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Are Broke Millennials Killing Fast Fashion?

Like the hero in a disaster movie, e-commerce seemed immune to the retail apocalypse that is engulfing western Europe. But recently, online business Asos waved the first white flag when it issued an unexpected profit warning after a particularly disastrous November.

Shares in Asos crashed 41 percent on Dec. 17 on the London Stock Exchange, wiping 1.4 billion pounds ($1.78 billion) off the firm’s market value. This quickly led to a loss of confidence in other online retailers that target the under-35s—rival fashion retailer Boohoo tumbled almost 20 percent on the same day. Asos’ chief executive, Nick Beighton, didn’t help by denying that Asos had lost market share, and explaining that lower overall consumer spending was to blame.

The core customer base for both these businesses is urban twentysomethings, and Beighton noted that the disposable income of this group is well below the level it reached in 2000, when Asos launched. “We are dealing with much more than just the Brexit-related factors,” he said.

They are indeed—Asos is an international company, shipping goods to nearly 240 countries, and the market forces, namely a decrease in spending power and a shift in attitudes in the youth market, are applicable to all western European countries.

Under-35s are struggling across the continent. According to a study by The Resolution Foundation, Britain’s millennial generation has suffered a bigger downgrade in financial stability than peer groups in every other European country except Greece.

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“This reversal of fortunes means that young people’s spending power relative to older working-age adults is back to where it was in the early 1960s,” Laura Gardiner, senior policy analyst from The Resolution Foundation, said.

“Younger generations have coped with having lower disposable incomes in a variety of ways,” she continued. “Some have cut back on the basics, including food, or accepted inferior quality housing. Mostly they buy fewer goods and prioritize spending on current experiences such as eating out.”

And while the British may be suffering particularly badly, the data paints a bleak picture for all young adults across western Europe—apart from the Nordic countries, where twentysomethings escape the fate of being poorer than their parents. In France, under-30s have 400 euro ($458) less a month to spend on clothes and eating out than they did a decade ago, and across the continent, incomes are falling, jobs are scarce and home ownership is becoming nigh on impossible.

Add to this less of a desire to spend their hard-earned money on goods and you have a recipe for retail disaster. After years of filling their wardrobes and homes with possessions, young Europeans are turning away from the concept of consumerism. In major cities across the continent, they are now more likely to be renters rather than buyers, meaning they have less of a yearning to buy possessions they’ll have nowhere to keep. Equally, the rise of Instagram means experiences are becoming more highly prized than goods.

Data backs this up. Barclaycard reveals a 10 percent increase in spending on entertainment and travel and an 11 percent rise in spending on telecoms by millennials in the U.K. However, spending on women’s clothing was down in equal numbers.

And it is a similar story in the U.S., where studies also show millennial spending is shrinking, as 18- to 29-year-olds today spend nearly $20 less every day than their counterparts 10 years ago, particularly on apparel.

Add to this the political uncertainty caused by Brexit in the U.K. and the gilet jaunes in France, and the market’s nervous approach to youth-focused e-commerce companies becomes more understandable.

So how bleak is the future? “ASOS are not alone in the industry in facing consumer-led challenges. Uncertainty and adjusting currency has disincentivized the spending seen in previous Autumn/Winter periods,” said Tamara Cincik of lobbying group Fashion Roundtable. “Product differentiation and value-driven products are likely to support retailers through difficult periods. We are working with business and fashion advisors to tell this compelling story and are optimistic that future certainty will restabilize this enormous market.”

However, a generational shift in spending is harder to rectify. “Some of the problems Asos is facing, such as a high level of discounting and promotional activity across the market around Black Friday, can be fixed,” said L2 retail expert Cymone Thomas. “Others, such as long-term lower incomes for millennials, cannot.”

And retailers—online or not—face an uphill challenge if they are going to be able to keep the financially unstable millennial consumer group onside as they weather the political storms ahead.