Whether because of the economy or because they're just too "niche", a bunch of newer concepts, especially in the teen space, are struggling or have closed down.
Pacific Sunwear has closed both its demo urban lifestyle concept as well as Thousand Steps, a footwear and accessories concept targeting a slightly older customer (18 to 24 years old) than its flagship chain. The Finish Line continues to struggle with its hip hop apparel chain, Man Alive, after closing down a women's footwear concept earlier last year. Aéropostale is moving to close its 11-store surf-apparel chain, Jimmy'Z.
At American Eagle Outfitters, Martin + Osa - a 28-unit apparel concept likewise targeting an older customer than the flagship - continues to sustain steep losses and may be shut if improvement doesn't come soon.
"Martin + OSA has a very definitive, very realistic goal for loss reduction in 2009," said James O'Donnell, American Eagle's chief executive officer, last week on the company's fourth quarter conference call. "If dramatic improvement doesn't take place at that time, then I'll have to make a decision."
Finally, Abercrombie & Fitch in the fourth quarter took an impairment charge of $30.6 million primarily because the carrying value of nine RUEHL stores exceeded their fair value. Launched in 2004, the 28-unit RUEHL chain is based on styles found in New York's West Greenwich Village.
An article in The Wall Street Journal notes that launching new concepts has been a core strategy for teen retailers in recent years. The stores often worked as research labs for core concepts, while addressing niche segments, whether the skate/surf crowd, club kids or slightly older customers. Abercombie's Hollister surf chain has been a huge hit. In a twist, Tween Brands is converting all its Limited Too concepts to its newer Justice concept, which carries less expensive merchandise.
But the Journal article implied that these efforts overestimated niches in many cases.
"There was a feeling within this sector that if you didn't target every single demographic with a concept you were going to be left behind," Brian Sozzi, at Wall Street Strategies Inc., told the Journal.
Creating these extensive strategies may have also led management to take the eye off the core business. The Journal notes two stores that have kept the focus on their main concepts - Hot Topic and Buckle - have been delivering robust sales lately.
But at least one chain, Aéropostale, continues to look at new concepts. While announcing the closing of Jimmy'Z, it said it would introduce P.S. from Aéropostale, a new format targeting the "younger kid who desperately tried to fit in our sizes but was ultimately too small," said Julian Geiger, chief executive of Aéropostale.
Discussion Questions: What lessons do these failures offer around niche marketing strategies and launching new concepts? How many are due to the economy versus misguided business models? Should retailers with sound financial conditions be experimenting with new concepts in this environment?