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Retailers Who Choose to Ignore Customization Do So at Their Own Risk

By Motley Fool Staff – Oct 11, 2016 at 7:44AM

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Consumers have spoken, and this once high-flying apparel retailer is closing over 150 of its stores after entering bankruptcy proceedings.

While profits abound for companies that can capitalize on the customization super trend, the reverse is true for those that choose not to cater to evolving consumer preferences.

Look at Aeropostale (AROPQ). In just four years, the company saw its top line plummet almost 40% as young shoppers turned away from its offerings in favor of competing brands. Its once multi-billion dollar market capitalization was wiped away, and the company declared bankruptcy earlier this year.

In this clip from Industry Focus: Consumer Goods, Motley Fool analysts Vincent Shen and Asit Sharma conduct a brief postmortem on the once popular teen clothing retailer.

A full transcript follows the video

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This podcast was recorded on Oct. 4, 2016. 

Vincent Shen: We flip to the other side of the coin. We had three companies that have, at varying levels, really turned their attention to customization, or increased choices for the consumers, and the draw it can have with shoppers in terms of building your business, growing your business. On the other side of the coin is, our example, what can happen if you fail to see that consumers want options.

Asit Sharma: Aeropostale is a name that's familiar to many of us who wandered into shopping malls, and parents who have teenage kids. It used to be a wonderful brand, a leading brand, very into these big Aeropostale logos on their sweatshirts, etc. Well, for the last several years, teenagers, preteens, those moving into college, have moved away from logos because of this whole sea- change shift away from mass goods into custom goods. So, if you think about walking into a store, maybe you can't get something customized as you wait, but you certainly don't want a huge logo splashed on the clothing. And that's a trend that's been apparent to a lot of folks who watch the fashion industry.

But Aeropostale was in denial. As other companies were shrinking their logos, or making them disappear altogether, Aeropostale continued to splash that big logo on their displays. The net result is the company declared bankruptcy in May of this year, and now they're undergoing a rescue package. Some of the rescuers are the actual malls that are on the hook for the Aeropostale leases. 

So, this is a cautionary tale. We call this a supertrend, because it goes across industries -- the customization supertrend. If you ignore it, it's actually to your peril. For those of you who are interested, there's an excellent article in Bloomberg yesterday about this. It's Rebel Teens Are Killing America's Clothing Giants.

Shen: I think, in this example, the fact that they didn't see that changing preference in terms of logos, definitely, the company, and maybe even 10 years ago, when I think back to my time in high school and going into college, 10 to 15 years ago, their competitors -- think American Eagle OutfittersAbercrombie & Fitch -- they all followed that. The clothes looked very similar. Now, if you think about the fast-fashion houses that have become more successful, it's less of a logo, but different pieces so that people -- coming back to the customization idea -- can build the outfit to look like they want. There's more of that individuality with how people want their fashion to look.

Asit Sharma has no position in any stocks mentioned. Vincent Shen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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