei, a PR representative for Amazon China, told QDaily that back-to-school season isn't like the August 19 mega-sale: there's no single plan, each category handles it itself. It isn't that the season doesn't matter, she said, but that only a few categories sell into it, unlike "8/19," which is a promotion across every category.

Chu Shiyuan, general manager of integrated marketing at JD.com's 3C division, said much the same: "[Back-to-school marketing] mainly exists to meet consumer demand in the gap between 618 and Double 11."

The sporting goods retailer Decathlon dropped its "Back to School" campaign this year. Decathlon China's explanation is that a vague "back to school" theme doesn't put sports front and center. But the company told QDaily that even without the campaign, teen sports remain a marketing focus in this stretch of the year. Through August, Decathlon held parent-child sports days across the country. In late August, its stores gave teen sports products prominent display space, with each store picking what to recommend based on local conditions.

Demand tied to "moving up a grade level" runs higher, by comparison, because most parents see it as their child entering the next stage of life, and shopping satisfies the need for a ceremony. A few other occasions get the same treatment — a birthday, finishing final exams. Beyond that, people aren't especially sensitive to the "start of school" as a date. Most of the time it's buy a new one when the old one breaks, or buy it when you need it.

But demand is always created. Just as e-commerce platforms love inventing shopping festivals, the point is to manufacture a reason to buy, buy, buy.

And middle and high schoolers already have reasons of their own to spend.

Liu Yuteng, in his third year of middle school in Guangzhou, likes Edison Chen's streetwear label. It costs too much and doesn't suit his mother's taste, so she is against it; in his words, hers are: "Students shouldn't wear clothes with that kind of style." Sun Yiting, who just started high school this year, said, "I buy A02 clothes because I like the black cat print." Yuan, the high school junior, said he has liked Girls' Generation for six years, but the Casio watches they endorse are still on his wish list only.

There's a more important point: young people are always more easily swayed by their peers than by their elders. American teenagers are especially open to YouTube personalities — time spent watching "back to school" and "first day of school" videos on YouTube grew 70% year over year this year. Retailers such as Target have accordingly brought in the youth influencer Jordan O'Brien to speak for them.

Chinese teenagers care just as much about approval from classmates. Yu Xi, mentioned above, only warmed to Swatch after seeing so many classmates wearing the watches, and has since become loyal to the brand.

You've probably lived through this yourself: the middle and high school years always come with quiet one-upmanship. In Gossip Girl, the American series about the elite prep school set on New York's Upper East Side, you see it constantly among the characters, especially Queen S (Serena), Queen B (Blair) and their circle. It's exaggerated, but that scene really does play out when American schools go back.

For Chinese students, the fun is heavily discounted. Wang Jing, a high school senior in Shenzhen, said some classmates of hers carry their books in branded paper bags with the logos showing, on top of their backpacks — everything from Muji to Dior and Chanel. "Nobody will ever say they're competing. They just watch each other quietly."

In China this demand is suppressed. You can still see the market's potential.

Muji has run "Back to School" in its mainland China stores since 2009. During that stretch, stationery takes the lead in the display area, stacked under a "Back to School" banner. Figures Muji China provided show that in the week of August 22 to August 28, stationery made up about 11% of total sales — not a small share.

Fan Hui, general manager of marketing at JD.com's apparel and home division, said that during last year's back-to-school season, running shoe sales grew more than sixfold year over year, student stationery more than fourfold, and backpacks more than 200%.

Taobao's search rankings (as of September 4) put "back-to-school backpack" first among the fastest-rising search terms, up 12,526.15%.

For companies that keep an eye on the youth market, this is a market they may be overlooking — or, put another way, an underrated opportunity.

(At the interviewees' request, Yu Xi, Huang Jiaxi, Yan Shao, Che Meihui, Xiaoxuan and Liu Yuteng are pseudonyms.)

Cover image from Visual China Group, screenshots, kiddiescornerdeals and Douban Movie