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NEW YORK — In an age when the mantra “know your customer” is more vital than ever, there are still plenty of consumers who are completely overlooked.
Take the demographic of Nancy Silva, a 43-year-old math teacher, who casually mentioned to a friend that she had her eye on a pair of $60 black stretchy overalls she saw in the Chico’s FAS catalogue.
Big mistake. By the time she got to the Chico’s nearest her home in Plymouth, Mass., Silva’s 52-year-old friend was already at the store and about to purchase a pair of the overalls for herself.
“It’s an unwritten rule that you wouldn’t buy the exact same thing your friend had,” Silva said, laughing. “I mentioned…that I was heading there, and when I walked in, there she was wearing what I was going to buy.” Unable to resist, Silva bought the overalls anyway.
Baby Boomers fighting over the ideal item is an exception given that they are one slice of the consumer pie retailers and manufacturers are neglecting. The marketplace is increasingly competitive and volatile, where consumers’ loyalty to stores is constantly shifting based on the fashion appeal of the merchandise, the prices and the retailer’s image and service. So why are stores and vendors not producing more petite sizes? Or petite-plus sizes? Or fashionable plus sizes for teens? All of these are markets worth millions of dollars in sales.
Even analysts don’t know.
Some chains are getting it right, though. Chico’s, which has established itself as the place to shop for middle-aged women, is clearly a successful example of knowing its customer. In fiscal year 2003 alone, the company’s net income skyrocketed 50.1 percent to $100.2 million over 2002, an increase of 547 percent from earnings in 1999. The Fort Myers, Fla.-based company’s sales jumped 44.7 percent in 2003 to $768.5 million. That’s up 395.8 percent from revenue of $155 million just four years earlier.
Yet the competition is rapidly heating up. Gap Inc. is trying to position itself to an older demographic to take on retailers like Chico’s with a 10-store concept set to be launched next year. Already, Gymboree Corp. has positioned itself to resonate with female Baby Boomers — defined as people born between 1946 and 1964 by the U.S. Census Bureau — who spent about $28.8 billion in the year ended Aug. 30 on women’s apparel, according to The NPD Group. The company announced in April a new concept called Janeville that targets clothing and accessories at women in their mid-30s and older; 10 stores will be rolled out by the end of this year. Meanwhile, start-up Iziz Dezigns has launched a shopping concept, the Atelier Avocado Collection, which features made-to-measure clothing and is aimed at women 35 and older. It is set to be rolled out nationwide in 2005.
The renewed fight for the mature woman’s attention could lead to an eventually saturated sector. But retailers setting their sights on the over-35 market won’t get anywhere unless they can clearly identify the needs of their finicky core consumers.
As if that won’t be challenging enough, consumers of all income brackets are increasingly looking at the complete shopping experience as a gauge of their overall happiness, said Pam Danziger, president of Stevens, Pa.-based Unity Marketing and author of the book, “Why People Buy Things They Don’t Need” (Dearborn Trade Publishing, 2004). In other words, they don’t find happiness based solely on what they’ve just purchased.
“For retailers…it’s all about selling things. But if people are saying, ‘I’m not into things anymore, I want experiences,’ that really has significant, far-reaching effects. It’s a paradigm shift because it means retailers have to become an experience,” Danziger said in an interview.
So, in addition to finding a way to make shopping more of an experience, retailers need to stay on track with fashion trends that make customers want to beat their friends to the store. The challenges are varied: Identify target customers, anticipate their future wants and provide a psychologically pleasing environment.
Defining — and Growing With — the Core Shopper
There are several things retailers can do to “take the pulse” of customers and help them narrow down who represents their core consumers, said Kristin Bentz, an analyst at Kinney + Kinsella, a New York marketing and creative services firm. “It’s about maintaining a closeness and putting yourself into her life. What is my customer doing right now? It’s looking at how she lives — what does she eat, drink?”
Talbots Inc., for one, tests new concepts in a small number of stores for sell-through and customer response before rolling them out to the rest of the 1,000-store fleet. Most recently, the company hopped on the denim bandwagon and this year rolled out new jean fits. “We replaced the old jean altogether with three new jean styles and more updated lightweight denim fabric in a classic, flare and boot cut,” said spokeswoman Margery Myers, adding it’s been a significant success.
Along with intense research, Talbots stays close to its core customer by encouraging her to talk to the company, Myers said. The company’s chief executive officer, Arnold Zetcher, personally corresponds with “the best customers” via e-mail. And each week, store managers send field notes to the company’s headquarters based on interactions with shoppers.
While Talbots has seen sales and earnings slump in the last few years, which it blames partly on the struggling economy, it managed to eke out a sales gain in fiscal year 2003 of 2 percent, to $1.6 billion, though net income dropped 13 percent to $14.7 million. Sales, however, have jumped 600 percent from $1 billion in 1996 to 2003’s $1.6 billion, according to annual reports. In one of Talbots best years, the company showed why it has had staying power: In fiscal year 2000, sales jumped 21.9 percent to $1.6 billion over 1999, while net earnings skyrocketed 97 percent to $115.2 million. The company had double-digit comps each month of 2000 except for two clearance months.
For Chico’s, defining its core customer has been an evolution. The company, which was formed 21 years ago, first started selling Mexican folk art and cotton sweaters. It has evolved to the 418-store specialty retail powerhouse it is today, having posted seven consecutive years of double-digit same-store sales gains at year-end 2003.
Silva, who currently prefers Chico’s over Talbots, cited Chico’s friendly associates who understand what she wants or needs and who treat her the same whether she’s in Boston or Chicago. Chico’s executives were unavailable for comment.
Sensing that its core consumer would like more, Chico’s is carving out even a larger niche. The company is in the process of rolling out 10 Soma by Chico’s intimate apparel test stores for the same age group. The move demonstrates another essential part of really knowing the core shoppers — anticipating what they’ll want to buy in the future.
“Thinking three to five years out is vital,” said David Wolfe, creative director at the Doneger Group, a New York-based retail consultancy. “But it’s counterintuitive to the retail tradition. Usually, they’re looking at yesterday and seeing what sold…building their future on the past, instead of projecting.”
Yet, even realizing they should know who their consumers are inside and out and then targeting specific merchandise to them, it is frightening for many retailers, Wolfe said. “They are so dedicated to the proposition of being all things to all people because they’re afraid of missing one single sale.” Consequently, “they end up being nothing to nobody.”
The resulting quagmire retailers have created between needing to know who the core shopper is and trying to find out what they want leaves consumers like Cindy Jenkins, a 54-year-old elementary school teacher also from Plymouth, Mass., frustrated. While Jenkins loves to shop — with Talbots among her favorite retailers — she would like more of an apparel selection for women in her age group.
“Someone my age is really stuck not wanting to look too young and not wanting to look matronly. It’s hard to find the look that’s right,” said Jenkins, who is also a personal trainer, a job she will pursue part-time when she retires in January and moves to Fort Myers, Fla.
Particularly telling of Jenkins’ shopping frustration was her desperation to find a dress for a wedding last June. After an intense search, she found a possible candidate at Talbots that was her size but cut too big for her petite, size 6 figure. “The style was kind of conservative…it looked too old,’’ she said. “It looked matronly.”
After pondering the dress with her daughter for a few minutes, it was decided that it would look better if it was taken in. Jenkins had it taken in all the way up the sides, and then it looked great, she said.
The dissatisfaction Jenkins feels is partly why there’s been “a migration back toward specialty retailers” such as Chico’s and Talbots, Marshal Cohen, chief industry analyst at The NPD Group, said during a conference call this summer hosted by Citigroup retail analyst Deborah Weinswig. “They’ve narrowed down the assortment.”
For these specialty retailers, deciding what that core shopper will like is a challenge and they don’t always succeed. Yet it’s been made slightly easier because many specialty retailers have been targeting their core consumers for decades. For Wolfe, that knowledge base gives them confidence in their merchandise selections — something more companies should have.
“I feel the consumer population would welcome retailers who took a stronger stance and said, ‘Here’s what we believe in,’” said Wolfe.
It’s clear that what Hingham, Mass.-based Talbots believes in is classic clothing. Part of what has made the company successful is its attention to its core audience, called misses’, and includes several other sub-concepts such as petites, plus sizes (called “woman”), petite plus and a higher-end luxury line, called Talbots Collection.
For Talbots, which was founded in 1947, it’s easy to know who the core customer will be five years from now because of the “perennial” nature of its clothing. Thus, the company’s strategy, said Myers, is to evolve with its core customer “on trend but not leading edge and not past the trend. We want to stay right in the middle…we don’t have these huge, dramatic swings in our clothing.”
Abrupt changes could mean losing customers, Wolfe noted, and retailers can run into trouble when they try to define a trend for customers before that trend is defined for the world. Talbots learned that lesson the hard way in 1997.
“We had gone too young and too trendy,’’ Myers said. “We introduced some synthetic, more high-performance fabric. Our customer just wasn’t ready for that….You have to have those things when she’s ready to want them….At that point, she wanted cotton and wool.” The irony is that today, the Talbots customer “loves” that type of material, Myers said, “because they’re high performance, easy to care for and they feel great.”
Talbots’ sales and earnings have faced headwinds due to competition from Chico’s, which has a huge, loyal fan base reflected in the estimated 1 million members in its loyalty program, called Passport. The program alone drove 74 percent of business in fiscal year 2003, according to Chico’s annual report.
For Ellen, an ardent shopper who lives part-time in both Miami and New York, shopping at Chico’s is a no-brainer. The keys to the company’s success, said Ellen, who asked that her last name not be used, is that Chico’s gives customers meaningful incentives, with coupons sometimes offering 50 percent off; precoordinated, age-appropriate outfits; decently priced accessories, and quality customer service.
“I’m 58 years old. I am not a size 2. [Chico’s] is one of the stores that is for women. It’s not where the top is going to come up to your navel,” she said. “There are a lot of designers that are forgetting about people that are not a size zero or 2.”
Chico’s also keeps customers coming back because it turns its in-store inventory between 10 to 12 times a year, or roughly once a month.
Both Ellen, who is retired from the travel industry, and Silva love Chico’s Travelers Collection of easy-to-pack, wrinkle-free outfits made of stretchy material.
“There are lots of companies that claim they have travel dresses….The wrinkle-free dress arrives in the mail and it’s already wrinkled!” said Silva, an avid traveler. “But the Chico’s clothes are amazing. I can finally travel without an iron.”
Yet Something’s Still Missing
Clearly, retailers are starting to check off key groups (frequent travelers) within key demographics (over 35 years old), but they are still missing certain untapped demographics that analysts say will be important to future customers — namely, women older than 50 years who have young mind-sets but not young bodies. “We need to get over our disillusion that 24 is the only age to be in which you’re fashionable,” said Wolfe. As a result, retailers need to do some “serious research into what looks good on a 55-year-old in a 24-year-old style.”
Another huge opportunity, according to Cohen, is in the petite-plus and plus-tall sizes. “These are areas that very few retailers have touched.”
Indeed, plus sizes are underserved in all demographics, said Bentz, noting that it’s an area where retailers could “make a fortune.”
Did You Know?
- Every eight seconds another person turns 50, according to MarketResearch.com.
- About 67 percent of Baby Boomers report more income after their children leave home, and about 60 percent of this group plan on saving the increases in their disposable income, while about half plan to spend the money traveling, according to a 2004 survey by Pulte Homes, the parent of Del Webb retirement and lifestyle communities.
Boomer Fast Facts
- Annual spending power: $1.1 trillion a year.
- Annual average spending per household: $45,000 to $46,000
- Apparel spending: 13 percent higher than other age groups.
SOURCE FOR “DID YOU KNOW” AND BOOMER FAST FACTS:” 2003 METLIFE MATURE MARKET INSTITUTE REPORT.