But losses mount for the home furnishings e-retailer that went public in October.
Carolyn Cross of Palo Alto, Calif., is a Web marketer’s dream. Every chance she gets, Carolyn is surfing the Internet, e-mailing friends, even building her own Web pages. Carolyn also likes to shop online and would do it more-if only the 11-year-old had a credit card.
More than 60 million strong, teens and preteens are the largest demographic to hit retailing since the baby boomers. Even before entering their wage-earning years, Carolyn and her counterparts are a gold mine in the making for online merchants. Forrester Research, Cambridge, Mass., estimates that the group spends $1.5 billion online each year, out of $37 billion in disposable income. Though not the top online activity for the group-that’s e-mail-40% shop online.
Dubbed Generation Y by demographers, the group born between 1977 and 1994 is the leading edge of a huge bubble of computer-literate Americans. Among Americans age 3 to 18, for example, 82% use computers at home, school or both. Households with children are much more likely to own a computer, says demographer Susan Mitchell, who wrote the book American Generations. In 1997, half of households with school-age children owned computers versus 31% of homes without kids.
Gen Y also spends more time online than adults do-38% more than the average wired adult, which works out to be nine hours per week, according to Forrester. “Any time they have access, they’re online,” says Mitchell. And though many adults stop at e-mail, Gen Y is full of serious surfers-chatting in real-time with friends, downloading and listening to music, playing computer games, or scrolling through Web magazines.
Having grown up with computers, Gen Y regards them with all the novelty of blue jeans or television. “They totally take computers for granted,” Mitchell contends. As for online shopping, that’s a “no-brainer,” she adds. “They have no reservations about it.” Carolyn, whose favorite stores are CDnow and Delia’s, says she never worries about the safety of online shopping: “I’ve always gotten everything I’ve ordered.”
To read Carolyn’s comment as naive or overly trusting is to misunderstand something basic about Gen Y. Mitchell and other Gen Y observers say the group gets jazzed by quality goods, decent prices and speedy service-and not as much by MTV-style graphics that look good but slow down a site’s performance. E-retailers popular with adults-especially Amazon.com, Reel.com, Disney and CDnow-also rate high with young shoppers.
Which explains why a site like Walmart.com is a favorite among teens. “It doesn’t do anything to attract teens per se,” says Forrester analyst Ekaterina Walsh, “but Gen Y goes there like crazy.” The reasons, according to Walsh: The world’s largest retailer runs a simple, clean site with teen-friendly prices.
Lose the attitude
In fact, retail sites that tout brands, games, gimmicks and celebrity endorsements are suspect, says Duif Calvin, senior retail analyst at Internet strategies firm iXL, Atlanta. Slick, image-building ads that ooze attitude don’t strike the same nerve with Gen Y that they do with baby boomers. Like much smaller Gen X-about 17 million strong-Gen Y was born into a culture overloaded with advertising and is wary of the hard sell. By the time kids turn 16, Forrester estimates, they will have seen some 6 million ads-more than one per waking minute. “They are intelligent consumers,” says Mitchell, “and suspicious about advertising.”
According to Calvin, the best way to get Gen Y’s attention is to show average teens using or wearing the products being sold-hence the popularity of outfitters such as the Gap, Delia’s and Alloy. Especially suspect are products hyper-marketed as “cool.” Levi Strauss & Co. made that mistake in its recently shuttered Web store. Along with selling jeans and other Levi’s goods, the site included a music area where browsers could sign up to win a guitar signed by the popular band Sugar Ray. But the guitar didn’t draw more shoppers, Walsh contends, because it lacked an affinity with the rest of the site. “If teens want music, they go to music sites,” she says. “This mistake must have cost Levi’s a fortune.”
Matt Stamski of Gomez Advisors, Lincoln, Mass., agrees. “On the Internet, no one has been able to make a huge impact with branding strategies,” he says. “With television, things are pushed at you, but with the Internet you are able to pull back.” Delias.com, which Stamski calls, a “premier teen site,” understands this trend, mixing commerce with chat rooms and links to teen sites. Stocked with baggy cargo pants, chunky platform shoes and other funky fashion hallmarks, the teen-girl favorite started as a catalog and expanded into a Web store.
Delia’s has become so popular that some high schools have banned the catalog because it disrupts classrooms of girls eager to pore over the latest edition. The 3-year-old company has followed the unwritten rules of Gen Y marketing: Young and fresh, it employs teen researchers and stocks what they want to wear. Delia’s stays accessible to its audience by showing its clothing-sans recognizable symbols or labels-on realistic-looking teen models. “Delia’s works because it’s practical,” says Calvin. “It knows what’s important to teen girls and provides that. Its emphasis is on trends, not brands.”
Web stores aimed at Gen Y succeed by offering more than merchandise. “Content and community are critical to Gen Y,” says Jan Gilbreath, CEO of MXGOnline, which operates a Web site and a print magazine that targets teens with a mix of merchandise and information.
And the content of Web sites aimed at teen shoppers doesn’t always promote goods sold on the site. Delia’s, for example, addresses trends in products it doesn’t even sell. “Delia’s talks about trends in nail polish,” Calvin says, “but doesn’t actually sell nail polish.” The soft-sell attitude, she adds, lends Delia’s an air of credibility with ad-wary teens.