Changing Demographics and Tastes Will Affect Retailers

SCOTTSDALE, Ariz.—The world of retailing is changing so fast that if companies are not familiar with the latest trends and customers’ rapidly evolving tastes, they may as well close their doors immediately.

That was the subject of the annual American Apparel & Footwear Association meeting, held Feb. 26–28 at The Phoenician resort. AAFA members learned how to attract loyal customers in a world where the average person is bombarded with 86,500 ads a year.

One of the major trends affecting today’s retailers is the changing demographic make-up of the United States. U.S. citizens are getting older, and society is becoming more ethnically diverse.

“The winners in this game have a strategy. They compete on a different dimension than the rest of the industry. They ignore traditional boundaries,” noted Rick Barrera, president of Rick Barrera & Associates, a San Diego, Calif., consulting firm that has been advising the apparel and retail industry since 1981.

One retailer consistently praised was Chico’s FAS Inc., headquartered in Ft. Myers, Fla. The retail chain, which has more than 400 stores, has identified its core customer: a 35- to 55-year-old woman hungry for upscale fashion that comes in an easy-fit silhouette and comfortable fabrics.

By identifying this forgotten customer, Chico’s has discovered a gold mine. Sales in 2003 grew 40.5 percent to $531.1 million. Net income in 2003 grew more than 50 percent to $66.8 million.

One of Chico’s retail strategies includes juggling its inventory every month, prompting shoppers to visit frequently.

“Their average customer comes in every month,” Barrera noted. “They have a Passport program for discounts, coupons, magazines and private sales. Seventy percent of their sales come from Passport members.”

Other retail secrets employed by Chico’s include dressing rooms without mirrors. Why? They make women look heavier. Instead, patrons have to walk out to the mirrors in the store’s center to view their outfits, which means salespeople can comment on styles and help select accessories or other items to go with the clothes. “Your shopping should be interactive,” Barrera noted.

Understanding the consumer

Apparel manufacturers also need to identify their niche customers and how to reach them. Experts at the AAFA meeting said the key points clothing makers should consider are: bull;Technology. Are labels scratchy, or do cuffs on golf shirts impede one’s golf game? Is the fit right, and is the fabric attractive?

bull; Functionality. Is an item comfortable, and does it change the way the wearer feels about herself?

bull; Customer service. Apparel manufacturers should define their style and attitude and explore how fast and responsive they are in delivering good service.

bull; Packaging. Is it attractive and memorable like the Apple iPod or the Dutch Boy plastic paint cans with a handle on the side and an easy-pour spout?

bull; Consistency. Manufacturers should make sure their sizes always fit the same way and their quality is always reliable.

Mitch Kates, director of strategic services at Kurt Salmon Associates, a retail consulting firm in New York, urged manufacturers and retailers to build their brand and understand their customers.

“There are three steps to building brands,” he explained. “Listen to the consumer, innovate with your products, and finally, act.”

Kates noted that a 2003 consumer survey showed that people thought manufacturers made fashions that were too youthoriented. Eighty percent had a problem with fit, and 72 percent said they couldn’t find items in stock. Another 55 percent said they found it was not easy to buy a product in the store. “The goal here is to increase our score on these important consumer attributes,” Kates said.

One company that received kudos for its brands was the Jones Apparel Group.

“They have done three great things,” Kates said. “They have invested in consumer research. They have done effective market segmentation and diagnostic research to understand what consumers like and dislike about their brands. And they have built a brand portfolio that does not overlap with the other brands.”

Marshal Cohen, chief industry analyst for The NPD Group, a market research company in Port Washington, N.Y., urged retailers and manufacturers to connect with their customers at a time when other industries, such as electronics and technology, are snapping up people’s disposable income.

“In 1985, the most popular size for women was a size 8. Now, the most popular size is a size 14,” Cohen observed. “Have retailers and manufacturers kept up?”

Latino consumer

One of the fastest growing sectors of the U.S. population is the Latino consumer. Currently, 14 percent of the population in the United States is Latino. By 2050, that will grow to 23 percent to 25 percent.

“[The] Latino [market’s] buying power is exceeding its population growth,” noted Alex Lopez Negrete, head of Lopez Negrete Communications, a Texas advertising firm hired by Wal-Mart Stores Inc. to help the mass merchandiser attract more Latino patrons.

In 1990, Latinos spent $208 billion. By 2007, that number is expected to jump to $926 billion.

Latinos love to keep up with the latest fashions and prefer to shop together as a family, Lopez Negrete observed. Retailers need to realize that the Latino market is a culturally diverse group of people that come from all over South America, Central America and the Caribbean, he added.

Pablo de Echevarria, senior vice president of marketing for Perry Ellis International in Miami, noted the company has made a major effort to market to the various Latino segments but has concentrated on Cuban Americans by developing such labels as Havanera and Cubavera.

Getting Latino celebrities to wear the labels on stage and in advertisements has been an important marketing tool. Gloria Estefan’s band wore Cubavera shirts on stage in Las Vegas. One JCPenney magazine ad shows Tito Puente Jr. wearing a Havanera shirt.