Teen Niche Formats Faltering and Failing
By Tom
Ryan
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?
The success rate of any new retail concept is always pretty low, especially under-24 concepts. The failures cited suffer from long odds made only longer by the current economic environment.
That said, if there’s one thing that these top-down corporate initiatives seem to suffer from is a sense of authenticity. There is a sense that they are over-calculated and contrived.
This is a tough one. Are people not buying at all or just going back to the chains they have known or years? In my opinion, an empty large chain store creates the same amount of revenue as an empty niche market store. The only difference is how much money head office is willing to pour into it to keep it alive through tough times.
Every one of these concepts when they launched, hit me as a misguided vanity project (the pretentious and oddball-sounding names didn’t help to change that perception). Abercrombie’s Gilly Hicks intimates, the 5th concept launched by the retailer, (www.gillyhicks.com) comes complete with a back story about the mythical Aussie, Gilly, the “cheeky cousin of Abercrombie and Fitch.” What in the world does this mean to the customer?
With the Gap sitting out there as a glaring example of over-concepting and cannibalization, these spin-offs seemed even more risky; what were they really doing differently that justified the niche build-out?
Contrast this with recession success story Urban Outfitters, an apparel retailer that has carefully nurtured three distinct retail brands (Anthropologie, Urban Outfitters, Free People) without pretense and with complete respect for the customer. Exciting, shopable store environments, well-trained store associates who take ownership of the customer experience from start to finish, relevant social media outreach (their blog is one of the coolest things I’ve seen in a long time), and a corporate culture that reinforces the brand mission.
Let’s not blame the recession for the frivolous fallen!
The fashion business thrives on innovation and testing new concepts, so for many of these retailers, doing concept stores is the nature of the beast. Many of them perhaps ignored early warning signs of slipping sales, but likely did not anticipate the credit crunch that is what’s really prohibiting them from keeping concept stores afloat.
Teen fashion is synonymous with mini-micro marketing. Years ago I was amazed when a shoe store clerk told me what junior high my daughter was going to by the brand of shoe she wanted. The trend now is that if the popular girls go vegan, all the girls go vegan.
At an early age, most kids do not see over the horizon so they are not influenced by what is in fashion in the village. They were influenced by the fact that A&F hired cool kids just a few years older than themselves. But most of all they are influenced by the teen idols and a few peers. This influence extends not only to the merchandise but to the store itself.
Developing niche formats for the teen market requires an excellent understanding of core customers. At the best of times, this is difficult–but developing new bricks and mortar stores for this ever-evolving shopper is tricky business. Finding a niche that will scale-up requires a new kind of expertise, tied to the brand value proposition, and executed in a timely manner. In this economy, it’s a big risk–things change very quickly for this generation of shoppers.
The definition of trendy is “short-lived.” These niche retail concepts targeted a specific consumer at a specific stage of life. They’re fads. Their original customers are growing out of that stage and newcomers are already looking for the next big thing.
Offering something unique and trendy is vital to the survival to any apparel chain. Unfortunately for us, shopper behavior has changed and these niche formats are going to suffer. Why not simplify, and offer everything under one roof?
Many of the chains listed in this article are in dire need of renovations at the store level. Take all this specialized merchandise and integrate it into the current format. Creating a whole new line of stores to sell to one specific group just creates more overhead for the retailer.
Apparel retailing has evolved into this multi-headed monster that is unmanageable. It’s corny to say, but apparel execs must observe KISS.
While the economy is certainly a contributing factor to most business performance today, it does not fully explain the demise of these formats. The key to niche marketing is finding customer compromises that you can profitably satisfy. In essence, you are looking to create and own markets versus share the markets.
The expression that I think best describes the retailers noted in this article is as follows: “Find the gap in the market and make sure there is a market in the gap.” Finding market gaps are easy. Finding markets in these gaps is the challenge. Who are the target customers? What are the compromises? Who else is targeting these customers? Answers to these and other relevant market definition questions will enhance the probability of niche success.
The devil, I think, is in the targeted age demographic which can be very negatively affect in a down economy. We buy for our kids and sacrifice ourselves. Priorities change as we age and the late 20/30 gang are busy having their priorities turned upside down. Think marriage, house purchases, and kids, all of which force a realignment of where money is spent.
But, I think the biggest lesson for retailers thinking about a niche-format is to have a reason for being. I don’t care what market you’re targeting; you better have your finger firmly on its pulse, or face the possibility of being irrelevant and failing.
The possibility of cannibalizing your core with a value priced spin-off is risky business. Gap did it with Old Navy which was a great success and set a trend that was quickly picked up by Target and other discounters.
Capitalizing on a strong brand and moving in to an underserved market can and does work. Look at the success Limited Brands is having with Pink, and American Eagle with Aerie. These are well-developed brands that people identify with want to show it. The successful brand should enter any niche market with a clear picture of their customer, product, and how they want to be perceived and then make it happen on all levels.
New concepts are a critical factor for retail growth. As retailers continue to segment the market there is always the risk of too narrow a segment. The very narrow segments will work, but only in the highest population markets. This generally applies to brick and mortar retailers. For internet retailers, there appears to be no limit as to a very narrow segmentation.
What may be happening is brick and mortar retailers may be stepping over the line with too narrow a market segmentation, but more likely it’s a change in consumer shopping patterns due to the economy. The real question is, will the consumer return to their old shopping habits or do we have a new playing field?
The above posts are excellent and I agree with them–some of these “concepts” are really too much. Like the professor said above, is there a MARKET in the “gap” and is there REALLY a gap to fill? As mentioned, a LOT of these concepts seem to be lines which should be incorporated into a greater whole and be additive instead of fracturing!
Wouldn’t a busy mom with teens and tweens and even younger kids love a place that they could take ALL of those kids too and then EACH one could occupy themselves with merchandise aimed at them in particular? Market those parts, of the whole, AT THE KIDS so as to make them relevant and “cool” to the kids–NOT marketed at the mom. We will always have Wal Mart for that. BUT the beauty is that the Mom can have some safeness in knowing that their child is in the same store and they do not have to hear the “other” kids saying, “I want to go to Justice!” “I want to go to Aeropostale!” “I want to go to Hollister!” Also, locating under one roof saves cost all around.
Well you say…then you are talking about a boring, old-fashioned irrelevant–God forbid–department store!
NO–I am NOT talking about a boring irrelevant department store!
Franklin Simon used to say they were a “store of individual shops.” I am talking about something like that–NOT a department store. This would be no more difficult than operating the individual stores, each under a different roof. The CATCH is that this would have to incorporate lines and product that are winners and relevant and desired! There is the rub! But That is retail. It requires merchants–not gimmicks.
Also, I believe that it would be difficult to sustain multiple versions of this. There would be someone who gets it and would be the “winner”–just like it is difficult to sustain all these little niche “concepts” as we are seeing. This format would also need to be flexible and have the ability to radically change parts within itself. It would have to be fluid and not fixed. And, of course, there would have to be strict, close monitoring of what the kids want and what is moving.
Also, remember that you are dealing with teens and tweens and that is a difficult demographic for many reasons
Ultimately, I think it is bad business model rather than the economy.
The issue in the US is one I am also sadly seeing echoed here in Britain. Having been forced [due to the economy] to extend my job search in Europe after spending 9+ years working in apparel & interior design in the US, I’ve spent a good deal of time this week familiarizing myself with the ‘high street’ market here in the UK.
What I found, to my horror, was stores that used to sell apparel now offering in addition, shoes, accessories and make up. Accessories stores now selling sunglasses, ball caps and luggage. Luggage stores now selling tee shirts and electronics, and electronic stores now selling CDs and DVDs! (need I go on?). Nobody now has a niche market today and everyone, it seems, wants a slice of everyone else’s pie, as cheaply made and disposable as the recipe has now unfortunately become.
They is an old saying that ‘you can’t please everybody all of the time’–but that’s just what brands here are, it seems, trying (in vain) to do, alienating most of their loyal customers in the process.
A lot of this I too blame on the malls themselves, placing businesses within a stones throw of another similar business, thus cannibalizing both store’s chances of success. One such pet peeve of mine was the innovative and creative idea of the ‘Build a Bear Workshop’ having to compete with a similar stuff-your-own-bear concept that moved in on the same floor of my local mall less than two years after opening! How is that fair? If the likes of Levi’s can patent the concept of a little red label being sewn around a jeans pocket, why can’t a successful business patent a teddy bear stuffing concept from the hands of other lazy unimaginative entrepreneurs!
Designers can, believe it or not, think outside the box and come up with original and successful ideas and concepts–if only we are given the chance!
I could go on for days on the topic of teen specialty apparel, but to keep it loose and lively I must say I have no clue what “cheeky cousin” means with respect to Gilly Hicks. It has been something I have referenced in analyst notes to our client base. In our store tours, Gilly Hicks has been empty from a traffic perspective. Also, Ruehl, Abercrombie’s other venture, is simply pricing itself out of the market. I do not see the demand on the horizon to support a $90.00 fleece inspired summer button down. Conversely, I believe American Eagle is onto something with aerie stand-alone stores. The store shopping environment is very inviting, and pricing is appropriate.