December 9, 2014
It ain’t easy being a teen (retailer)
Delia’s and Deb Shops both surprised retail watchers by filing bankruptcy petitions with plans to liquidate before the final weeks of the holiday season. Disappointing quarterly performances last week by Abercrombie & Fitch, American Eagle, Aeropostale and Wet Seal also underscored the widespread challenges facing teen chains.
A Forbes headline questioned whether the former kingpins, Abercrombie & Fitch, American Eagle, Aeropostale, would "be around in five years."
The challenges, according to several reports, include:
Fast fashion competition: H&M and Forever 21 are winning over teens by offering trendy fashion and runway knockoffs within weeks at bargain prices.
Uncool malls: Teens now socialize on the internet rather than at malls. Speaking to the Wall Street Journal, Neely Tamminga, an analyst at Piper Jaffray & Co., added that the ability to shop countless websites eliminates the reason to go the mall. She called it a "massive and probably permanent shift."
Tech’s appeal: Headphones, iPhones, apps and other tech accessories are more fashionable than any current apparel trends.
Apparel is trendier: Teens are shunning the logos and uniform looks of the major teen chains (Abercrombie, American Eagle, Aeropostale., Hollister, etc.). Mobile phones are allowing them the find and showcase trendier looks on Instagram, Facebook, and haul videos on YouTube. ModCloth enables teens to customize outfits while Etsy provides access to countless independent designers. Chad Dickerson, CEO of Etsy, told Forbes, "In the old days of big box retailing, it was cool to have what everybody else had." Now, teens "want to have something that nobody else has."
Less money: According to the Labor Department, the unemployment rate among 16- to 19-year-olds was 22.2 percent in October and has remained above 20 percent since May 2009. Parents are also said to be more value-oriented around kids’ apparel purchases. Jahnia Sandford, an analyst at Kantar Retail, told the Associated Press, "If you have limited income, you’re not going to Abercrombie and Hollister and spending $40 on a pair of denim."
- Teen Retailers Becoming Out of Fashion – The Wall Street Journal (sub. required)
- Another teen retailer to file for bankruptcy – Reuters
- Is trendy tech really Abercrombie’s problem? – RetailWire
- Abercrombie & Fitch Isn’t Ready to Wear – The Wall Street Journal (sub. required)
- Will Aeropostale, Abercrombie And Fitch And American Eagle Be Around In Five Years? – Forbes
- Panic at the mall: Wet Seal dives 29% on bleak forecast – New York Post
- Teens, thanks to smartphones and less income, change the way they shop – The Associated Press/St. Louis Post-Dispatch
BrainTrust
Recent Discussions
Discussion Questions
How would you rank the biggest challenges facing the traditional mall-based teen chains? Do you see their prospects improving or continuing to erode in the years ahead?
Poll
This is the first generation that has been relentlessly told it is all about the deal, the discount and the sale. This has made Millennial shoppers more like my grandparents with their thriftiness. Sure they’ll spend the money on an iPhone because they use it, but they’d just as soon buy clothing on Craigslist, from a friend or something cheap from the fast-forward retailers. The damage this has done will be seen throughout their generation. I think the smart retailers understand that Boomers still control 70 percent of disposable income and they are the ones to pay attention to.
Definitely, the mall itself is a large part of the problem. RSR ran a consumer survey and while we didn’t get to the 13 to 18-year-old demographic, I was still surprised to see how few 18 to 25-year-olds thought of shopping as a social activity or a way to hang out with friends. That’s all I did as a teen. It was our primary activity.
The switch is extreme. Malls are only utility value to teens today, for many self-reinforcing reasons—their discretionary budget is going towards cell phones and Xbox Live, and when you don’t have any money left to spend there is no point in going to the mall. My kids go to a charter school, so their closest friends are not in the neighborhood, which means Xbox Live, Skype, and FaceTime are their primary ways to “hang out”—which is done primarily on the couch in their respective houses.
And parents are busy enough and teen schedules are busy enough that there just isn’t any of that free time for teens to go hang out at malls anyway. They’re at music lessons and athletic events, and no self-respecting parent of today would be OK with a group of 14-year-olds hanging out unsupervised anywhere, forget about a mall.
I’m not sure that I buy the online argument, though. Teens can browse online, but it’s still the parent’s credit card required to buy. Maybe that is the only saving grace?
The biggest challenges facing traditional mall-based teen chains’ survival are price point and individual style. Price point is for the reasons already stated—these stores are too expensive for a simple fashion item. And individual style—the internet is filled with unusual, distinctive, even customized product that is easily available. Who wants to shop in a chain store with a look-alike selection of merchandise? Teens want, and now have the ability, to create their own look outside the mall stores.
There are many issues at play here. First, it comes down to merchandise content: The mall-based junior retailers have been too slow to move to the “fast fashion” model of competitors like Forever 21, so their long lead-time product development can put too much of the wrong product into their stores. The junior customer figured this out a long time ago.
Second, mall-based apparel traffic has suffered for years. The misses’ chains (Talbots, for example) have hardly done any better than their junior counterparts. There are too many fast-fashion and off-price options where the “treasure hunt” for variety is a compelling part of the shopping experience now.
Finally, the economics of the consumer have changed: The Great Recession put a damper on overall discretionary spending for apparel that has yet to recover fully. And the discretionary dollars have shifted dramatically, away from apparel and toward personal technology. One more element in this “perfect storm” for the junior industry.
Can I select all of the above? Many teen retailers have realized too little too late that their core demographic has changed, and honestly, a season or two of better looking clothes is not going to reverse what has been a sea change.
Mall-based teen chains have wind in their face. First, malls are losing their appeal. I visit the local mall maybe three times a year. They are viewed as expensive and not all that convenient. Second, sales, including apparel, are moving to the internet. This is especially true for teens who are computer literate. Third is keeping the customer with fresh merchandise. What is hot today is out of style tomorrow. Remember Merry-Go-Round? The customer you have today will outgrow you, so you must attract a new customer or change your target market. Anything sold in a mall that can be bought online will erode store sales.
Tech IS the new fashion and at the same time, traditional fashion is operating in a trend-less environment (quick, what is the hottest apparel trend for fall/winter 2014? I don’t know either). There is simply no compelling reason to refresh the wardrobe or reverse the trade-off between togs and tech.
A larger deadly dynamic is at work that is by no means exclusive to teen retailers though: Death by category killing. What was once a recipe for success, going deep and wide within a category, is now a perilous path for brick-and-mortar retailers. When opportunistic digital niche killers like Amazon (and the flies they either swat or eat, like Quidsi), take a focused fancy to a category, brick-and-mortar retailers have little recourse. Toys ‘R’ Us is in this hard place as are office retailers (hence the mergers and recent maniacal focus on category expansion through digital marketplaces).
Abercrombie just (finally) extricated Mike Jeffries, ending his mind-bogglingly long tenure at the top. Hopefully the new guy/gal addresses this inescapable reality through business model innovation (versus more category or brand rejiggering).
The teens in my life don’t hang out at malls because they can’t get there by themselves, for one thing. But hang out, they do! Usually at a place within walking distance of their school, and moms can pick them up later. My youngest niece hangs out in the local Zoe’s in the village nearby her school. Yes, they are all instructed that they must buy something.
While hanging, they shop and share with friends but with very limited spending as mom still holds the credit card and mom still has final say on purchases.
So where do they go when it’s time for that party dress, Easter frock, etc.? Mom usually takes them to the mall so they can try on and get ideas. The problem is that many of the teen retailers mentioned here are simply not providing the fashion looks that these young people want. Can you spell Anthropologie? It is a mall store and my nieces can’t wait for their moms to take them there.
As retailers discover that the right merchandise along with a great experience design are key, I’m thinking we may see a new model for the mall.
Were the kids who used to hang at the mall actually buying anything? I’m thinking not enough to make a difference. And that’s my two cents.
Teen traffic in traditional malls will continue to decline as the new generations shift their social behavior, mostly due to technology.
However, the malls can probably get them back if they adopt a better tech strategy themselves to attract teens. We still don’t have open/free WiFi throughout malls. Sure some retailers have it—mostly coffee shops—but the malls can do this and then use that infrastructure to have teen social events and activities using technology. Malls need to shift their mindset from being property management to becoming a partner with the retailers and address these issues.
I still see teens being concerned about how they look and dress. Fashion is an integral part of the teen experience and I do not expect that to change very soon.
The greatest challenge that retailers face at malls is getting the teens into the mall in the first place. “Going to the mall” as a form of entertainment has been replaced to some extent by digital hangouts. If teens are not there, you cannot get them to buy.
Unless malls work to develop unique offerings and teen-focused entertainment and events, these trends will continue.
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This is the first generation that has been relentlessly told it is all about the deal, the discount and the sale. This has made Millennial shoppers more like my grandparents with their thriftiness. Sure they’ll spend the money on an iPhone because they use it, but they’d just as soon buy clothing on Craigslist, from a friend or something cheap from the fast-forward retailers. The damage this has done will be seen throughout their generation. I think the smart retailers understand that Boomers still control 70 percent of disposable income and they are the ones to pay attention to.
Definitely, the mall itself is a large part of the problem. RSR ran a consumer survey and while we didn’t get to the 13 to 18-year-old demographic, I was still surprised to see how few 18 to 25-year-olds thought of shopping as a social activity or a way to hang out with friends. That’s all I did as a teen. It was our primary activity.
The switch is extreme. Malls are only utility value to teens today, for many self-reinforcing reasons—their discretionary budget is going towards cell phones and Xbox Live, and when you don’t have any money left to spend there is no point in going to the mall. My kids go to a charter school, so their closest friends are not in the neighborhood, which means Xbox Live, Skype, and FaceTime are their primary ways to “hang out”—which is done primarily on the couch in their respective houses.
And parents are busy enough and teen schedules are busy enough that there just isn’t any of that free time for teens to go hang out at malls anyway. They’re at music lessons and athletic events, and no self-respecting parent of today would be OK with a group of 14-year-olds hanging out unsupervised anywhere, forget about a mall.
I’m not sure that I buy the online argument, though. Teens can browse online, but it’s still the parent’s credit card required to buy. Maybe that is the only saving grace?
The biggest challenges facing traditional mall-based teen chains’ survival are price point and individual style. Price point is for the reasons already stated—these stores are too expensive for a simple fashion item. And individual style—the internet is filled with unusual, distinctive, even customized product that is easily available. Who wants to shop in a chain store with a look-alike selection of merchandise? Teens want, and now have the ability, to create their own look outside the mall stores.
There are many issues at play here. First, it comes down to merchandise content: The mall-based junior retailers have been too slow to move to the “fast fashion” model of competitors like Forever 21, so their long lead-time product development can put too much of the wrong product into their stores. The junior customer figured this out a long time ago.
Second, mall-based apparel traffic has suffered for years. The misses’ chains (Talbots, for example) have hardly done any better than their junior counterparts. There are too many fast-fashion and off-price options where the “treasure hunt” for variety is a compelling part of the shopping experience now.
Finally, the economics of the consumer have changed: The Great Recession put a damper on overall discretionary spending for apparel that has yet to recover fully. And the discretionary dollars have shifted dramatically, away from apparel and toward personal technology. One more element in this “perfect storm” for the junior industry.
Can I select all of the above? Many teen retailers have realized too little too late that their core demographic has changed, and honestly, a season or two of better looking clothes is not going to reverse what has been a sea change.
Mall-based teen chains have wind in their face. First, malls are losing their appeal. I visit the local mall maybe three times a year. They are viewed as expensive and not all that convenient. Second, sales, including apparel, are moving to the internet. This is especially true for teens who are computer literate. Third is keeping the customer with fresh merchandise. What is hot today is out of style tomorrow. Remember Merry-Go-Round? The customer you have today will outgrow you, so you must attract a new customer or change your target market. Anything sold in a mall that can be bought online will erode store sales.
Tech IS the new fashion and at the same time, traditional fashion is operating in a trend-less environment (quick, what is the hottest apparel trend for fall/winter 2014? I don’t know either). There is simply no compelling reason to refresh the wardrobe or reverse the trade-off between togs and tech.
A larger deadly dynamic is at work that is by no means exclusive to teen retailers though: Death by category killing. What was once a recipe for success, going deep and wide within a category, is now a perilous path for brick-and-mortar retailers. When opportunistic digital niche killers like Amazon (and the flies they either swat or eat, like Quidsi), take a focused fancy to a category, brick-and-mortar retailers have little recourse. Toys ‘R’ Us is in this hard place as are office retailers (hence the mergers and recent maniacal focus on category expansion through digital marketplaces).
Abercrombie just (finally) extricated Mike Jeffries, ending his mind-bogglingly long tenure at the top. Hopefully the new guy/gal addresses this inescapable reality through business model innovation (versus more category or brand rejiggering).
The teens in my life don’t hang out at malls because they can’t get there by themselves, for one thing. But hang out, they do! Usually at a place within walking distance of their school, and moms can pick them up later. My youngest niece hangs out in the local Zoe’s in the village nearby her school. Yes, they are all instructed that they must buy something.
While hanging, they shop and share with friends but with very limited spending as mom still holds the credit card and mom still has final say on purchases.
So where do they go when it’s time for that party dress, Easter frock, etc.? Mom usually takes them to the mall so they can try on and get ideas. The problem is that many of the teen retailers mentioned here are simply not providing the fashion looks that these young people want. Can you spell Anthropologie? It is a mall store and my nieces can’t wait for their moms to take them there.
As retailers discover that the right merchandise along with a great experience design are key, I’m thinking we may see a new model for the mall.
Were the kids who used to hang at the mall actually buying anything? I’m thinking not enough to make a difference. And that’s my two cents.
Teen traffic in traditional malls will continue to decline as the new generations shift their social behavior, mostly due to technology.
However, the malls can probably get them back if they adopt a better tech strategy themselves to attract teens. We still don’t have open/free WiFi throughout malls. Sure some retailers have it—mostly coffee shops—but the malls can do this and then use that infrastructure to have teen social events and activities using technology. Malls need to shift their mindset from being property management to becoming a partner with the retailers and address these issues.
I still see teens being concerned about how they look and dress. Fashion is an integral part of the teen experience and I do not expect that to change very soon.
The greatest challenge that retailers face at malls is getting the teens into the mall in the first place. “Going to the mall” as a form of entertainment has been replaced to some extent by digital hangouts. If teens are not there, you cannot get them to buy.
Unless malls work to develop unique offerings and teen-focused entertainment and events, these trends will continue.