It's been a bit of retailing wisdom in the past that parents will cut back on purchasing for themselves before they curtail buying for their kids during economic downturns. While it may still be true that parents put themselves last when it comes to discretionary spending, there is evidence that spending on clothing and other products for teens is sliding also.
According to research by WSL Strategic Retail, the high cost of fuel and food has led to spending cutbacks. Fifty-six percent of teens said they are spending less on goods overall while nearly half said they're using more of their own money because Mom and Dad are saying no to buying things.
A report on the Knowledge@Wharton (K@W) website claims that even though kids are spending less, they are still extremely fashion conscious. That puts greater pressure on retailers to offer merchandise that is seen as cool and affordable.
Aéropostale is among the retailers that have found a way to strike the balance teens are looking for, while Abercrombie & Fitch has struggled, according to the K@W article.
Erin Armendinger, managing director of Wharton's Jay H. Baker Retailing Initiative, said, "Abercrombie has thumbed its nose at price reductions when other retailers are saying, 'We understand that you need to spend less.' That's a risky strategy."
A&F saw its profits and share price take a hit during the second quarter. Still, A&F CEO Mike Jefferies raised the prospect of the chain raising prices in the future. In August, Mr. Jefferies told investors on a conference call, "We do not compete on price or promotion regardless of macroeconomic conditions, although it may be both easy and tempting to drive short-term sales with pricing and promotional efforts."
Aéropostale has managed to make gains despite the inflationary environment and stiff competition for teen dollars from other specialty chains, discounters and department stores.
"Aéropostale has gotten better about its product offering and what's playing with teens," said Ms. Armendinger. "It's not just about being cheap; the clothes have to be something they want to buy."
Discussion Questions: Is the teen retailing market protected more from economic downturns than businesses catering to adults? What is your take on the paths currently being taken by Abercrombie & Fitch and Aéropostale? Should A&F, in particular, be modifying its positioning and offer more price reductions?