LOS ANGELES — Retailers — are you ready for some constructive criticism?
Three industry experts took a magnifying glass to junior and specialty store chains in three malls in Southern California over May and June. They found the chains just treading water in a sea of sameness, needlessly vulnerable to weak traffic at malls and lacking in their response to modern shopping patterns and spending shifts.
The observers — Sandy Potter, co-owner of retail consultants Directives West; Barbara Fields, owner of Barbara Fields Buying Office, and Marshal Cohen, senior retail analyst at NPDFashionworld — say it’s not just outside factors like the U.S. economy turning shoppers “fickle.” Rather, there are some problems with stores and merchandising that can be remedied fairly easily. These discoveries are surprising, they say, given that for the most part, retailers have been battling a prolonged economic slump — notwithstanding a reprieve in May, when mall-based specialty stores benefited from pent-up demand and increased sales activity. June sales will be released on Thursday.
Critics’ overriding complaint is the prevalence of similar merchandise in stores. There is pressure on the market to carry the season’s must-have sales drivers, but too much of it — like last spring’s peasant tops and this year’s cargo pants — saturates the market, bores the customer and forces a high rate of markdowns.
“Too many stores are looking at everybody else to see what they are doing,” said Potter. At the Glendale Galleria in Glendale, Calif., she noted the problem of losing focus is exaggerated when a new competitor hits the market, as was the case when Forever 21 came onthe scene three years ago. “Retail executives are like uncertain teenagers — ‘I’m not sure, so I’m going to follow everyone else.’ It’s like there’s only one concept. No one’s taking a stand, no one’s taking a risk. Differentiation among stores happens when they go after their customer.”
Not surprisingly, retailers that unwaveringly cater to a niche lifestyle were described as concepts with staying power.
At Hot Topic, where comp-store sales for the last six months have been mostly in positive territory, culminating in May’s 3.2 percent increase, Potter singled out the juxtaposition of Care Bears and stuffed versions of SpongeBob SquarePants hanging alongside Motley Crüe underwear and T-shirts scrawled with “Morbid” in blood-like script. “This store is really the epitome of lifestyle,” she said. “It’s music and accessories and it’s the underdog consumer that nobody else wants to touch. She feels at home here. I can see why kids want to run in here, even if their mothers don’t want them to.”PacSun earned high marks as a lifestyle winner, too, where trendy screen T-shirts and cargoes take a backseat to surf and skate mainstays. Here, shelves stocked with an increasing junior assortment — long and cropped Dickies pants, Paul Frank T-shirts and accessories and Roxy underwear — have netted the retailer double-digit monthly comp increases consistently since January and a 142 percent increase in profit during the first quarter.
“I applaud them for consistently bringing these brands in that will sell anywhere,” said Fields, who on this day toured a unit at Topanga Plaza Mall in Canoga Park, Calif. “They are quick to get in and out of brands that are not working.”
Known as Miller’s Outpost two years ago, the Anchor Blue chain of about 250 stores turned away from a Western-style denim concept featuring a vast array of Levi’s jeans in favor of a brightly-lit industrial club-like concept with racks of music-inspired screen T-shirts, Dickies and denim brands L.E.I. and Paris Blues.
The problem, according to the experts, is that Anchor Blue has gained little name recognition among teens. While it gives customers access to top brands, “choices are miniscule in comparison to PacSun,” said Fields. Another mistake was to phase out Levi’s and stock stores with the Anchor Blue private label. “Nobody wants that,” said Potter. “Image-wise, the only thing they stand for is Dickies,” she added. “What is the reason for their existence?”
The chain is privately held and does not release sales figures. Some analysts claim it pulls in average annual sales per square foot in the $400 range, but some others say that’s a “rich” assessment. By comparison, PacSun pulls in $1,000 a square foot at its top locations, and at the end of 2002, Hot Topic’s annual sales per square foot were $634. Charlotte Russe and sister company Rampage, combined, report $300 a square foot and Wet Seal notches average annual sales of $267 a square foot. Aeropostale had annual sales per square foot in 2002 of $471. At press time, American Eagle was in a quiet period a day before the release of its June sales, but analysts estimate average sales per square foot in the $500 range.“Small specialty stores are not about unique product anymore,” said Cohen, pointing to cropped cargoes, screen printed T-shirts and peasant blouses — marked down between 20 and 40 percent — in virtually every store he entered at the Del Amo Fashion Center in Torrance, Calif. “It’s all about speed to market today.”
In the world of vertical retailing, Hollister and Abercrombie & Fitch, which post a combined $400 in sales per square foot, received praise for catering to the teen surf and college preppy lifestyles, respectively, but above all were lauded for being first to market with trends. Last month, both chains had already moved on from summer bright colors to transitional plums, smoky blues and olives in the form of beaded camisoles and beaded screen-printed T-shirts, trends Fields recently noted on a buying trip to Europe. Same-store sales have been mostly negative this year, including a 7 percent decline in May for both chains, which report collectively. But in trends, experts agree with Fields’ assessment: “They are unmatched. They do their own thing.” Fingering a lightweight cotton beaded jersey T-shirt tagged $29.50, she said, “Look at how much they’re getting for this. Amazing for a basic T.”
Competitors American Eagle and Aeropostale lost points for brazenly knocking off the A&F concept and for both going after market share strictly on the basis of an estimated 15 percent lower price point. The two concepts have recorded mixed same-store sales, with American Eagle edging up 0.4 percent in May and Aeropostale falling 1.5 percent in the month. “They’re just a little off,” said Potter, referring to a stack of screen-printed fine gauge cotton T-shirts at American Eagle without the updated beaded detailing. “They’re just not as special. Do you really want to be number-two?”
All three observers applauded Express for neat layouts and sizeable spaces, and for presenting each item “deep” in many colors as opposed to organizing stores by outfit. At entrances, tables are piled high with tank tops and scoop T-shirts in orange, hot pink, yellow and blue. Further inside, the customer can, in seconds, discern from a wide assortment of shorts, sundresses, activewear and denim.Express comped up 1 percent in May after six months of slight dips and gains, and Potter, for one, believes the chain has tapped in to how customers currently shop. Average annual sales per square foot for Express stores are $348.
“It means putting jeans in one spot, cargoes in one spot, shirts in one spot and then doing your color story that way.
Potter blamed Rampage and parent firm Charlotte Russe’s comp decline of 7.2 percent in the quarter, in part, to merchandising stores by outfits as opposed to item. “If a customer wants jeans here, where are they? She has to go through every color story. They are just not understanding how she is shopping now.”
In three years, Forever 21 has tripled its store count to 153 units and has retained some of its edge for being aggressive on price and trends. The privately held chain is poised to reach $500 million in sales this year, with $400 in sales per square foot.
Here, Fields found a white ruched wrap cotton shirt similar to one she included in a trend presentation for fallfrom Europe already on the floor for $15. But while executives of the privately held chain have complained of a drop-off in mall traffic causing a weak first-quarter, observers wonder whether internal issues are more to blame. At Del Amo and Topanga Plaza Mall, stores were overstuffed with merchandise, cluttered and largely on sale, indicating there might be underlying distribution flow problems due to growing the chain too quickly. The chain’s wide use of synthetics was another red flag to onlookers, given the junior customer’s current taste for natural fabrics.
There were also stores that weren’t sufficiently capitalizing on a robust category. Bebe suffered criticism for its club-inspired mix with satin cargoes, bombers and fluttery dresses that appear to hit the trend mark — but when made in synthetic fabrics, they come across as cheap. Only recently, stores have begun to turn around 17 months of declines with a 4.2 percent increase in May comps.
“Right now, contemporary is emerging as one of the hottest categories,” Potter claimed. “There is so much going on in terms of knitwear, athleticwear and the jeans business. I used to look in Bebe windows and see skirts I had just seen in Europe. Now, they’ve started to look like Miami Beach. It’s not that the contemporary customer isn’t shopping. It’s that the contemporary customer is not shopping here.”The Wet Seal was also singled out for an apparent lack of understanding who its customer is and, true to form, its torpor continued in May with a 25 percent plunge in comps. At Glendale Galleria, a unit stocked urban trends with JLo-esque athletic jumpsuits; surf and skate looks with short denim shorts and screen-printed T-shirts, and an ode to punk with black mesh pullovers.
“Who is this girl?” asked Potter. “It’s confusing.” She added, “Good for them for getting into trucker hats,” she said, pointing to one marked $16.50. “That is smart.”
Cohen gave credit to Gap for once again making strides with its mid-level customers. He applauded the chain’s “great” depth of color and its return to clean, crisp, wearable basics like khakis and plain white T-shirts. Gap posted a 10 percent same-store sales rise in May, its seventh straight month in positive terrain.
“I’m seeing so many women shopping in the same places their daughters are,” Cohen said, “and Gap has become a haven for that.”
Gap recorded average sales per square foot at the end of fiscal 2002 of $349.
The critics still wonder how long growth will last, however. In the fall, it will be harder for the chain to beat last year’s improved sales figures, they said.
Overall, the large number of chains catering to the teen market is staggering compared to the scant few that serve a mature customer, said Cohen. In the last six months, NPDFashionworld calculated that women in the 13-to-17 age group have spent $6 billion on apparel, significantly less than the 18-to-34 crowd’s $14.7 billion in purchases and the 35-to-54 year old’s $13.9 billion spending tally. “There is a huge opportunity out there.” he said. “Retailers have been enthralled with the younger consumers who, for a long time, have been outspending their population percentage. We are seeing the results of the economy, lifestyle shifts and overall change in what creates the image for teens. This has caused a major shift in their buying habits and interest in fashion.”
Once retailers realize this spending shift, “The ignored generation is no longer going to be so ignored,” Cohen continued. “What was the fastest growing market is now the one of the slowest and the most ignored is quickly displaying the best opportunities.”
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