Teenagers tend to think they know best. When it comes to
retail, they may have a point.
Research firm Piper Jaffray released its 33rd
bi-annual "Taking Stock with Teens" survey on recently, providing a helpful
scorecard on which brands are hot - Adidas, Starbucks, and Amazon - and which
are not - Ralph Lauren, Ebay and Under Armour.
Perhaps more telling, however, is how the report captures
how these young consumers are making a mess of some long-held retail truths.
For one, teenagers are generally spending less on
stuff. And no, it doesn't have to do with the economy.
Retail sales and other economic indicators
have marched together for decades, reflecting the idea that the more
people were employed and the more money they made, the more they would spend on
sneakers and jeans. Ditto for consumer confidence (if people felt good about
the economy, they would spend more).
But these factors have decoupled.
Teen unemployment in March dropped to the lowest since
February 2001, according to the US Bureau of Labour Statistics, while the
percentage of teenagers surveyed by Piper Jaffray saying they thought the
economy was getting better ticked higher for the first year since 2013. Yet
spending by this group dropped by 2.4 percent in the April 2017
survey from a year ago.
In other words, just because teens have jobs, that
doesn't mean they want to spend their hard-earned money on clothing and shoes
like they once did. This divergence is echoed in the curious split between
so-called soft data, such as high consumer confidence numbers, and hard data,
like flagging retail sales numbers.
Ingrained
More to the point, the fact that this split is already so
ingrained in teenager's habits doesn't bode well for the future of the retail
industry. Piper Jaffray's survey suggests some of these depressed
retailers have little recourse to find their way back into consumers'
consideration.
Teens' rapid move away from department and specialty
stores in favour of online retailers is dimming the outlook for bricks and
mortar. More than 40 percent said Amazon was their preferred website,
while Nike came in a distant second in votes for favourite online shopping
destination, at 5 percent.
In addition, clothing fell to only 19 percent of
teenager's spending, down from 21 percent in the same period in 2014. A growing
preference for experiences over things gave food a bigger share in their
budgets, underscoring the long-term trend of meals and snacks taking a bite out
of retail.
Read also: How South Africans are dealing with inflation
It's perhaps no surprise that spending on fashion
is down as Snapchat overtakes Facebook and Instagram as social
platform du jour - more than 80 percent of teens surveyed by Piper Jaffray use
Snapchat at least once per month, compared to 51 percent who use Facebook. If
teens can just use filters and photo editing to change the way they look and
impress their friends for free, then why would they have to shell out real
money to buy clothes and shoes at real stores to show off?
Of course, some of these behaviours could be
situational, suggesting teen spending habits could evolve as they grow up. But
it's undeniable that this generation is spending less on clothing than their
parents and could carry those frugal habits with them into adulthood. That
could mean even lower customer traffic numbers and further declining sales
at department stores and specialty retailers. Investors would be wise to
listen to the youngsters.
This column does
not necessarily reflect the opinion of Bloomberg LP and its owners.