Why Teens are MIA in the Retail World

Retailers are already facing a tough economic environment, with stagnant household incomes and a still-sniffling jobs market, but a bigger battle might be looming on the horizon: engaging teen shoppers.

Recent earnings and forecasts from some teen retailers hint at a possible slowdown in sales as technology trumps fashion and spending priorities shift among teenagers, a vital part of the retail economy. Last week, American Eagle Outfitters (NYSE:AEO) slashed its second-quarter earnings forecast citing weak sales and margins.

“Teen shoppers are responsible for a huge amount of sales for retailers,” says Liz Crawford, author of The Shopper Economy . “As a group, they spend around $200 billion on average every year. That’s a lot of spending power that retailers are fighting to get.”

She further explains that teens now set the trends in the fashion world and older consumers follow suit, making the demographic even more vital to retailers.

“Now, the younger shoppers are influencing what older generations are wearing. Styles and trends work their way up. It used to be the other way.”

Other popular teen shopping spots have recently showed some weakness, with Aeropostale (NYSE:ARO) reporting its sales fell in the second-quarter and reducing its earnings forecast for the next quarter. Buckle (NYSE:BKE) missed sales forecasts for July.

Back-to-school shopping is the second biggest holiday for retailers behind the holiday season, and teens make up the bulk of the spending heading into the school year.

“Right now, it should be all about the high schoolers and middle school students wanting new clothes and supplies, but they are being much more selective and not spending as much this go around,” says Chris Christopher, director of consumer markets for IHS Global Insight.

Logos Fall out of Fashion

Remember the LFO song that crooned, “I like girls that wear Abercrombie and Fitch…”? The summer anthem is from 1999 and, just like the band, that desire is no longer in fashion.

“Ten years ago it was all about brands, what you were wearing defined you. Teens wore hoodies and Polos with logos emblazon on them, now it’s more individual, hipster style -- who really cares what you are wearing,” says retail expert Kristin Bentz, president of The Talented Blonde.

Bentz expects teen shoppers to flock to retailers like Zara, Forever21, American Apparel and H&M that offer lower-priced items with very little branding. “Teens are much more savvy. Many have seen their parents struggle financially and lose their jobs, and they choose where and on what they spend money on very judiciously.”

Christopher points that Americans -- across all generations -- are spending less time shopping than they did in the past due to economic circumstances and because they have more entertainment options. “Families have been struggling over the last few years. Income, when adjusted for inflation, has declined, so households don’t have as much money as they’ve had in the past. Plus their entertainment options are much more vast with the Internet.”

It’s Not Who You’re Wearing, but What You’re Carrying

When it comes to either getting the latest gadget or the hottest fashion trend, tech wins with this generation, says Crawford. “Technology is priority No.1 with teens, they will spend the bulk of their money on one big item.”

Bentz agrees, saying that when it comes to being “cool” in this environment, it’s all about what’s in your hand. “Tech is the new fashion statement, it used to be having the A&F hoodie and wearing multiple tank tops, now it’s how much tech you have: do you have the latest iPhone, tablet, or Beats headphones.”

Lack of Fashion Direction

With no major fashion trend dominating the market or TV show dictating the latest wardrobe requirements, experts say teens lack motivation to get into the stores.

According to Bentz, there are two cycles in the teen fashion world: denim and dresses, and we are currently in dress mode, making it easier for teens to choose less-pricey pieces to fill their closets.

“You can’t fake high-end denim, people will look at the brand on the back; with a dress, who knows who made it,” she says. “Just the other day, I saw a waitress wearing this gorgeous dress and I could have sworn it was from some big designer, but it was $18 from Urban Outfitters. I was shocked.”

Learning to Play the Game

To attract teenage shoppers, the experts agree it’s all about offering promotions to lure people into the doors and using social media properly to drum up interest.

“Facebook is too passé and there’s not enough stickiness, it’s all about Twitter and Pinterest. Put together looks and show teens what they should be wearing, that’s how you are going to get attention,” says Bentz.

Many retailers have blamed the “showrooming effect” -- when consumers come into the store to ask staff questions and physically hold and review the products but by them online for a cheaper price -- for eating into sales. Crawford suggests that when dealing with teen shoppers, retailers take the opposite approach.

“Teens now are looking at outfits online but will still go to the store with friends to socialize, so retailers should show the outfits they are liking online in the stores to lure them in. It’s all about offering a shareable online experience in the store.”