The teen market looms enormous for retailers. Department stores such as Macy's and JCPenney are always trying to invent new ways to attract young shoppers, and the end of the recession is a crucial time to win over Generation Y consumers. Even more pressing: The upcoming holiday shopping season challenges retailers to figure out what will get this group to spend.
Although 2010 teen unemployment rates stand at a record high, teen spending is increasing as we inch our way out of the Great Recession. Turns out that even when unemployed, teens have a leg up on adults when it comes to spending freely and without consequence. With more time on their hands, teens can plan their day around trips to the mall and other outlet stores. Social pressures also make it easy to feed into consumer culture: Why not burn last week's allowance on accessories at American Eagle or games from GameStop, if it keeps your friends interested?
"Whenever we talk about teen spending, what we are really talking about is their parents and how willing their parents are to finance their spending," said Kit Yarrow, a consumer research psychologist and professor at Golden Gate University and author of Gen Buy: How Tweens, Teens and Twenty-Somethings are Revolutionizing Retail. "You can't really blame kids for any of their spending behavior when it's fueled by their parents."
Though teens did reduce spending due to the recession, they reduced it less than other groups. Since teens are dependent on their parents, they stand unburdened by credit card debt, student loan bills, and mortgage payments, which makes it easier for them to spend more impulsively and frivolously.
Although overall teen spending still lingers below pre-recession levels, it has seen an increase in 2010 from years prior. According to Marshal Cohen, chief industry analyst at market research firm the NPD Group, teens today are spending approximately 6% to 8% more compared with a year ago. This certainly signifies an overall positive turn in the economy. The National Bureau of Labor Statistics says the recession officially ended in June of 2009.
With predicted Black Friday deals already appearing for laptops, video games, and electronics, teens are likely to empty their pockets for many products from now until November 26. Parents purchasing holiday gifts are also likely to spend on their teens, especially since many of the most coveted items are like catnip to this demographic.
In 2010, teens have begun their retreat to checkout counters; the difference between their pre-recession spending and their current status is that they are doing it more consciously, hunting down bargains, and as of last year, buying electronic equipment and footwear instead of clothes and beauty supplies.
"Teens were the last to cut spending at the beginning of the recession and they are the first to start spending as we're coming out of it," Yarrow said. "[By financing their kids' spending], parents have tried really hard to protect their kids from the effects of the recession. Personally, I don't think that's necessarily wise."
Yarrow said some parents have gone to extreme lengths to make sure their kids aren't burdened by the recession, even delaying their retirement by forfeiting their 401k's just to make sure their children have spending money.
Since parents are responsible for teens' spending habits, rising unemployment in teens doesn't necessarily correlate with a change in their spending.
Though at a record high, teen unemployment is independent of teen spending statistics, and this goes to show that parents are ultimately responsible. According to Federal Labor Statistics, unemployment among 16-to-24 year olds stood at 19.1% in July, the highest July rate on record since 1948. Theories abound as to why this is the case: Teen unemployment could be due in part to the loss of jobs during the recession, that parents of teens are shielding their children from the working world, or that adults and otherwise skilled workers are now accepting low-paying and low-skill jobs once filled by teenagers. Another theory is that more teens are going to school during the summer.
Whether teens now spend more time with their books, video games, or the Internet, the fact remains: Many of them are unemployed, but still spending money. Just how much and on what they'll spend it on as this year comes to a close remains to be seen. And that, as it turns out, is the literal multi-million dollar question for America's retailers.
Teens still spending, but Black Friday holiday outlook murky