Wet Seal's future is online
Wet Seal, a California based fashion retailer catering to young women 18 to 24, is shuttering 338 of its 500+ stores and laying off 3,700 employees. The chain took the action after sales declined 12 percent and posted a loss of $79 million for the nine-months ending October. But all the news is not bad for Wet Seal, which has found a way to connect with its core customers online even as it has failed to do so in stores.
In Wet Seal's fiscal 2013, online sales accounted for six percent of the company's total. In 2014, that number ballooned to 17 percent — the rate of growth was 19 percent in the third quarter alone. Wet Seal has also found a way to sell its fashions profitably online. According to the company, sales margins for online are higher than in stores.
The chain is looking to build on the success of its site and has switched ad dollars from the stores to online. It is also enhancing its mobile commerce capabilities, investing in web analytics, social media outreach and e-commerce merchandise planning.
The moves being made by Wet Seal play to a consumer market that is increasingly turning to digital channels for fashion. The ease of shopping online and the ability to quickly review a huge range of products is now a strong dynamic among women shoppers. Added to this is that the retail "treasure hunt" for intriguing items appears more and more to be identified with e-commerce sites than brick-and-mortar.
Wet Seal is far from the only fashion retailer struggling to meet the demands of teen and young adult consumers. Deb's and Delia's are being liquidated. Abercrombie & Fitch saw its longtime CEO leave after years of trying to get the once highly successful chain turned around. Aeropostale and America Eagle are closing locations as consumer traffic continues to fall at many malls.
In the end, whether online or operating stores, fashion retailers are being challenged by a market in which consumers are foregoing clothing purchases for other products such as electronics. Craig Johnson, president of Customer Growth Partners, told The Business of Fashion, that apparel sales, which represented about five percent of the typical American household's budget in 2000, has fallen to 2.8 percent today.