Electronics and computer-related items are expected to flunk the back-to-school retail season.

But that's the only failing grade likely to be given out in the coming days during one of the Canadian retail sector's busiest seasons.

Retail experts predict back-to-school sales will rise this year, following a strong year in 2005 when the Retail Council of Canada (RCC), which represents more than 40,000 stores of all retail formats, said Canadians planned to spend $1.5 billion on school-related items. This year, however, the council only says it expects continuing growth, having changed the way it surveys anticipated expenditures.

"Our expectation is that it's going to be a strong back-to-school season," says RCC spokesman Lanny McInnes. "Year over year, retail sales are up six per cent so far and from what we've heard from consumers, it leads us to believe that our strong sales growth will continue not only over the back-to-school (period), but the rest of the fall season."

Forty-two per cent of Canadians plan to shop for back-to-school items this year and, on average, Canadians intend to spend approximately $337 on such products, with 29 per cent anticipating spending $400 or more, according to a new study conducted for the RCC by public opinion and market research firm Pollara.

"Our view is the Canadian economy is still strong," adds John Williams, a senior partner with the Toronto-based J.C. Williams Group, a retail and marketing consultant firm. "There was a slight slowdown in July, but we think some of that was weather-related. The West is going gangbusters and the rest (of the country) is doing just fine, so we see a strong back-to-school season."

The important fall retail season starts the momentum going for the final push to the end of the year, he adds, when retailers make the majority of their profits.

The sales leader for 2006 will be clothing, a traditional back-to-school staple.

Slightly more than three-quarters of shoppers, or 77 per cent, plan to purchase clothing this season.

Residents of Quebec and Ontario intend to spend the most on clothes at $176 and $174, respectively, followed by residents of Alberta at $163 and British Columbia at $153. But only one in six (16 per cent) residents in Saskatchewan and Manitoba will spend more than $200 on clothes, says the Pollara survey, which was conducted from a randomly selected sample of 1,945 adults between July 31 and Aug. 8, and is considered accurate to ?±2.2 percentage points, 19 times out of 20.

The focus on clothing is good news for smaller and independent retailers such as Jack & Jill Co. Ltd., a multi-generational family business located at West Edmonton Mall that focuses on children's fashion and footwear. The back-to-school season - starting at the beginning of August and ending around mid-September - is eagerly anticipated at the 58-year-old retail operation.

"It's our Christmas," says company vice-president Nicole Tougas. "It's the busiest time of the year for us. It's getting busier every year and we are seeing a bit of an increase each year."

The only stumbling block, says Tougas, is an inability to hire as much staff as it needs to handle the rush. "We try to hire more people this time of year, but it's pretty hard to find people, so everybody is pretty much working to the max."

Those words don't surprise Dan Kelly of the Canadian Federation of Independent Business (CFIB), representing 108,000 small and medium-sized businesses across the country.

"Half of our retail members are telling us they can't find workers," says Kelly, the CFIB's vice-president for Western Canada. "The retail sector is a large employer of young people and students, so back-to-school can also mean a drying-up of the student workforce for small businesses.

"It is most acute in Alberta and Western Canada as a whole, but it is an issue from coast to coast."

Even so, clothing is selling quickly at Jack & Jill, particularly Yogini, a line of yoga-inspired clothing from Vancouver. "We can't even keep it in. It's very, very comfortable, it's like the Lululemon for little ones," says Tougas.

Also hot is camouflage - clothes and outerwear - with a girls' line coming out soon.

Jack & Jill says it more than holds its ground against big-box competitors or department stores by specializing in unique lines and focusing on customer service.

That's what needs to be done if smaller businesses are going to survive, says analyst Williams. He points to a retail sector that has expanded to include a wider range of stores, all of which are looking to get their share of back-to-school bucks.

"As soon as something gets this strong, everybody gets into it," says Williams. "Also you have people like Canadian Tire entering it aggressively because it drives a lot of traffic."

But Williams notes Canadian mom-and-pop retailers, particularly those specializing in stationery and school supplies, have gone the way of the dodo. Pricing is so competitive, it is virtually impossible to compete with the Wal-Marts and the Staples. "It's deeply discounted, there's no margin for the independents. They can't play in that game."

But clothing is an area in which they can still compete, says Williams, noting that a smart niche player can easily avoid the pricetag battles. Strategies can include offering a unique product assortment, exclusive product lines and individualized service, including knowing regular customers by name.

Aside from clothing, residents of Quebec plan to spend significantly more - at $167 - than other Canadians on school supplies. Alberta comes in second at $99, while Atlantic Canadians place third, intending to spend $93, on average, the Pollara poll shows.

But the RCC's McInnes says electronics and computer sales won't be as robust because of a couple of factors: Students may have purchased them previously, or they may be restricted in what they can take into class. "Some schools are cracking down on cellphones and MP3 players."

Seventy-four per cent of the respondents to the Pollara survey say they do not plan to spend on this category. Of those who do plan to purchase electronics and computer-related equipment for back-to-school purposes, they intend to spend an average of $273.

(Laura Severs can be reached at laura@businessedge.ca)