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Teen Retailers Continue to Struggle With Online Shopping

NEW YORK (TheStreet) - Given the terrible earnings results this quarter by teen retailers including Abercrombie & Fitch (ANF), American Eagle Outfitters (AEO) and Aeropostale (ARO) and cautious outlooks for the rest of the year, the argument that retailers need to get their acts together when it comes to digital and mobile shopping continues to burn brightly. It's not clear however, these companies are taking big enough steps.

Retailers across the board blamed poor mall traffic and highly promotional environments from competitors for disappointing earnings during the second quarter. The teen retail sector particularly suffered during the quarter as their demographic shored up spending, mainly for things that weren't apparel.

Aeropostale, for one, plans to "accelerate" store closings to 30-40 this year. American Eagle and Abercrombie already warned that it expects third-quarter sales to fall and both declined to give guidance beyond the October-ending quarter.

However, of the three companies mentioned, all saw double-digit increases in sales from their direct-to-consumer businesses - essentially their e-commerce businesses, though it's still a small portion of total sales.

Also see: Wal-Mart Disappoints on Earnings, Kohl's Profit Slips

Also see: A Tale of Two Retailers

Also see: Abercrombie & Fitch Plunges on Weak Earnings, Cautious Outlook

In today's digital and mobile landscape, there are definitely retail winners and losers, with many that are playing catch up. Coffee giant Starbucks (SBUX) is seen as a winner, while J.C. Penney (JCP) is a latecomer.

While it's true that teens have less money to spend these days, if retailers don't want to become dinosaurs, getting on the digital and mobile bandwagon should be priority.

A U.K. study following a group of 10- to 15-year-olds over a period of five years may have big implications for how big and small retailers, on both sides of the Atlantic, strategize the future business of shopping.

According to the results of the latest Amaze Generation report released on Friday, three quarters of the study group expressed a "clear preference" for shopping online vs. in stores, "offering a bleak vision of the future of the high street and very rational view towards store closures," as well as the very real threat of so-called showrooming, where consumers enter stores to view products in person, but ultimately make purchases online.

Commencing in 2011, the five-year research study looks at the impact of technology on the behavior and attitudes of consumers age 10 to 15. The latest report follows the third year of research by Amaze, a London-based marketing and consulting firm.

The report found that youngsters see more choice in the digital space as a large benefit to shopping online along with the experience being easier and more convenient. Study participants "also see the potential to sell online through sites like 'eBay (EBAY) to buy cheap clothes and make money,'" the report says.

The study also found "a clear, rational, unsympathetic view towards recent store closures with participants expressing views showing they have little loyalty towards traditional retailers." However, store for high fashion and luxury brands will remain, the group said.

Youngsters studied by Amaze essentially said that a "core function" of high street stores - Main Street retailers in the U.S. - will be for showrooming.

Social shopping is also increasingly becoming a key element to the purchasing experience. Two-thirds of the group has shared a "photo of items they were considering buying with friends and almost the entire group has done this while shopping online," the report says. Two-thirds of the group has also "shared a photo whilst shopping in-store."

Interestingly enough, mobile has to still to emerge as a significant shopping channel for this group, the study found. Most prefer to make purchases from home (likely because of the need for permission from parents).

"Whilst the use of mobile for shopping has yet to take hold with this generation, it will be extremely interesting to see how this develops given the overall increasing popularity of the device. This savvy, technologically connected age group are clear about what they want - ease of use, convenience and choice," says Amaze CEO Natalie Gross. "The process of shopping is changing forever and the trends we can observe from the group give us a unique insight into the future of online retail."

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

>To submit a news tip, email: tips@thestreet.com.



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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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