Wet Seal’s future is online

Discussion
Jan 09, 2015

Wet Seal, a California based fashion retailer catering to young women 18 to 24, is shuttering 338 of its 500+ stores and laying off 3,700 employees. The chain took the action after sales declined 12 percent and posted a loss of $79 million for the nine-months ending October. But all the news is not bad for Wet Seal, which has found a way to connect with its core customers online even as it has failed to do so in stores.

In Wet Seal’s fiscal 2013, online sales accounted for six percent of the company’s total. In 2014, that number ballooned to 17 percent — the rate of growth was 19 percent in the third quarter alone. Wet Seal has also found a way to sell its fashions profitably online. According to the company, sales margins for online are higher than in stores.

The chain is looking to build on the success of its site and has switched ad dollars from the stores to online. It is also enhancing its mobile commerce capabilities, investing in web analytics, social media outreach and e-commerce merchandise planning.

The moves being made by Wet Seal play to a consumer market that is increasingly turning to digital channels for fashion. The ease of shopping online and the ability to quickly review a huge range of products is now a strong dynamic among women shoppers. Added to this is that the retail "treasure hunt" for intriguing items appears more and more to be identified with e-commerce sites than brick-and-mortar.

Wet Seal is far from the only fashion retailer struggling to meet the demands of teen and young adult consumers. Deb’s and Delia’s are being liquidated. Abercrombie & Fitch saw its longtime CEO leave after years of trying to get the once highly successful chain turned around. Aeropostale and America Eagle are closing locations as consumer traffic continues to fall at many malls.

In the end, whether online or operating stores, fashion retailers are being challenged by a market in which consumers are foregoing clothing purchases for other products such as electronics. Craig Johnson, president of Customer Growth Partners, told The Business of Fashion, that apparel sales, which represented about five percent of the typical American household’s budget in 2000, has fallen to 2.8 percent today.

What do the realities of the current teen and young adult fashion market mean for retailers operating in the space? Do you think we will see fashion retailers promote their e-commerce sites as their primary sales venue while relegating brick-and-mortar stores to a secondary role?

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7 Comments on "Wet Seal’s future is online"

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Bob Phibbs
Guest
2 years 11 months ago

This article completely avoids how they closed their stores which showed a lack of integrity as I wrote yesterday in Wet Seal Employees Thrown Into The Drink.What Does That Say To Retail?

You can’t say you have corporate values and then totally go against them and get away with it as the Twitterverse hashtags #ForgetWetSeal and #BoycottWetSeal show.

There are a host of issues with retailers in this space, granted—and online is not a panacea, but Wet Seal will be another textbook case of a retailer getting it wrong—after of course, Ron Johnson’s J.C. Penney failure.

Marge Laney
Guest
2 years 11 months ago

The fact that Wet Seal’s online business is growing and is profitable tells me that they have product their target demographic is looking for. The big fail here appears to be their execution of their brick-and-mortar channel, which is wrapped in personal customer engagement and experiences.

I wonder, however, if they can survive with purely an online presence. Even the best online apparel retailers (Bonobos, Rent the Runway) are sticking their toes into the brick-and-mortar pool in order to grow and be profitable.

At the end of the day, consumers just want to shop whenever and however suits them at any moment. Being online or offline exclusively is limiting and risky.

Gary White
Guest
2 years 11 months ago
Oh my! You are so wrong on Wet Seal. Consider a few things: Wet Seal online business as a percentage of the total grew, partly because the base business is collapsing. Everyone’s online business has grown. Wet Seal is riding with that trend. Wet Seal issue is simple: Very bad management (and board) for several years, very bad product point of view for the malls they are in and customers they have, uninspired employees in a channel that requires high positive energy. You can’t blame the employees with such bad management. Now the online issue for teen retail: No, just online won’t work. Back to the product point, get it right. No trend apparel business can work well in one channel. Even Amazon is opening stores. Teen retailers that have success in brick-and-mortar only: rue21. rue21 opened its online shop just one year ago. Until then, they have done just fine opening more stores. Over one hundred opened this past year. Teen retailer that has superior omni-channel and plenty of store locations: Urban Outfitters. Urban’s… Read more »
Lee Kent
Guest
2 years 11 months ago

I can’t say it any better than my other colleagues here. The right product with the right execution is what it’s all about. Wet Seal blew it on both points, for my 2 cents….

Craig Sundstrom
Guest
2 years 11 months ago

Not to spread rumors, since I know nothing of their finances (to be honest I never even understood the name), but I wonder if they truly “sell…fashions profitably online.” I would think online right now is only being charged for a small portion of corporate overhead, which it will have to absorb 100% if that becomes standalone. Not that management (of a company which just closed 2/3 of its stores) wouldn’t have figured that out, of course.

Naomi K. Shapiro
Guest
Naomi K. Shapiro
2 years 11 months ago

First, the answer to the question is, “yes.”

As the article says:

  • The moves being made by Wet Seal play to a consumer market that is increasingly turning to digital channels for fashion.
  • The ease of shopping online and the ability to quickly review a huge range of products is now a strong dynamic among women shoppers.
  • Added to this is that the retail “treasure hunt” for intriguing items appears more and more to be identified with e-commerce sites than brick-and-mortar.
W. Frank Dell II
Guest
2 years 11 months ago

Teen and young adult apparel is a difficult business. You catch one segment and they stay with you until they grow out of fashion. It is very difficult to attract another group of customers as they age into the retailer’s target. It used to be teen and young adult fashion started on the East and West Coasts and then moved into the rest of the country. Today with online shopping, the two year cycle has been reduced into one season.

There have been a number of one-hit-wonder retailers succeeding and then failing as the consumer is always looking for something new. E-commerce is strong with this group as they are growing up shopping online. Since generation Y are not buying cars or even getting driver licenses, except in major cities with public transportation, online will be the primary sales channel.

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