CUs Stand to Benefit from Growing Back-to-School Spending

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Back to school shopping isn't what it used to be, but that could be good news for credit unions.

According to the latest "Back to School Report" from Cardlytics, consumers doing back-to-school shopping are making more trips to more stores, with specialty retailers seeing the biggest gains. Additionally, once brick-and-mortar shopping is done, there's a bump in online purchasing.

Credit unions that dig into the research may discover some real loan growth opportunities, particularly in credit cards.

Examining data from the six-week mid-July through August shopping season in 2013 and 2014, Cardlytics found not only a 3.04% increase in back-to-school spend for 2014, but that increase was driven by a 3.74% increase in the number of shopping trips consumers made. Consumers are spreading their spend around, too, hitting up more specialty stores instead of shops like Target and Walmart.

"The amount of trips that consumers take outside of their normal fallback was a big surprise to me," said Dani Cushion, CMO at Cardlytics. "That means consumers are going outside of their normal stores and normal fallback. There's a bit of a change of shopping behavior within that back-to-school period compared to the rest of the year."

While one-stop shops such as Target still represent more than 42% of consumers back to school shopping activity, they saw a decline of more than 7%, losing ground to the likes of apparel stores (a 2.1% lift) and office supply and electronics stores (a 2.4% increase). Pricier electronics also saw a significant spike in online sales during September.

Cardlytics didn't have data on whether back-to-school shopping patterns have shifted away from Trapper Keepers and Nikes toward electronic items, though John Brown, Cardlytics' president of U.S. operations, said that "there is data out there that suggests overall that more dollars are shifting away from clothes and toward electronics."

Despite Cardlytics data, there are signs that this year's back-to-school shopping might not measure up to previous seasons. According to public television's "Nightly Business Report," a recent Deloitte study predicted that shopping patterns in 2015 could drop by as much as 20%, thanks to consumers shopping for school items throughout the year and refreshing their supplies when they run low. Similarly, the National Retail Federation is forecasting a 6% drop in overall spending for back-to-school shopping this year.

'Kind of a Tradition'

Whether spending is up or down this year, going back to school won't be cheap for many consumers, and credit unions have products at the ready to help cash-strapped members.

OE FCU in Livermore, Calif., has offered back-to-school loans since 2011, and marketing manager Francisco Salazar said the CU normally makes 30 to 50 of the loans each year. Priced at 9.25% for a 12-month term, OE members can borrow anywhere from $1,000 to $3,000, though the average amount borrowed is $2,065. Salazar said he does not believe this year will be much different.

While some students do need pricey electronics for school, Salazar said that based on OE's membership, "most likely it's going for younger kids — school supplies and clothes. Nowadays everybody has a laptop and iPad and that type of stuff, so electronics do play a role, but our membership [is] definitely going for [more traditional] school supplies."

At UNCLE CU, also in Livermore, Calif., the loans are "just kind of a tradition," according to Sarah Samuel, VP of sales and marketing at the $308 million credit union.

Samuel said that for many people, back-to-school costs can be an issue for cash-strapped families struggling to deal with everyday expenses and bills.

"I have a daughter who's a freshman in high school now," said Samuel. "They come home with those packets and you have to pay for PE uniforms, all kinds of stuff that you need to pay for in addition to that if they want to get enrolled in extra-curricular activities, plus clothes or shoes or maybe a calculator or other school supplies that aren't cheap. … The expenses may vary, but the fact is that they're there."

For 2015, UNCLE is offering loans of up to $20,000 starting at 5.49%, depending upon credit worthiness. While in the past the credit union has also offered Visa balance transfer promotions at this time of year, Samuel said that one benefit of the back to school loans — which are merely seasonal repackagings of the credit union's personal loan — is that personal loan balances are higher than credit cards.

Samuel said the hope is that UNCLE will make between 50 and 75 of the loans this year for total loan fundings of $310,000 to $465,000, or an average loan balance of $6,200.

White Sands FCU in Las Cruces, N.M. has been marketing back to school loans for at least six years, and VP of Marketing Sharon Summer said that the loan — another repackaged signature loan — is a no-brainer.

"It's kind of dumb if you don't advertise these things, because it doesn't really cost you anything," she said. "When you send out a newsletter or put something on your website or in-branch it's a very minimal cost, so if you don't do that type of advertising I think you're remiss."

OE FCU's Salazar said that dressing up the personal loan for back-to-school season helps remind members that they might need a loan in a way that advertising a traditional personal loan might not.

"It's the right message at the right time," he said.

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