These 3 Retailers Keep Their Teenage Customers Coming Back

Fashion risk is the single thing that keeps top executives of retailers awake at night. Successful teenage-focused retailers have worked hard on their merchandising and store strategies to keep their customers loyal.

Jan 14, 2014 at 1:51PM

 It is very common for retailers to see their biggest fashion hit launched this month become practically worthless in the next month. If there is any single customer segment that best represents this fickle nature of customer tastes, it is the teenage demographic.

Teenage-focused retailers Tilly's (NYSE:TLYS), Abercrombie & Fitch (NYSE:ANF), and Zumiez (NASDAQ:ZUMZ) have successfully navigated this landscape by staying ahead of the ever-changing needs of their customers with their store and merchandising strategies.

The 'where' -- store strategy
The availability of suitable real estate locations has been a constraint for many expansion-hungry retailers. Tilly's gets around this potential bottleneck with its flexible real estate strategy. As of the end of 2013, Tilly's operated about 196 stores, with its success not limited to any specific venue or geography. Although its apparel is 'West Coast inspired,' it has stores on both the East and West Coasts of the U.S. Tilly's also doesn't limit itself to high-traffic mall locations; stores in off-mall locations such as power centers and neighborhood centers have worked as well.

In Abercrombie & Fitch's case, it is working on its store appeal. Abercrombie & Fitch will be experimenting with a new storefront concept for its Hollister brand early this year. This new storefront will be based on an open-access concept showcasing its store and product assortment by using more glass in the architecture. Also there will be an extension of the video-wall displays that have worked for Abercrombie & Fitch internationally. Video walls utilize audio-visual projection systems to project videos that will capture the attention of passer-bys and improve store footfalls.

It is not just about where your stores are and how your stores look, but also what's in your stores and the overall shopping experience. Zumiez has placed couches and video game stations in its stores, in-line with its action-sports product focus. As a result, its customers have a better shopping experience, which leads to a longer time in the stores and more purchases.

The 'what' – merchandising strategy
Tilly's operates with a larger store format (averaging more than 7,000 square feet) that allows it to carry a wider range of merchandise in its stores. As a result, its teenage customers are more likely to find apparel of the right styles, colors, and sizes that also meets their budgets. Furthermore, Tilly's flexible real estate strategy makes it easier for Tilly's to find suitable locations to house its larger store formats.

Tilly's also turns over its products very quickly to maintain the 'newness' factor, with new merchandise delivered to stores five times per week. These include exclusive up-and-coming third-party brands that are not available at its competitors. Moreover, Tilly's has a high proportion of in-house brands such as RSQ, Full Tilt, Blue Crown, and Infamous that make up 30% of its sales mix.  

Similarly, Abercrombie & Fitch has strategies in place to allow it to be up to speed with fashion trends and customer needs. Firstly, it has started to engage in fabric platforming, which basically means reducing the number of fabrics it uses across various brands and designs. This will shorten the sourcing process and improve Abercrombie & Fitch's speed to market. Secondly, Abercrombie & Fitch is supplementing its core product assortment with vendor-designed and private-label products. If its third-party brand suppliers are not providing it with fashion-relevant products fast enough, it can fill up the gap with alternatives.

In addition to sharing a common target demographic with peers Tilly's and Abercrombie & Fitch, Zumiez has a lifestyle focus in the area of action sports. Unlike its peers, which focus on soft goods such as apparel, footwear, and accessories, Zumiez also has a mix of hard goods such as skateboards and snowboards. This broadens its appeal and simulates cross-selling of the different product categories.

However, it also practices merchandising strategies similar to its peers. Zumiez carries hard to find, unique items and private labels that are in-line with emerging fashion trends. In addition, it boasts a broad merchandise mix, with no single brand accounting for more than 9% of 2012 sales.

Winning the hearts and minds of teenage consumers is not that much different from any form of retailing in general. You have to get the merchandise (the 'what') that they like and put them in their hands with the right store location and experience (the 'where'). It is just much tougher getting the teenager demographic right. Retailers like Tilly's, Abercrombie & Fitch, and Zumiez have taken steps in the right direction, mitigating the risks of losing their less-than-loyal teenage customers.

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