Consumers aged 25 to 38, the so-called generation x, often have been overlooked by apparel retailers in favor of teens and baby boomers — but that may be changing.
Retail stores are hoping to find the “missed” generation.
Virtually ignored by fashion firms and marketers in recent years, Generation X, or the 37 million Americans now between 25 and 38 years old, has piqued the interest of a number of retailing firms. Industry insiders say this overlooked demographic, with its school days behind it (but not its school loans) and retirement still years away, is increasingly the target of specialty store aspirations, from Chico’s FAS and J. Crew on the more mature side to Abercrombie & Fitch and American Eagle Outfitters on the other side of the middle-age line. Department stores such as J.C. Penney, Neiman Marcus and Nordstrom are also gearing up to stake their claims.
Less than half the size of the Baby Boomer and Generation Y groups that flank them and have been at the center of retailing banter over the past several years, the X crowd, which grew up on Gap, khakis and mules, again is translating into an important growth opportunity for fashion companies.
As they emerged from their college years to start careers and families, the X crowd fell off the retail radar screen, which was increasingly sensitive to Gen Y teens and, to a lesser degree, Baby Boomers. In addition, pre-conceived notions about the group as self-absorbed, independent, cynical and fashion-adverse made it harder for retailers to market to them.
But a slew of retail observers agree that Gen X women are extraordinarily viable and potentially a more important audience for retailers as they move towards less casual dress in the workplace, remain single longer and, of course, have more money in their pockets.
As retailers grapple with diminished sales and an aging teenager, companies are hoping this slice of American consumers, as they transition from one life stage to another, will need to dress for their new roles. Stores are looking to open new concepts and put a different spin on specialty retailing.
“Absolutely, there is a shortfall marketing to the 25- to 34-year-old age segment,” Marshal Cohen, co-president of NPD Fashionworld, said. The biggest void in the mall and department stores is that age group, and even beyond, he said. “She is the most ignored customer.”A growing number of retail companies are beginning to recognize that, when marketing to teens, they have to reinvent themselves every three years. “Stores recognize it is hard to go out, capture and captivate the imagination of the teen and then give it away and do it again,” Cohen said, adding stores are recognizing it is necessary to grow with its customers.
“Some stores won’t grow if they don’t grow with their consumer,” Cohen said, noting it is just bad business to allow customers to walk away.
According to Cohen, total spending on apparel was $160.9 billion for the 12 months ended May 2003. Gen X, which represents 13.3 percent of the population, spent $24.7 billion on apparel, or 15 percent of the total. That compares with fashion-hungry Gen Y — 17 percent of the population and 27 percent of apparel sales — and the Boomers — 14 percent of the population and 13 percent of sales.
In addition, Cohen said Gen Xers shop at specialty stores 31 percent of the time, compared with 19 percent at department stores and 17 percent at mass chain stores.
Deborah Weinswig, a broadline analyst with Smith Barney, said department stores, currently entrenched in teen warfare, have an opportunity to gain sales by focusing more on the Gen X age group. “Eventually teenagers are going to grow into this age set and department stores are currently significantly underperforming. This could be a great opportunity if they can capture them,” Weinswig said.
In particular, she said designers such as Calvin Klein, Marc Jacobs and Michael Kors are rolling out bridge lines, thus creating new opportunities for exclusive arrangements at department stores, which are grappling with some fairly mature designer collections.
She also noted how better department stores like Neiman Marcus, Nordstrom and Bloomingdale’s stepped up efforts to expand their contemporary areas and expand their targeted age range. In addition, she said J.C. Penney, which has exclusive distribution pacts with Bisou Bisou and BCBG Max Azria Group’s Parallel unit, is outperforming its peers in this category with its improved contemporary department.
A spokeswoman for J.C. Penney said the retailer has increased its focus in its young contemporary women’s department with lines that are “trendier and edgier than the misses’ category and at affordable prices.” She said adding brands like Bisou Bisou and Parallel will help set the Plano, Tex.-based department store apart from the competition. “This kind of fashion at these prices can differentiate us from others that sell perhaps more basic items,” she said.Sue Patneaude, who oversees the designer division at Nordstrom, said, “The Gen X customer is a great match for Nordstrom. Many of our salespeople are Gen X customers and relate to this important segment. Additionally, we love to find and promote the new talents that are Gen X customers themselves.”
And Margaret Hinojosa, Nordstrom’s national European designer buyer, said, “"The Gen X customer is very aware of the importance of the hot brands such asDolce & Gabbana, Chloë, Stella McCartney and Roberto Cavalli and is looking for a way to capture some of the status, so she looks for pieces and items.”
However, retailers like May Department Stores, Sears and Dillard’s have failed to generate excitement in their contemporary merchandise, and often blame the lackluster economy for its shortfalls.
Yet Gen X women represent a wealth of opportunities for retailers that target them. According to data from Cambridge, Mass.-based STS Market Research, there are 18.7 million female sportswear wearers in Gen X who spend $5.4 billion on sportswear.
Overall, STS said Gen X women’s average family income is $52,000 and they spend $291 on sportswear a year. That compares with the $57,000 earned by Baby Boomers, who spend $309 on sportswear annually, and $45,000 among Gen Y females, who spend $312 on sportswear.
WSL Strategic Retail president Wendy Liebmann said there are plenty of opportunities for retailers to target this missed generation by talking directly to them and not by thinking of them as a hard-to-reach audience that isn’t interested in apparel. And besides, she said, any opportunity to sell more product in this economy, especially in apparel, should not be overlooked.
“The Gap model of ‘give me chinos or denim and a shirt and mules and I am fine’ is not true,” Liebmann said.
To start, Liebmann said that, to dress and market to the X factor, the product has to be relevant to their lives, as the group is very discriminating, skeptical and less accepting. Still, if the product is interesting, she said, they will buy it.
But one thing is for sure: a concept that appeals to the X group will need to be different than those aimed at Y or Boomers. “They aren’t going to accept their mother’s Oldsmobile,” Liebmann said. “A spin-off version of what your mother might have worn isn’t really realistic to them.”Concepts geared to Gen X “are all the rage lately,” Dawn Stoner, senior specialty retail analyst with Pacific Growth Equities, said. “While there has been so much buzz about the teen sector, the retail square footage growth has grown unbelievably high and companies are looking for new niches that are not as saturated.
“Everyone is looking at the few remaining demographics and Gen X is the most compelling,” she said, noting that by getting older in focus, stores have the opportunity for higher operating margins. Concepts like Urban Outfitters’ Anthropologie, for instance, carry higher average price points and sales per square foot of about $555.
The analyst said most companies probing the Gen X market are thinking in terms of a new concept, or a separate store brand, because it is harder to carve out a niche within a store and creates confusion when stores attempt to do so.
“The mix of merchandise and price points is different and the older customer demands a higher quality of service, all of which are tough to do in the same store. In addition, these stores need a different tone to their environment, for example different music, more space and seating, and a higher concentration of sales associates, particularly if the aim is for the more affluent customer.”
While there are a number of brands and stores that already cater to the group — Banana Republic and Anthropologie on the casual end and BCBG and Zara on the urban front — retail analysts and others say there is a definite void in the market. Wall Street believes Abercrombie & Fitch and American Eagle are looking to expand their teen niche into a post-college audience, while Chico’s FAS moved into this age group when it opened Pazo. In addition, J. Crew’s Mickey Drexler said in March on a quarterly conference call the firm’s target audience is 25 to 40 years old. As Crew’s ceo, he plans to make it more of a lifestyle retailer, and fatten its prices, while upgrading the quality of the merchandise to appeal to the more demanding taste of its targeted customer.
“Our research told us this customer may go one place for great pants, another for T-shirts, and still another for shoes,” Jayme Alemechko, senior merchant at Pazo, said recently. “There’s no one place where customers say they can find it all at the same time.”Neither A&F nor AE would comment on its plans for Gen X for this story. An A&F spokesman said the firm believes it can manage more than three brands and noted there will be a concept that will help with square footage growth as the A&F and Hollister stores become more mature.
Allan Ellinger, managing director of Marketing Management Group, said smart retailers have got to offer focused merchandise. “When you go to the department store, you really have to search through lots of products, but when you go to a highly focused specialty store, the entire store is built around your needs and buying habits,” he said. “I am sensing a return to the specialty-store venues and focused retailers and away from the department stores as being kings of our market over the past couple of years.”
Ellinger said the Gen X demographics are very compelling — it is a big generation with lots of disposable income and a need to look timely. “They have come of age and don’t want to dress like either their moms and dads nor their younger brothers and sisters,” he said.
Glen Senk, president of Urban Outfitters’ Anthropologie unit, which targets women aged 30 to 45, said about 80 percent of his customers are in a committed relationship and 50 percent have children and are in the nesting phase of their lives, compared with misses’ stores like J. Jill and Chico’s, where the majority of their customers are empty-nesters. Anthropologie currently operates 41 stores and said it is looking to open a total of between 10 to 12 new doors this year, and eventually believes it can have at least 200 stores in total within five years and a $1 billion business.
Anthropologie has been enjoying strong same-store sales over the past two years, increasing 12.3 percent in 2002 and 10 percent in the recently concluded second quarter of fiscal 2003. Senk said the formula for success is staying close to the customer. “She is fashion aware, but doesn’t want to be a fashion victim. She is interested in looking good, but wants to be comfortable,” he said.
Todd Slater, a retail analyst with Lazard Freres, thinks the opportunity exists for brand extensions or new brands.“Very few brands are focused on an upscale casual lifestyle,” Slater said. “There is almost no specialty concept in the mall for the 30- to 50-year-old man and woman.”
He pointed out that J. Crew went young, Banana Republic is geared to a very specific niche and Kenneth Cole addresses the X customer, but in a modern kind of a way.
Using Polo Ralph Lauren as a starting reference, Slater said retailers that are looking to cater to Gen Xers need to offer higher quality fabrications; comfortable and durable products that are primarily casual, and activewear with a casual wear-to-work element.
Slater said a big part of the push today is that retailers are beginning to look beyond 2010, when teen demographics level out and will even shrink. He said he believed that both AE and A&F could be successful with Gen X formats because they have the organization and the merchandising aptitude to tackle the space.
It isn’t an unlimited opportunity, however. Slater warns that given the recent noise about new brand launches in the Gen X group, “it is likely if any of these rumors or plans become concrete and launches occur, space is likely to get oversupplied rather quickly.”
On the other hand, some observers say retailers are indeed reaching out to Gen Xers and have been doing just that during the past decade. Retailers had to know this consumer group’s behavior because they were influencing so much of their parents’ purchasing. Now that they have money, stores are devoting more floor space to them.
Steven Skinner, a partner in the retail industry group at Accenture, said he does not see a void in the Gen X space, and in fact said because of increases in the group’s disposable income, as opposed to that of their younger siblings, companies are expanding their assortments to target this group.
“I think they have actually been a generation that has been targeted strenuously because they set trends in the marketplace,” he said. So while they don’t possess the greatest buying power, the group influences Baby Boomer and Gen Y purchases.
Skinner said there are two retail groups that are successfully targeting and reaching Gen Xers, the first being specialty retailers, particularly Gap, Anthropologie, Abercrombie & Fitch and H&M. The other group consists of the value retailers that are targeting Gen X and want to expand their footprint with the group. He said Target is an example of a retailer aiming to remain relevant to the group, pointing to its in-store signage and product. In addition, he credited Wal-Mart and J.C. Penney for trying to become more relevant to this group through marketing and product assortment.Another benefit of opening new concepts catering to the Gen X crowd today is it helps retailers look to the future, when today’s teens become young adults.
“If you get on board with them now, a retailer is set up nicely for Gen Y, who are more demanding and technologically sophisticated,” Skinner said. He said Gen Xers can serve as a test group for new retailing service models that are more digitally immersed and can provide different service levels so the stores will be ready when Gen Y comes through.”
Lois Huff, senior vice president at Retail Forward, said she expects to see retailers develop more concepts for that twentysomething and over customer. She said retailers are starting to pay more attention as the first wave of Gen Y consumers, including Chelsea Clinton, who are generally brought up with higher expectations and have expensive tastes, style and fashion, age.
Huff said value-oriented chains like Forever 21, H&M, Target, Kohl’s and Old Navy are in the strongest position to capture the wallet of the twenty- to thirtysomethings because of their current limited spending capabilities.
“They are trying to figure out how to keep this huge base as it moves into a more demanding life stage in terms of their spending requirements as they go from teen/college life into adulthood,” Huff said. “They still have a strong desire for good fashion.”
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