With an estimated $44 billion in buying power, teens could pave a path to success at retail.
The traditional US department store format is no longer conducive to the way Generation Z shops — and shop, they do. Gen Z, those born between the mid-'90s and early aughts, now represents roughly $44 billion in buying power, which means that teenagers today wield a not-inconsiderable degree of consumer clout. In part motivated by a constant desire to one-up their peers online, teenagers have emerged as crucial kingmakers for brands both squarely positioned within and operating on the periphery of streetwear's all-encompassing purview — and perhaps surprisingly, the vast majority of them still prefer to shop in-store.
To effectively appeal to Generation Z, big-box retailers need to act more like multi-brand boutiques, starting by adopting elements of the shopping experience that have turned the business of selling hoodies and tees into a multibillion industry and made elevated streetwear the overarching aesthetic of choice for teenagers across the country.
Members of Generation Z represent some of the savviest shoppers in the world, and the amount of information they have access to when comparison shopping is unprecedented. It's important for department stores to refine a point of view and then stick to it; competing when it comes to what used to be differentiating factors like price is futile. Generation Z still needs a reason to shop in-store, and exclusive, highly-personalized product is an increasingly valid one.
True exclusivity no longer means buying into a few designer pieces no other store stocks; at Kith, Ronnie Fieg built a budding retail empire in part on the strength of an in-house brand that always merchandises seamlessly alongside the store's already existing product assortment. Sean Wotherspoon's Round Two stores routinely feature a selection of covetable vintage finds expertly curated by his team so his customers don't have to sift through an otherwise overwhelming morass of clothing in dusty bins or crowded Goodwill warehouses.
"There are really only two propositions in today's retail landscape that are viable: You must be either the cognitive default or the emotional default for consumers," says Doug Stephens, a retail futurist and expert on the market. "For specialty retailers and multi-brand boutiques, this means having a very clear and powerful brand point of view that is articulated at every touchpoint." Stephens cites stores like Kith as doing a particularly good job of appealing to teenagers by "creating a customer experience both on and offline that reflects a point of view and draws customers into the brand story."
Perhaps the most important thing that successful retailers are doing today is using their physical stores as a media channel for their brand. "New era brands do not view the store as the end of the purchase funnel, as has been the case in the past," Stephens notes. For brands like Glossier, the beloved community-oriented beauty startup, physical retail spaces represent the perfect opportunity to finely burnish an aesthetic already established online: Glossier's flagship store in NYC is blanketed in the brand's signature shade of dusty pink, with ample space built-in for impromptu photo ops.
Specialty stores and new era brands like Glossier understand retail spaces as "a customer acquisition vehicle aimed at promoting a longer-term relationship with consumers across channels," Stephens says. "This means thinking very differently about how their stores are planned, located, built, managed and measured. The store should be a living, breathing 24/7 advertisement for the brand and all it has to offer."
Members of Gen Z also like to shop with friends, says Michael P. Londrigan, an assistant professor of fashion merchandising at LIM College. Earlier this year, LIM conducted a widely-shared study indicating that members of Generation Z, in contrast to their Millennial counterparts, prefer shopping in stores to shopping online. One of the driving factors for shopping in-store is "social interaction," Londrigan points out.
"Retailers need to create experiences that address this social need for shopping," he says, and for department stores, "finding creative ways to allow for these interactions can be a key to increasing foot traffic."
Incorporating an element of experience into staider shopping environments has long since become a standard industry talking point, but it's one that's rarely executed well by the retailers that would benefit from it the most. That influential internet-savvy stars have already parlayed their online followings into lucrative live events (see the success of, say, Tyler, the Creator's Camp Flog Gnaw Carnival) indicates Generation Z is eager to follow their favorite entertainers offline and is willing to spend to do so. Leveraging already existing physical storefronts to facilitate IRL experiences that can't be replicated online is an ideal way to cultivate meaningful relationships with younger customers that go beyond the transactional, fostering a crucial sense of community through their active involvement with the store.
"Unlike 30 years ago, department stores can no longer trade on convenience," Stephens says. "Put simply, they are no longer the starting point in most shopping journeys, as they might have been a generation ago. Today, department stores have to trade on experience. So, department stores need to use their space to create magic that can't be found elsewhere - either online or in-store."
When Barneys debuted The Drop, a jam-packed two day event at its Madison Avenue flagship produced in collaboration with Highsnobiety, it drew thousands of young customers to the store, many of them for the first time. When the concept migrated to the Barneys outpost in LA, the store refined the event even further, incorporating live performances from the Wu-Tang Clan, a pizza parlor and a roller rink. For Barneys, however, The Drop would prove to be too little too late; one-off events are no longer enough to satiate younger customers' appetite for constant newness, and for the already-ailing retailer maintaining the momentum would require far more than the occasional weekend blowout.
The entirety of the internet is now the competition for department stores. Mimicking the sense of discovery distinctive to scrolling through the timeline — not unlike the wow factor that used to drive customers to department stores in droves at the peak of their influence — is a must, whether that takes the form of a rotating shop-in-shop or a space dedicated to spotlighting local designers. Today, the most successful brands and the boutiques that stock them release a steady drip of new products in a cadence on par with how Generation Z actually shops.
Dover Street Market's dedicated t-shirt space includes a constantly changing selection of affordable tees from lesser-known emerging labels and some of streetwear's heaviest hitters, and has helped the church of avant-garde cool remain relevant to members of Generation Z that might not be ready to spring for Gucci, let alone the more experimental labels in the Comme universe. (It helps that DSM is also one of the only stores that sell Supreme outside of the brand's own retail locations.) Constant variety is key, Stephens notes.
"With the speed of life today and the revolving door of content at our fingertips, brands have to view each new day as a new event, a new happening and a new opportunity to bring something unique to their customers," he says. "Simply rolling in two seasonal collections a year is a road to oblivion."
Under the stewardship of Olivia Kim, Nordstrom's director of creative projects, the department store introduced a regular rotation of shop-in-shops early on. Nordstrom Men's New Concepts initiative, a shop-in-shop spotlighting a rotating mix of Generation Z fan favorites (including a recent collaboration with Union, Chris Gibb's beloved LA-based boutique) is a step in the right direction. (News also came recently that the aforementioned Glossier will be entering a retail partnership with Nordstrom, bringing its aesthetic and products to the retailer's in-store experience.)
"Our goal is for Nordstrom to feel inclusive and approachable to all customers, across all ages," says Sam Lobban, the VP of men's fashion at Nordstrom and the creative mastermind behind the New Concepts platform. "As such, it's important to us that we offer products and services which appeal to younger customers, who may be new to our stores and website." Lobban readily acknowledges the success specialty stores have experienced appealing to younger customers. "There are some fantastic specialty doors out there who create a dedicated fanbase that often starts localized but through the internet and social media can expand more broadly," he says.
Since 2015, Nordstrom has also rolled out a series of highly successful collaborations with influencers including Something Navy's Arielle Charnas, but the Seattle-based retailer has yet to partner with a Gen Z personality like Emma Chamberlain. Department stores need to mix it up by looking outside the confines of the notoriously provincial fashion industry to work with young creatives from a variety of disciplines. Members of Generation Z revere YouTube stars and internet-adjacent personalities and are frequently willing to pay for their merchandise, oftentimes over and over again; partnering with a popular Generation Z personality represents an opportunity to reach a very different demographic and drive serious sales volume.
Department stores also need to eat the short-term costs of investing in automation and other new technologies to reduce rampant operational inefficiencies, which could yield tremendous returns in the long-term. It's essential that brands remain current with the technology they use wherever it makes sense, Londrigan maintains. Any sort of operational streamlining can be costly and time-consuming, but revamping backend systems desperately in need of an update can boost both employee morale and the company's bottom-line.
Perhaps most important, department stores (and the companies that run them) need to work hard to recruit young talent and then work equally as hard to retain them. For members of Generation Z just entering the workforce, checking off a series of boxes when it comes to what they're looking for in a work environment can be as important as the work itself. Both Londrigan and Stephens emphasize the importance of actively cultivating a sense of corporate culture that new hires can reference as a reason they want to work at the company, and more senior employees can reference as a reason they've stayed so long.
"The people entering or about to enter the workforce consistently tell me that one of the most important things to them is having a real relationship with those they work with - knowing about their broader lives, who they are as human beings, their passion, their purpose," says Marcie Merriman, a managing director at EY who specializes in cultural insights and consumer strategy. "Retail is in a prime position to leverage culture to attract Gen Z, as the industry already has a very team-oriented model; this should help retailers successfully compete for the best talent by creating a sense of community, cultivating a sense of belonging, friendship and understanding of individual desires within it."
As a dying breed, department stores are particularly susceptible to perceived concerns regarding job stability and long-term career mobility, and they need to show they're committed to nurturing rising stars in myriad formal and informal ways. That being said, when it comes to effectively appealing to members of Gen Z, both as potential employees and customers, it's critical not to treat them as easily categorized stereotypes.
"Simply installing 'selfie studios,' smoothie bars and using hashtags in your marketing will not only fail to resonate, it will turn this generation off," Stephens says. "Better to appeal to true human emotions, aspirations and desires. The desire to be part of a community, to be successful, to be valued and celebrated for who you are — these are the things that will drive loyalty with Gen Z."