Retailers heading into the back-to-school window should stop assuming blanket discounts will bring shoppers back. New data from Circana shows spending this season is likely to be “moderate at best,” with demand concentrated among higher-income households and purchases skewing to essentials and technology rather than discretionary items.

What Circana’s numbers show

Circana reports overall U.S. retail sales revenue fell 1% year over year in July, while unit sales declined 2%. For the four weeks ending Aug. 1, discretionary general-merchandise dollar sales dropped 4.3% and unit demand fell 3.9%.

The firm finds growth is now concentrated with higher-income consumers while many shoppers trim discretionary purchases. As Kiara Barrett, Circana’s global head of thought leadership, put it: “Consumers are still spending, but they are increasingly doing so through prioritization rather than expansion; driven by purpose rather than promotions.”

Circana expects back-to-school purchases to favor essentials — school supplies and first-day technology needs — while kids’ apparel looks set to be spread across the year. The firm projects kids’ apparel dollar sales will decline 1% to 2% in Q3, driven by weaker unit demand.

Complementary signals: stress and payment flexibility

Other recent surveys add nuance. An Omnisend survey found roughly 40% of parents expect more financial stress this season compared with 2025, and it reports 45% of U.S. households plan to use buy now, pay later (BNPL) for back-to-school purchases — up from 39% last year.

At the same time, the National Retail Federation and Prosper Insights & Analytics project total K–12 back-to-school spending will reach $43.3 billion this year, up from $39.4 billion in 2025. That contrast suggests macro pressure is not necessarily shrinking total dollars across every channel, but is reshaping where and how consumers spend: more concentrated, more strategic, and more reliant on payment options.

What marketers and merchandisers should do now

Circana’s findings require a tighter playbook than broad markdowns. Practical adjustments to consider:

  • Lead with essentials and tech: Prioritize merchandising, creative and paid channels for school supplies, devices and first-day items where purchase intent remains strongest.
  • Replace blanket discounts with targeted offers: Use measured promotion windows, loyalty pricing and behavior-based coupons to protect margin and incentivize incremental purchases.
  • Segment by income and intent: With growth concentrated among higher-income shoppers, apply CRM and lookalike targeting to match assortments and messaging to buyer cohorts.
  • Surface payment options: Make BNPL and installment choices visible at point of sale and in advertising to capture shoppers who prefer to spread costs.
  • Stagger apparel promotions: If apparel demand will be deferred, plan markdown cadence and inventory buffers to avoid deep end-of-season discounts.
  • Test promotional lift: Run incremental-lift and holdout tests before scaling promotions; track CPA, margin impact and repeat-buy behavior, not just short-term conversion.

Operational moves matter too: align inventory and fulfillment for tech and essentials, and maintain service levels that higher-value shoppers expect. These action points preserve margin while targeting the pockets of demand Circana identifies.

What to watch next

Monitor updated monthly retail-sales reports and category-level data from Circana, NRF/Prosper’s final season totals, and BNPL usage trends. Together those data points will reveal whether spending stays concentrated in specific cohorts and categories or broadens across channels.

For marketers the immediate task is clear: redeploy budget and promotions where intent and willingness to pay are demonstrably higher, back offers with targeted creative and testable KPIs, and make payment flexibility part of the buying path. That approach preserves margin and captures the shoppers who are still buying — not the ones who only respond to broad discounts.