Despite daily affirmations from the White House that “everything is awesome” with the economy, 2017 has been a miserable year for retailers. As Reorg First Day points out, over 30 retailers, with debt aggregating into the billions of dollars, have filed for bankruptcy so far this year…
Of course, as we discuss frequently, this trend is attributable to, among other things, collapsing mall traffic courtesy of a persistent shift of consumer spending to online retailers like Amazon and others. And while apparel was always expected, or at least hoped, to be somewhat immune from the “Amazon Effect,” one of the derivative results of lower mall traffic, and one that is only becoming more apparent now, is the collapsing brand loyalty of millennials.
As Bloomberg points out today, a whole generation of millennial Americans, who are just now starting to obtain financial self-sufficiency, couldn’t care less about polo ponies, crocodiles or any of the other clever logos that retailers have spent billions on over the years to convince you that you should pay $125 for a shirt that would sell for $15 absent the logo on the breast…
“Every new generation is becoming less and less brand-loyal,” Bahulkar says. “Millennials don’t care as much about logos. They will buy anything from anywhere at any price point, and that is a big change.”
The erosion of brand loyalty has been a boon for Target, the cheap-chic retailer that made its name in apparel via partnerships with top designers Isaac Mizrahi and Jason Wu more than a decade ago. It’s leveraged that success to create its own private labels in recent years, most notably Cat & Jack, a kids’ apparel line whose sales surpassed $2 billion after a little more than a year on the shelves. Target’s winning formula has emboldened Wal-Mart, which recently hired a veteran of Saks Fifth Avenue and Ralph Lauren Corp. to boost its fashion game.
…which is great news if you’re an online retailing giant and want to get into apparel but haven’t spent decades dumping billions of dollars into now-useless brand development.
According to Wells Fargo estimates, Amazon will leapfrog T.J. Maxx and Macy’s in 2017 to become the second-biggest seller of apparel and footwear in the United States and it has everything to do with how they’ve managed to transform the shopping habits of consumers.
For those of you who are old enough, consider how you planned out your apparel shopping trips in the late 90s. For many of you it probably included a trip to the mall with predetermined stops at the specific stores you liked for any number of different reasons…not the least of which was brand recognition.
Now, contrast that to today when apparel shopping often begins with an online search…a search which consultants at Bain & Co. recently found to often exclude any mention of a brand at all…consumers just enter “yoga pants” and see what comes up.
Searching for generic product categories on Amazon turns up plenty of private-label options. More than one-quarter of first-page Amazon search results in categories such as men’s button-down shirts were private labels, Bain says. That helps explain why almost 40 cents of every dollar spent online on clothing and footwear in the U.S. will go to Amazon this year, according to data tracker Euromonitor, up from 23 cents in 2014.
In some categories—like the active wear that Americans increasingly wear all day, whether or not they hit the gym—private labels combined account for 20% of the market, according to researcher NPD. That makes store brands in aggregate larger than any single brand, which should strike fear in the executive suites of Lululemon Athletica, Nike, and Under Armour.
“Active wear is going like wildfire,” Wilson says, for the simple reason that “you don’t have to try on spandex pants. If I was in those categories, I would be worried.”
Of course, not everyone, including Candace Corlett of WSL Strategic Retail, thinks Amazon will be successful in apparel, saying “I don’t know anyone who is jumping up and down about buying clothes on Amazon…They’ve put together a lot of midpriced, uninteresting stuff.” Somehow, we suspect the CEO of whichever apparel giant is forced into bankruptcy next just might disagree.
This article was originally published by ZeroHedge.com.