Teen Spending Shifts To Value; Electronics Hold Firm

July 27, 2009

Today’s challenging economy and low consumer confidence has led to a 14% decline in fashion spending among US teens and a shift toward value in both fashion and restaurant purchases, according to a survey published this spring by Piper Jaffray.

Despite these overall decreases, the survey found that video-game spending is increasing as a percentage of teens’ overall budgets, as is the percentage of teens who plan to buy an iPhone.

The 17th biannual ‘Taking Stock with Teens” survey, which polled students both online and at school,? revealed that teens and their parents are still buying new clothes, footwear and accessories, but are more selective and increasingly price conscious. Similarly, teen restaurant spending also reflects a similar shift toward value.

Fashion, Beauty & Apparel Preferences

  • West Coast Brands (e.g. Pacific Sunwear, Volcom, Quicksilver, Zumiez) took the #1 spot in clothing brand preferences among teens, followed by Hollister, Nike, Forever 21, and American Eagle.
  • Specifically among brands ranked by young women, Hollister took the “most preferred” position, while West Coast Brands continued to remain a favorite among young men.
  • Spending in the junior apparel category has decreased 19%, but increased 9% for footwear and 8% for accessories.
  • Footwear posted the strongest year-over-year and sequential results at a 4% and 21% gain respectively – an indication that the strong footwear cycle, particularly relative to the weakness in apparel, continues for the youth demographic.
  • Beauty spending is down from last year, but is stabilizing from fall 2008 as lower-price categories of fragrance and cosmetics outpace skin care, and department stores continue to cede share to discount, drug, and specialty stores.

Clothing makes up the largest part of the teen budget, according to Experian Simmons research.
Video Games and Electronics Preferences

  • Video-game spending is now 8% of teen budgets, up from 3% five years ago.
  • 89% of teens own at least one video game console, while 59% own two consoles.
  • GameStop remains the retail destination of choice with 31% share, as teens trade in old games to get credit toward purchasing new ones.
  • In digital music, 86% of students who own an MP3 player indicated that they own an iPod – up from 84% last fall.
  • iTunes rose to 97%, from 93% last fall.
  • 8% of students indicate they own an Apple iPhone (up from 6% year-on-year), while 16% of students expect to buy an iPhone in the next 6 months.

These findings appears to sync with a recent Morgan Stanley report (pdf), which explores the profound impact of digital media on teens and quotes a 15-year-old intern as saying that members of his generation place an extremely high premium on downloading and acquiring music.Restaurant Preferences
As in recent past studies, Starbucks takes the #1 restaurant spot among teens, and is preferred by respondents in both the school and online survey.
Additional restaurant-category findings:

  • The average estimated teen restaurant spend has decreased since the beginning of the recession (fall 2007 survey).
  • Value as a factor of influence continues to rank increasingly higher, even moreso than convenience.
  • The lunch daypart continues to gain share at the expense of dinner. As a result, operators with a value message are gaining teen market share; including Starbucks, Chipotle and McDonald’s.

Parents Speak Out

A separate but related study of parents indicates that spending on themselves and their teen/s decreased sequentially, although spring 2009 levels appear to be stabilizing and slightly ahead of last year.
Key findings:

  • Apparel spending by parents for their teens was $915 compared with fall 2008 at $1,085, but this level is above the $883 average in spring 2008.
  • Parents indicated that annual spending on their own apparel declined 20% sequentially and 6% year-over-year, with a shift toward discount and value retailing.
  • When shopping for themselves, parents prefer Nordstrom and Kohl’s as preferred retailers. When shopping for their teen, parents choose Hollister, Nordstrom, and West Coast Brands.

“After the drop in teen spending stabilized last fall, it is apparent that the continued challenges in the economy are having a dramatic impact on teen spending this spring,” said Jeff Klinefelter, senior research analyst at Piper Jaffray. “The decrease in spending leads us to believe that the economy is forcing parents and teens to cut back on spending across the board.

About the study: The 17th semi-annual survey was conducted nationally to determine purchasing behavior and brand preferences among teens. This spring, a research team visited nine cities across the US and surveyed approximately 600 students with an average age of 16.3 years. In partnership with DECA, Piper Jaffray also captured online survey responses from an additional 7,500 students with an average age of 16.7 years. A separate survey was conducted among parents of teens.

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