How teens and smartphones are killing teen-fashion retailers
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 last 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 teen-oriented 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. On a recent Friday at Cherry Hill Mall, neither store attracted much foot traffic from 7 to the 9:30 p.m. closing.
Generation Z: E-commerce sales continue to grow at about 15 percent 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 percent of their total income online. This compared with 5.33 percent for millennials and 3.85 percent 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 e-commerce," 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 in-store/online sales strategy, "this is why there has been a wave of teen apparel retail failures that is nowhere near finished," he said.
Factors: 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 (Aero, Wet Seal, PacSun, American Eagle, Abercrombie, Tilly's, Zumiez). "Consumers are venturing to (mediocre, under-performing) 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."
Under performing: Compared with all of retail, the teen category has under-performed 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 under-performed in 13 of the last 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 will debut a store at Cherry Hill Mall in fall 2017.
"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."
Yung Girbaud, 22, who stopped going to malls when he was 19, represents the malls' greatest fear.
He was at another Philly-area mall on a recent weekend to hang out with his buddies and "pick up girls," he said sheepishly. His posse was sitting on sample massage chairs in front of Aeropostale and never ventured into the store.
Girbaud, of Hamilton, New Jersey, said he does virtually all of his shopping online from such websites as Neiman Marcus, Barney's and Saks Fifth Avenue.
Mall offerings are "so vanilla," he said. "When I see people walking around the mall, they are all wearing the same clothes.
"I like finding stuff on eBay — clothes and accessories that no one else is wearing," he said, citing a Christian Dior wallet from eBay.
Girbaud then pulled out his iPhone to show off what he wore while recently visiting a friend in New York: a headband with a matching blue shirt/pants outfit. "Everything you can't find in a mall," he said.