Teenagers are making a mess of retail wisdom

File image of Mall of Africa

File image of Mall of Africa

Published Apr 17, 2017


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.


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'


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.


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