Shifts in scholastic system put education market to test - Stationery - Statistical Data Included

DSN Retailing Today, August 26, 2002 by Mike Troy

The supplemental education category is poised for increased sales during the next several years thanks to steady growth in enrollments combined with recently enacted federal mandates that will require kids to take more tests.

In the past, category sales tended to benefit when kids' performance on tests or their grades on report cards fell short of their parents expectations, according to supplemental education suppliers. "The supplemental education market is hot and it is growing because of all the testing initiatives," said David Kelly, director of marketing with McGraw-Hill Children's Publishing. "Some of our best sellers are test preparation books. It is a case of Johnny coming home with some bad grades and mom deciding to do something about it."

Now, as retailers head into the new school year there are more kids attending public schools who will be taking more tests and, in the process, generating new opportunities for sales of supplemental education products.

Much of the credit for the category's anticipated growth can be given to President George W. Bush, who was a driving force behind the No Child Left Behind Act of 2001 that he signed into law this past January. The changes this legislation will require of public schools, hailed as the most sweeping since 1965, require states to create standards for what kids should know and learn during each grade.

The states had to immediately create standards in math and reading, but were given until the 2005/2006 school year to develop standards for science. Once the standards are in place, states are required to gauge students' progress through testing. Beginning this year, tests must be administered every year in grades 3 though 12 for reading and math. Testing for science doesn't begin for another four years.

"Until teachers and parents recognize what their students know and can do, they can't help them improve," explains a specially created U.S. Department of Education Web site (nochildleftbehind.gov) devoted to the No Child Left Behind Act. "Testing will raise expectations for all students and ensure that no child slips though the cracks."

In addition to the increased testing, expectations that enrollments will increase during the next four years also bodes well for continued category growth, according to the U.S. Department of Education's National Center for Education Statistics. The center each year produces a congressionally mandated report on the condition of the nation's public education system.

The recently released version, "The Condition of Education 2002," reported total enrollment in public elementary and secondary schools last year was 47.2 million and that for the recently begun school year it increased to a projected 47.4 million. By 2005, estimates call for modest growth with enrollments rising to 47.5 million. After 2005, enrollments are projected to begin a modest decline.

Even before the projected increases in enrollment and new testing initiatives, the supplemental education category has long been a staple of the mass retail market and enjoyed growth the past few years.

"Business has been very good," said Kurt Spitler, general manager of Learning Horizons, a wholly owned subsidiary of American Greetings. The success of Learning Horizons has been driven by two factors, according to Spitler. "Retailers are expanding the amount of space they devote to the category, and the strength of the Parents magazine license has increased our sales. The Parents magazine license has opened a lot of doors and improved the credibility of the category."

In the not-too-distant past, the supplemental education market at mass retail stores consisted of coloring books and activity books. Those products are still important for mass retailers, but more recently the category has taken on a more scholarly look as parents are looking for ways to enhance their kids' education.

However, that does not mean products have become boring. Quite the opposite is true. Today, parents have endless choices when it comes to the type of products available to supplement their children's education. Learning Horizons, in addition to its core line of products and those offered under the Parents magazine license, has licensed several new properties from Nickelodeon and plans to unveil the new products at the School, Home & Office Products Association show this November.

"What we are doing with Nickelodeon is creating new product. We are not going to take existing product and slap the Nickelodeon name on it," Spitler said. "We will introduce flash cards and workbooks that are unique to the marketplace."

McGraw-Hill also is taking a scholarly approach and, according to Kelly, is pulling back on licensing and coloring books. Roughly two years ago, McGraw-Hill acquired Tribune Education, which itself had only recently acquired Landoll Children's Publishing. According to Kelly, Landoll was a licensing-oriented company that sold a lot of books, but didn't make a lot of money.

"We are profit-oriented, not unit-oriented," Kelly said.