Piper Jaffray & Co. (NYSE:PJC) has completed its 26th semi-annual "Taking Stock With Teens" collaborative consumer insights project, which pointed to a sequential sign of spending moderation and tempered intent to spend across multiple categories and household income levels. “Our fall 2013 survey results suggest teens are experiencing general spending fatigue across key categories, specifically fashion related items. The absence of a clear product catalyst is a key contributing factor to diminished spending proclivity. Intent to spend also moderated, despite over two-thirds of teens signaling confidence the economy is stable to improving,” said Steph Wissink, co-director of research and senior research analyst at Piper Jaffray. “We are also observing trends that imply teens are browsing regularly on their mobile devices, shopping less frequently and engaging with brands ‘on demand’ on their own time. This dynamic alters the assumptions surrounding the square footage and retail inventory needed to service this target demographic. A period of rationalization may be needed.” Key findings from the survey in fashion, beauty and personal care, restaurants, media, gaming and entertainment include the following:
- The fashion category accounts for roughly 39% of teen budgets, consistent with prior survey cycles. Spending declined mid-single digits to the prior year and prior season. Shopping frequency declined and trip measures are down nearly 25% from prior peak. Evidence suggests that households are digesting the payroll tax increases from early-2013 as parent contribution to teen spending returned to normal levels. Within the fashion category specifically, footwear is outperforming apparel and accessories and insights into key trend changes include a modest improvement in action sports mindshare, further contracting demand for fast fashion, a stable refined classic or preppy aesthetic, and growing preference for fashion athletic wear.
- Teens are shopping less in single brand, vertically integrated stores and more in multi-branded, multi-category and online retail environment. Approximately 78% of females and 82% of males shop online, and respondents indicated that a mid-teens percentage of their spending is online. Roughly 60-70% of teens indicate they prefer to shop the Web sites of their favorite stores-based retailers. In addition, teens prefer labels to logos and seek value in their purchases, owing to the rise of spending in the outlet and off-price channels. Approximately 71% of teen girls and 57% of teen boys shop at off-price stores and 52% and 45%, respectively, indicated it is popular to do so. The shift toward digital is proliferating softlines, hardlines and media purchases. DVD by mail and streaming account for 52% of movie rentals and online music provider Pandora accounts for 25% of preferred music sources.
- Teens have cited "friends" as the strongest influence over their purchase decisions for the duration of our survey history, but "Internet" is quickly rising in profile. More than half of teens indicate that social media impacts their purchases with Twitter being the most important, eclipsing Facebook, followed closely by Instagram. But the popularity of Facebook is waning among teens with 23% citing it as the most important, down from 33% six months ago and 42% a year ago.
- Beauty spending among upper-income teens declined high single to low double digits to the prior year and prior season. MAC was cited as the No. 1 cosmetics brand for upper-income teens for the sixth survey in a row and Cover Girl ranks at the top of the list for average-income teens. Teens continue to demand greater diversity of cosmetics offerings, likely spurred by several emerging cosmetics brands coming to market with new and superior innovations.
- Teens are increasingly choosing organic food options, with 39% eating organics versus just 33% two years ago. This trend is likely to support ongoing demand for natural and organic grocery, as teens age into young adults and establish independent households. When eating out, 60% of teens prefer limited service restaurants, up steadily from 43% four years ago. In addition to classifying by segment, preferred restaurant brands also provide insight into various cuisine profiles—for American Cuisine, teens favor Cheesecake Factory; for Italian, teens favor Olive Garden; and for Mexican-inspired fare, teens favor Chipotle Mexican Grill.
- Teens represent more than one-third of video game players and gaming accounts for 7% of teen spending. Interest in traditional gaming consoles remains strong entering a new console cycle. Awareness of next generation consoles was 86% among teens that play video games at least monthly. Approximately 49% of teens intend to purchase a next generation console. Buying and selling used video games remains a critical component of the gaming industry, with 64% of gamers buying used games and 26% of teens trading in old games to fund new software and hardware purchases.