When it comes to basic clothing items—the T-shirts and trousers that are the foundation of all our wardrobes—millennials continue to shun brick-and-mortar chains like Gap and J.Crew while flocking to direct-to-consumer retailers like AYR, Cuyana and Everlane.
It isn't only that younger consumers prefer shopping online. It is also that millennials—with an estimated spending power of $2.45 trillion, per You Brand—are graduating from fast fashion. At the same time, they are drawn to the superior service and deals that are defining elements of the Web-based stores.
"The explosion of smartphones and really powerful apps in mobile are changing the way people shop, especially for things like basics where you don't need to try on one T-shirt versus another," said Allen Adamson, North American chairman at brand consultancy Landor Associates.
Traditional retailers have suffered consistently poor results lately. J.Crew reported that its second-quarter store sales tumbled 13 percent versus the same period last year. ("J.Crew Isn't Cool Anymore," went the headline on the site Business Insider.) Gap's 2Q store sales fell 6 percent, leading Forbes to ask: "Is Gap a Dead Brand?" The situation is even more dire at American Apparel. It admitted during its second-quarter earnings call that it might not have enough money to keep the business operating in the next 12 months.
Compare those results to the direct-to-consumer upstarts. Everlane's sales last year grew 200 percent versus 2013. Every year since it launched in 2007, Bonobos has doubled revenue. AYR, which started up in 2014, projects revenue will grow 50 percent this year.
"A lot of brands we grew up with—really great brands—haven't grown up with us," said Maggie Winter, brand director and co-founder of the women's apparel site AYR, whose tagline is "Edited, effortless essentials." Added Winter: "It's not just the digital piece, although that's a big part of it—it's an intimacy and authenticity that feels like it's missing with many big legacy brands."
How exactly have the online brands improved the shopping experience? By connecting with the consumer in a way that is simply not possible for larger retailers. The site Popbasic, which specializes in women's basics, even involves the customer in the clothing-design process. "The Internet generation responds well to brands that listen to them and include them," said Popbasic co-founder Madeline Veenstra.
Bonobos, an online retailer of men's apparel, has set out to service shoppers via its "guide shops," brick-and-mortar locations in cities like New York, San Francisco and Atlanta where customers can try on items and have their purchases tailored. The Bonobos approach is unique in that it provides a more personalized, face-to-face touch but without the expense of a full-service brick-and-mortar outlet.
"Traditional retailers are sort of stuck with infrastructure, both from a manufacturing and a distribution standpoint, that maybe they wish they didn't have now," explained Russ Meyer, global director of strategy and insights at branding firm Siegel+Gale. "Meanwhile, this new business model is almost bespoke. It feels almost made for me. There's an experience that feels much more custom. How do you counter an experience that you only used to get at a couture house?"
For retailers like Cuyana, which sells women's basics, and the men's and women's clothing site Everlane (which this year tapped former Gap creative director Rebekka Bay as head of product and design), transparency is top of mind.
Everlane, whose tagline is "Radical transparency," explains to its customers precisely why each item costs what it does. Cuyana shares with its customers the stories behind its materials and production.
"[Online brands put] more of an emphasis to differentiate themselves by placing a lot of value in customer experience," said Emmett Shine, founder and CEO of New York branding firm Gin Lane Media. "A big part of the legacy of these direct-to-consumer brands is that they invest so much in terms of the customer experience, and millennials buy into experience."
This story first appeared in the Sept. 7 issue of Adweek magazine. Click here to subscribe.