LONDON, United Kingdom — It’s an all too familiar sight: a harangued mother, desperately seeking her bearings, shepherding a cabal of excitable girls into a temple of teenage consumerism. Yet despite the seemingly endless flow of young tourists to destination stores like the Abercrombie & Fitch flagship on London’s Savile Row, it’s no secret that the “three A’s” of teen retail — Abercrombie & Fitch, Aéropostale and American Eagle — are in deep trouble, decimated by the rise of fast fashion and the shifting allegiances and shopping habits of today’s teens, who spend more time online than at the mall.
At the start of 2014, Abercrombie announced that it planned to close between 60 and 70 stores, which would bring the total number of stores closed by the retailer since 2010 to over 220. American Eagle and Aéropostale intend to close 50 and 125 stores respectively.
“Each of the ‘three A’ brands are simply no longer as relevant to the way kids live and shop today. It was a compounding problem, because they kept on expanding, even while they were losing relevance,” said Craig Johnson, president of Customer Growth Partners, a research company.
“There are categories millennials care a lot about, in which they are trading up, even to a luxury level, and then there are categories that millennial consumers care less about. They are funding the categories they trade up in, by trading down in other categories. So you have got a number of specialty teen retailers that are stuck in between trading up and trading down from a price, quality and fashion forwardness perspective,” added Christine Barton, a partner at the Boston Consulting Group.
So what would it take for the ‘three As’ to save themselves?
A More Fashion-Driven Approach
“They have to get to the trends quicker, picking up a leaf from fast fashion’s book. Almost by force of gravity they are being brought into the fast fashion circuit,” said Johnson.
"In the past quarter, we believe we have made great progress in evolving the fashion component of our assortment,” said Mike Jeffries, chief executive of Abercrombie & Fitch, which has launched new trend-based product, such as festival ranges, and increased its production capabilities in the United States and South Americas, allowing the company to bring product to market more rapidly.
Aéropostale has “essentially fired their entire old customer base, which is mostly under 15 and logo-orientated, and is in the process of replacing it with girls from 15 to 19 with a whole new fashion positioning, while the logo product is getting whittled out of the stores,” noted Johnson.
But becoming more fashion-focused and trend-driven is more easily said than done. “It is not just an assortment issue. They have to adapt their whole supply chain to be able to accommodate that, which is different and it will be a learning curve,” he cautioned.
“To execute this strategy requires massive supply chain infrastructure and the ability to commit to fabrics and manufacturing capacity seasons in advance. The decision-making process of the buyers and merchandisers is extremely rapid, as decisions to commit to a style and have it go from factory to floor in as short as three weeks requires a cultural decision within the brand to empower designers and merchants,” explained a report published in April by The Cowen Group. “Inditex [the owner of Zara] actually has designers inside many of the factories making decisions on orders and production.”
Community & Lifestyle
But embracing fast fashion isn’t the only approach, said Barton. “I do think there is a role around specialty and that role is really around the development, celebration and cultivation of a lifestyle — of a community. That can be achieved through content creation, participation in relevant causes, experiential elements, digital assets; there are a number of ways, but it has to be delivered beyond store and beyond product.”
“The more millennial teenagers can see that a brand gets them and reflects what their life is about, the more that they are going to feel connected to that brand and shop it. It is going to have to extend beyond product. What are other services they could offer; what is the overall experience?” echoed Marcie Merriman, executive director of retail strategy and consumer engagement at Ernst & Young.
Teen retailers will also need to up their game when it comes to connecting with customers online. “Historically, specialty retail hasn’t spent a lot on its marketing; it has used its footprint, its front of store, as well as its product and its logo on that product, to carry the marketing burden,” said Barton. But today’s teenagers spend more time on their mobile phones than at the mall. “You have to be present where millennials are for the bulk of their time when they are not in malls.”
Whether the ‘three A’s’ can turn things around remains highly uncertain. But, success, if it comes, may look quite different to the past and key business metrics will need to shift to reflect this. “Sales per square foot might look different in this new world,” said Merriman. “Especially as these teenagers do more purchasing online, the retailers are going to have to expect that physical stores are as much about brand building and relationship building and creating trust and a two-way communication, as getting stuff checked out the door.”
Editor's Note: This article was updated on 1o November, 2014. An earlier version of this article misstated that Mango was owned by Inditex. It is, in fact, owned by Punto Fa, S.L.