Macy’s reported a disappointing outlook as executives say consumers are spending their dollars elsewhere. Michael Kors’ inventories are rising amid criticisms that the brand isn’t cool anymore.
Teen retailers like Abercrombie & Fitch, Aeropostale, and American Eagle are downsizing and changing their strategies. Several apparel stores like C. Wonder and Wet Seal have shut down locations or shuttered their doors this year.
What’s the biggest problem for these companies?
Millennials, according to recent data from consumer information company NPD Group.
“The fashion industry has undergone one of the most dramatic makeovers in recent history – no doubt influenced by the Millennial consumer,” said Marshal Cohen, chief industry analyst at NPD.
While US consumers spent slightly more on apparel, footwear, and accessories in 2014, those increases were driven by the new “athleisure” trend, not traditional retailers like Macy’s, NPD says.
While previous generations dressed up for work and play, millennials have a tendency to wear brands like Nike, Under Armour, and Lululemon everywhere, according to NPD.
“There is an underlying sense of rebellion that comes through in today’s fashion,” Cohen said.
While department and discount stores struggle, business for athletic retailers is booming.
Cohen says that traditional retailers will have to evolve to newly casual consumers.
“This is no longer a trend – it is now a lifestyle that is too comfortable, for consumers of all ages, for it to go away anytime soon,” he said.
Millennials’ tendency to rent instead of buy is also turning the retail industry upside down.
Apparel retailers are threatened by rental startups like Rent the Runway and Bag Borrow or Steal, Grace Ehlers writes on industry website The Robin Report.
The younger generation is increasingly “looking for less expensive alternatives to ownership,” Doug Stephens, author of the blog Retail Prophet, writes.
Millennials, defined as 18- to 34-year-olds, are increasingly living in small, urban apartments rather than sprawling suburban houses. As a result, they don’t have room for as many goods.
On top of that, younger people have discriminating taste as a result of exposure to online reviews.
“Sharing is here to stay,” he writes.