Stay Connected
Business Insights From Conway MacKenzie
October 2, 2017

The New Retail Reality

Part one in a 3-part blog series.

The wide world of retail finds itself today at a crucial crossroads. Lesser affected have been the elite, high-end shopping centers and, conversely the lower-end centers, each of which cater to a defined subset of shoppers. However, the majority of retail centers nationwide fall into the mid-range category. Many of the mid-tier retail centers as well as the retailers themselves are struggling which, in many ways, mimics the plight of the country’s shrinking middle-class.

Consumer tastes, preferences and budgets continue to evolve, leaving many formerly strong retail brands dying in the wake. An obvious example of this new retail reality can be found in the teen apparel sector. A closer look at who, what, when and where helps shine a light on the why – and how the industry can recover.

What a Girl Wants
A look at teen apparel-focused retailers who are struggling or have filed for bankruptcy within the past 18 months reads like a veritable ‘who’s who’ of once proud, once strong name brands, including:

  • Aeropostale
  • American Eagle
  • Bebe
  • J. Crew
  • Quicksilver
  • Rue21 (closing 400 of its 1,200 stores)
  • Wet Seal

Additionally, Gymboree, along with its associated Crazy 8 and Janie and Jack nameplates, is closing 400 of its 1,300 stores, while, Children’s Place (closing 300 stores by 2020) and Claire’s (53 store closings in 2016) could be close to filing bankruptcy and/or shedding additional stores in an effort to stay afloat. While some retailers will no doubt emerge from bankruptcy leaner in the short term, many will inevitably find themselves right back where they started within a few years and, following in the footsteps of Radio Shack, Wet Seal, and American Apparel, that means once again filing for bankruptcy, a term derisively referred to as a Chapter 22. The long-term future looks bleak for many of these retailers. Some will not survive.

Today’s teenagers simply do not feel obligated to spend a lot of money on clothing like their predecessors. As such, teens are now shopping at hot retailers such as H&M and Forever 21, which offer trendy clothing at affordable prices. There are a lot of cheap, fashionable options in the marketplace. Teens are no longer choosing to spend $75 on an Aeropostale or Abercrombie & Fitch t-shirt when they can buy one at Forever 21 for $10.99. Money earmarked for significant purchases instead goes toward technology buys such as iPhones and iPads.

Other interesting dynamics at play are taste and preference. Today’s teens appear unwilling to pay a premium for retailer logos affixed on the apparel. American Eagle, Aeropostale, and Abercrombie & Fitch each used to be sought out for their emblazoned marks – a sign of peer prestige. At the root of this new preferential choice, beyond style, is, again, price. After all, why pay $80 for an A&F logo’d sweatshirt when you can find it cheaper elsewhere for $10-$20.

Next: What a woman wants.

Authors
Matthew Mason is a Managing Director, Conway MacKenzie. Lauren Leach is a Director, Conway MacKenzie. Together they lead the firm’s real estate practice and specialize in distressed real estate; both managing large CMBS portfolios and malls, as well as working directly with retailers.

To read Part III of this series, click here.