Where Do Millennials Shop for Fashion?

Of all the scary financial news in the past few weeks, the scariest for marketers are the dire 4th quarter retail sales predictions. Yesterday the WSJ ran an article, "Neiman Marcus Sees Bleak Holiday: Luxury-goods Retailer Reports a Doubling of Its Quarterly Loss and Warns the Wealthy Are Cutting Back". If that's not scary, I don't know what is, especially since, until recently, luxury goods were retailing's bright spot. Only last week (9.15.08) the WSJ had a story titled "Fashion in a Faltering Economy". Here's an excerpt I found especially amusing:

Neiman Marcus fashion director Ken Downing praised the edgy "'80s moment" he saw on several runways, a trend long absent from stores and one he felt would look fresh to shoppers. At Bloomingdale's, fashion director Stephanie Solomon expected "rich hippie" looks to appeal in spring.

Excuse, me? I don't recall the 80's ever having an "edgy moment"; "rich hippie" sounds like an oxymoron if there ever was one; but I digress.

With all the doom and gloom, it may be interesting to see what is known about Millennial's fashion shopping habits. First of all, they don't shop in department stores, for a score of reasons, among the most prominent being that is where their moms shop. Millennials much prefer smaller, more boutique like shopping venues, even if they happen to be chains that act like boutiques such as Abercrombie, American Eagle, or Limited. The photo above shows my friend, Melissa and one of her friends having a birthday shopping spree on Melrose, far from Nordstroms, Macy's and JC Penney. According to BIGresearch, Melissa is pretty typical: 31% of 18-24 year olds say they shop most often for clothing at a specialty retailer, compared to just 16% of those 25 and older. This month, Fortune picked 3 specialty apparel retailers as their 'five retail winners':

American Apparel: The Los Angeles based apparel chain sells basics with a twist: Its advertisements tout both the company's high quality, hipster-friendly tees and its fair-wage policies. Such meticulous branding has not only distinguished the retailer from Wal-Mart, but has also enabled American Apparel to boost profits 42% this quarter to $6.8 million and same-store sales by 23%.

American Outfitters: Urban Outfitters, which also owns clothing retailers Anthropologie and Free People, increased revenues by 30% this quarter to $454 million and boosted same-store sales by 13%.

Aeropostale: Aéropostale reported a 43% increase in profits in 2Q, and an overall sales increase of 21%, to $377.1 million. Even more shockingly, the New York based chain saw same-store sale growth of 13% this July, compared with a decrease of 12% in July of last year.

Not all specialty retailers are doing as well as these three; Abercrombie & Fitch and Urban Outfitters have both suffered small losses, which Fortune speculates as having to do with higher prices/lower value.

When Millennials do venture into the world of mass merchandising, Target is far and away their favorite. We have discussed the reasons for Target's status as Millennial darling in previous blog posts, so won't rehash here, other than to point out that BIGresearch data provides confirmation: twice as many 18-24 year olds say they shop Target most often for clothes than those 25 or older.

Macy's is thinking of revamping its famous Cellar of housewares in its flagship Manhattan store to appeal to younger shoppers: "By giving teens a separate entrance and their own place to hang out - similar to creating a rec room in the basement - Macy's is hoping kids will feel less self conscious about shopping where their parents shop." (Fortune, 9.24.08, "Macy's searches for the fountain of youth"). This might work, if like Target, American Apparel and Urban Outfitters, they emphasize value as well as ambiance. Millennials have money but they don't think of themselves as affluent. Sniffing out the bargains AND the fashion is more than half the fun.

Millennials: I'm Gonna Be A Star!

Celebrities have a special appeal to Millennials. Many Millennials aspire to be famous themselves -- and being famous actually seems within their reach -- so they pay special attention to those who are already famous. We have noted before how many tween TV shows now feature ordinary kids with celebrity careers, thereby 'normalizing' the experience. Furthermore, Millennials have been told from a young age they can be anything they want to be. USA Today, in a Jan 2007 article, titled "Generation Y's goal? Wealth and fame" observes that half of Millennials expect to become rich, and many expect to become famous in their field, though not as famous as Jessica and Nick. They attribute this to being raised with a camera pointed at them and now the ability to put themselves on the Internet. A 24-year old woman who aspires to being a college professor summarizes Millennials motives neatly: "Fame doesn't necessarily mean being on TV. I personally hope to become an influential figure and to be a prominent researcher in my field...it's famous, but it's much less than stardom. I want to affect society."

Several retailers, including Macy's and Wal-Mart, have leveraged this preoccupation nicely. Wal-Mart cleverly leverages Hannah Montana's superstardom in its current back-to-school commercial with a repeated musical refrain 'want to be rock star' to which the Hannah-wanna-be replies "Bring it on!" The message? 'I've become and star and so can you!'

Pauline Hwa, a former Notre Dame MBA student of mine, who is now helping ogplanet.com market video games, says she and her friends enjoy Macy's celebrity-filled commercials featuring Mariah Carey, Gabriel Aubrey, Carlos Santana, Donald Trump, Martha Stewart, Kenneth Cole, Jessica Simpson and more.

When I asked my friends, the best response I got was for the recent Macy's commercials... the Macy's commercial was very appealing for her and her friends. What made the Macy's commercials resonate with them is not just that (it had celebrities). One person said while she's not a fan of the celebrities featured in the commercials, she knows who each of them are, and she was surprised that they all had products in Macy's stores, which she didn't know about since she doesn't shop there typically. I have seen the commercial she was talking about, and I somewhat agree with her about its success.