How teens and smartphones are killing teen-fashion retailers
Generation Z leads growth in online spending
PHILADELPHIA — Mipri Haye, a high school junior, is on Instagram and Snapshot daily, showing off her latest outfits to her girlfriends.
She also shares where she got those clothes: Forever 21, H&M, and Charlotte Russe often top her list.
“I take pictures of myself trying on new things, post them, and see what my friends think,” said Haye on a recent Friday as she shopped with her mother, Capri Haye, inside Francesca’s at Cherry Hill Mall in the New Jersey portion of suburban Philadelphia.
Retail experts say such prolific use of social media by Haye and others is driving the rapid success of some teen retailers, and causing the quick demise of others. Teen brands have also been among the slowest to close their brick-and-mortar stores and grow their websites.
In the past 18 months, Aeropostale, with 800 stores, Pacific Sunwear, with nearly 600 stores, and American Apparel, with 273 stores, have all filed for bankruptcy. (An ownership group stepped up in September 2016 to buy Aeropostale for $243 million at auction; the new owners plan to reopen its 500 stores across the country this year.)
Wet Seal, a California teenoriented brand with 171 stores, filed for Chapter 11 last month. It specialized in selling clothing and accessories to young women. Others, such as Abercrombie & Fitch and American Eagle Outfitters, are struggling.
E-commerce sales continue to grow at about 15 per cent a year, noted Garrick Brown, vice president, retail research of the Americas for Cushman & Wakefield. And online retailers keep gaining market share.
But while most have been focused on millennial shopping habits, “what has been missed ... is the impact of the next generation: Generation Z,” Brown said. “This generation (the first to have grown up completely on smartphones) are poised to put that growth to shame.”
In 2015, Forrester Research reported that, despite low incomes due to their youth, Generation Z consumers spent 8.75 per cent of their total income online. This compared with 5.33 per cent for millennials and 3.85 per cent for Generation X.
“The entire apparel marketplace has been sharply impacted by the encroachment of Amazon into the fashion arena and by the general rise of ecommerce,” Brown said. “But that impact has been sharpest on teen apparel because their core consumer, Generation Z, have been even stronger users.”
Combined with retailers being slow to develop an instore/online sales strategy, “this is why there has been a wave of teen apparel retail failures that is nowhere near finished,” he said.
Ken Perkins, president of Retail Metrics Inc., which provides investors with research on retail, cited four factors in teen fashion’s fall:
Teen apparel retailers are almost exclusively located in malls. “Consumers are venturing to malls at a rapidly declining rate. Teen chains are not alone in their inability to make up for lost foot traffic with rapid e-commerce growth.”
Social media have changed what teen consumers focus on. “Teens are more interested in dining out with friends, attending shows, concerts, sporting events that they can post to social media than they are about their wardrobes.”
Teens are very fashion fickle, and no overarching fashion trends are driving sales. “Denim is a constant but what else?” said Perkins.
The transition to mobile spending and rapid delivery “is happening so rapidly that most retailers cannot keep pace with it,” he said.
“Amazon is eating everyone’s lunch.”
Compared with all of retail, the teen category has underperformed every quarter since 2008, according to Retail Metrics.
A similar pattern holds with earnings growth. Teen earnings are far more volatile than the industry’s and have underperformed in 13 of the past 16 quarters.
Corali Lopez-Castro, a Miami-based lawyer, has handled retail bankruptcies and regularly represents landlords. She said “fast fashion” retailers, such as Zara out of Spain, which sell a lot of volume and change offerings daily, were altering the rules of the game.
“Zara changes the trends all the time,” Lopez-Castro said. “Teens will go to the store here (in Miami) just to see what’s new. There’s often a group waiting outside for the store to open. It has great price points and a very hip web presence.”
With teens, “status is less important,” Lopez-Castro said. “Today it’s more about what’s unique.”