5/15/2013
There’s a revolution underway in the retail industry, driven largely by young shoppers.
Although the convergence of the online and offline worlds has an impact on all shoppers, teens and children’s perceptions of these two experiences are distinctly different from those of adults. Adult shoppers divide these channels into separate, complementary experiences. They are either shopping online or shopping in-store, and each comes with different expectations and behaviors. These older shoppers also tend to consciously favor one channel over another depending on their purchases. They may buy books online, for instance, but prefer to buy clothes in person due to fitting concerns.
Teens and children, on the other hand, have always lived in a world where offline and online experiences coexist. Amazon.com, keep in mind, is 14 years old, and eBay 13. Today’s young shoppers, who have always had these options, seamlessly interchange between offline and online shopping experiences. More important, they view each channel with the same level of expectation. Amazon.com is no less a retailer than Walmart in their minds simply because it doesn’t (yet) have physical stores.
Still, the marketplace-run by adult executives-divides brick-and-mortar from online shopping. This separation fuels the perception that one channel (offline) is superior to the other (online). There’s also the matter of scale and profit, although each year the two sides grow closer on both factors.
Moreover, licensed brands and property holders maintain their view that online retailers primarily serve as their proof of concept. They feel online outlets serve as their farm system before heading to the majors. As such, they team with online retailers to build demand before seeking mass market partners.
Warner Bros., for instance, uses online retailer Café Press to test its back catalog to see what characters and phrases have momentum with interested fans before they approach retailers. PBS Sprout, via its licensing agency Big Tent Entertainment, is first introducing preschool properties Sunny Side Up and the Chica Show online, with the expectation that they can leverage this online demand into attracting offline interest.
However, this continued importance affixed to brick-and-mortar retailers is increasingly upended by young shoppers’ behaviors and expectations. They don’t care where or how they purchase products, they just want them now. These attitudes favor online retailers. “There’s only so much physical room in the stores,” says Pottery Barn Teen’s Laura Alber, adding that the retailer’s 2012 profits were hindered by the inability to carry the full range of merchandise offered on line in its physical stores.
The expectations of teens and children that online and offline retailers will operate in similar ways are mostly driven by their online experiences. This means they expect items to be grouped by brand, not product. “With brick-and-mortar, you have 100 licenses from different manufacturers all around the store,” says Café Press’s Ty Simpson. “That doesn’t work online. You don’t go to one site for T-shirts and another site for toys. Consumers want everything in one place. If they want to purchase Superman, they want to see everything.”
Teens live in an on-demand world. If Glee can post songs on iTunes for fans to download one day after the show’s airing, why does it take six months for Glee T-shirts to hit store shelves?
Online retailers have the ability to react quickly to pop culture demand. To this end, when the Fox TV series Fringe aired its last episode in January, online retailer Café Press saw sales of Fringe merchandise grow 600% in a day, according to company executives. Café Press was able to track online momentum and capitalize on the show’s finale. Brick-and-mortar retailers aren’t able to turn product around so swiftly
Similarly, LionsGate and licensing agency Striker Entertainment benefited from the online world’s ability to react quickly to emerging trends. The two companies approached Café Press to launch a branded shop in five days for the buzz-heavy summer 2012 movie Ted. Without retail placement, but with support from a few Facebook ads and a tweet from the movie’s creator, Seth MacFarlane, Café Press quickly sold thousands of the $60 talking Ted bear and Ted Is Real pajamas. Teens saw the movie and wanted the merchandise. Although brick-and-mortar retailers refused to carry Ted merchandise since it was an unproven property, this decision ultimately does not matter to young shoppers. They expect to find what they want.
Teens are also accustomed to seeing new merchandise. They expect to regularly see new products online or in stores. Brick-and-mortar retailers may change floor layouts once a month or once a season. Online retailers, on the other hand, refresh product offerings daily. Fab.com, for its part, refreshes its pages twice a day.
Although the offline world may be viewed more favorably among adult executives, young shoppers clearly favor the online experience. Therefore, the most effective result may be a mixture of the two. “What should happen is that you have what online does well with what offline does well and they morph to come together,” says Big Tent Entertainment’s Kristen Fallon, speaking at the 2013 Kidscreen Conference. Many retailers are pursuing this omnipresent strategy. In fact, Nordstrom plans to eliminate all traditional cash registers by 2014 in favor of iPads. To them, it doesn’t matter where or how consumers access Nordstrom products. This change also opens up several additional feet of new space to carry product.
But there are always a few outliers taking a strikingly different path. Rather than embrace both the offline and online world, a few retailers are sticking with one or the other. In this vein, retailers H&M and Hibbett Sports don’t have e-commerce sites. Lifestyle brand Kate Spade is launching its younger-skewing concept Saturdays without a U.S. retail presence. While the reasons for these decisions differ according to company, the general consensus is that each is sticking with what it knows best. “We always try to do what is needed,” says Hibbett’s executive chairman Michael Newsome. “If you go back 20 years, approximately 13% to 15% of sporting goods were sold by mail order or catalog. Today, there’s almost nothing by mail order or catalog. It’s gone to nothing, but e-commerce has gone up to the 13% to 15%. So this is probably why we haven’t been impacted in Hibbett. But if [e-commerce] keeps growing in the future, we’ll have to look at it, but we want to be needed, and we’re not too sure we’re needed there today.”
© 2013 Business Valuation Resources, LLC (BVR). May not be reproduced without written consent of publisher.