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New Survey: Teen Retail Spending Slows Down

Youth is king, at least when it comes to fashion retail. Competition for so-called “millennials”, or shoppers aged thirteen to thirty, has become fierce now that they collectively account for more than $65 billion in retail spending per year. And more than other age groups, they are keenly interested in both cutting-edge fashion trends while remaining keenly sensitive to value as well.

Apparel retailers have struggled with this consumer group for a variety of reasons. First, they are increasingly directing their discretionary income to electronics instead of clothing. Also, they simply have less money to part with since their parents are besieged by higher payroll taxes, an anemic job recovery that has disproportionately impacted millennials and the increasing price of transportation.

And the  retailers who have adjusted their strategies accordingly are the ones who have prospered. Besides H&M, the Gap and Zara, Forever 21 and Uniqlo have managed to remain profitable by relying upon an ever shifting fast fashion landscape with an eye to low discounted prices and high margins.

But there might be reason to believe the influence of teen consumers is already on the wane. Piper Jaffray, self-described as a “leading investment bank and asset management form serving clients in the U.S. and internationally,” has released the results of its 26th semi-annual report, “Taking Stock with Teens,” which seems to indicate that teen spending is experiencing a broad decline.

Speaking to the Business Wire in Minneapolis, Steph Wissink, co-director of research and senior research analyst at Piper Jaffray, said, “Our fall 2013 survey results suggest teens are experiencing general spending fatigue across key categories, specifically fashion related items. The absence of a clear product catalyst is a key contributing factor to diminished spending proclivity. Intent to spend also moderated, despite over two-thirds of teens signaling confidence the economy is stable to improving. We are also observing trends that imply teens are browsing regularly on their mobile devices, shopping less frequently and engaging with brands ‘on demand’ on their own time. This dynamic alters the assumptions surrounding the square footage and retail inventory needed to service this target demographic. A period of rationalization may be needed.”

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In other words, teens are shifting the nature of their shopping habits faster than retail strategy is accommodating them, fueled by breakneck technological progress. Shopping has become a largely cyber-affair, with 82 percent of males and 78 percent of females making their purchases online. Trips to the mall are down 25 percent. Even more telling, considerably more than half of all teens surveyed reported preferring to buy apparel online.

The movement from brick-and-mortar to click-and-order challenges the fundamental principles of traditional retailing, which relies heavily upon physical space to drive sales. How much space, if any, is necessary to attract teen shoppers? Should stores be closing and downsizing or should retailers be more fully integrating their physical assets into a an overarching omnichannel strategy?

As far as fashion trends are concerned, teens are most influenced by their peers, and largely through social media rather than traditional advertising. Footwear and athletic apparel have been surging in popularity, while fast fashion apparel, once a dominant trend, is already ebbing.

The crux of the problem with effectively courting teen shoppers seems to be twofold. First, their disposable income is heavily dependent on their parents, and so easily swayed by macroeconomic vagaries. Studies show that an increase in the payroll tax that pinched workers’ net pay has trickled down to teens, resulting in restrained spending habits. Teens are more autonomous shoppers than ever, making their own purchase decisions, but income-dependent upon others.

Also, their attention as consumers has become diffuse, hard to capture since spread across so many media channels, largely directed through their mobile devices. They no longer sit passively in front of television screens simply waiting to be blanketed with targeted ad campaigns. The paradox of advertising to teens is that they have never been more “pugged in” to media, but never more elusive to attempts to precisely communicate with them. Teen shoppers comprise a retail goldmine no has quite figured out how to fully exploit.

The Piper Jaffray survey culled data from approximately 8,650 teens with an average age of about sixteen and covered thirty-seven different states.