Teen market clicks past e-tailers
Teens make up the most computer-savvy generation in U.S. history, and they're also prodigious consumers. So why is this wired generation the least likely to buy online?
But the 16-year-old has never purchased a single item online.
"I don't buy anything because I don't have a credit card," the San Francisco resident said during a trip to the Sony Metreon, a teen-packed entertainment complex where shoppers buy DVDs, CDs, software and computer gaming equipment. "Some of my friends have older brothers who buy stuff online for them, but most of us just have to go to the store."
And while marketers note with irony that this very wired generation is also the least likely to buy online, many big-name e-commerce companies popular with adults don't seem too worried. Some pointedly ignore or even discourage teen shoppers, content to wait until they hit 18 and start getting credit card offers.
At eBay, where each transaction amounts to a legal contract between buyer and seller, you must be 18 to even have an account--the only way to buy and sell on the site. And leading e-commerce site Amazon.com acknowledges that it hasn't done much to court the teen market.
Teen shoppers are "just not something that we focus on," Amazon spokeswoman Patty Smith said. "We make it very clear that our site is intended for folks 18 and older who have a credit card."
Other sites say they're reaching out to teens--even though they're a relatively tough sell--so that they'll have name recognition when teens enter adulthood.
Louise Solomon, spokeswoman for Sacramento, Calif.-based Tower Records, said teens have always been "a small, small percentage of our audience." Still, the company sends its monthly magazine, Pulse, to a disproportionate number of young people and promotes its Web site in all Tower stores.
"Our stores are our No. 1 resource. They're one of teens' favorite places to hang out," Solomon said. "Hopefully they'll feel the same thing about our site."
Generation ICQ comes of age
Nicknamed Echo Boomers because they're children of Baby Boomers, teens make up the most computer-savvy generation in U.S. history.
Also called Generation ICQ for their fanatic use of instant messenger applications, they've learned to depend on the Web for researching school assignments, and those with home computers use the Internet more than the telephone to communicate with friends. According to a January survey by AOL subsidiary Digital Market Services, 81 percent of all Americans age 12 to 17 regularly use e-mail, and 70 percent use IM.
They're also prodigious consumers. According to Northbrook, Ill.-based consulting firm Teenage Research Unlimited (TRU), Americans age 10 to 19 spent about $155 billion last year, an average of $116 a week, with half of the money going toward clothing. One in four teens have checking accounts, two in three have savings accounts, and one in four own stock or bonds.
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"When you look at sites popular among teenagers, e-commerce sites are not top on the list--or anywhere near the top," said Lisa Strand, director and chief analyst for Milpitas, Calif.-based research firm NetRatings.
"Entertainment sites, especially teen-specific sites, are very popular, as well as IM or anything involving communication. But when they do go to e-commerce sites...they're going primarily for information, like release dates. They won't buy anything."
In addition to the credit card issue, e-commerce companies' ability to appeal to teens hits a formidable psychological roadblock. Teenagers are notorious impulse buyers--scooping up deals on clothes or equipment whenever it strikes their fancy. Like younger consumers in previous generations, they generally dislike the idea of waiting three days or a week for an online order to arrive in the mail.
"Adults see buying online as convenient, but teens are really driven by immediate gratification," said Michael Wood, vice president of TRU. "They go to the mall on Saturday afternoon to try to find an outfit they can wear Saturday night. They tend not to plan in advance for their purchases--something that's required for most transactions online."
It's unclear whether e-commerce companies are losing an opportunity to build brand awareness with teenagers. Wood and other teen experts say consumers tend to develop shopping habits early--so today's teens might not automatically gravitate toward e-commerce simply because they have credit cards.
Darryl Lewis is an e-commerce marketer's nightmare. The 17-year-old, headed to University of California at Davis later this summer, has 154 IM buddies and spends roughly five hours a day online. He'd love to be able to order computer software and foreign goodies such as Japanese candy online, but he can't because he doesn't have a credit card and no one in his family will loan him one.
He's already figured out ways to work around the problem. The Oakland, Calif., resident knows which local specialty stores sell Asian sweets, and he spends most of his time online at sites that offer free software. He's become so used to software freebies that, at this point, he doubts he'll use a credit card for online purchases even after he gets one.
"Using credit cards (is) like paying with invisible money, and I don't trust them," Lewis said. "They could be stolen. Plus, there's always going to be software available for free. Even if one site shuts down, there's always a shell knockoff that I'll be able to get for free from another site."
Targeting teens
But some sites that see teenagers as their core market have gone to great lengths to overcome the credit card issue--with mixed results. Although they can attract large numbers of teens to use chat sites or to read articles, most struggle to get readers to spend money.
"The credit card issue is the No. 1 issue people ask us about our business plan: How will teens ever buy from you?" said Jim Johnson, chief operating officer of New York-based teen site and e-commerce shop Alloy. The site's core audience is teenage girls, and roughly 85 percent of sales are done by credit card--much lower than most online sites.
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"They tend not to plan in advance for their purchases--something that's required for most transactions online."
--Michael Wood, vice president, TRU
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"We're not sitting there saying, 'If teens could only get their hands on credit cards, we'd sell a lot more,'" Johnson said. "We'd like it better if they had credit cards, but it's not stopping them from ordering. We're obviously doing everything we can to make it as easy as possible for them to get to know us and trust us."
Marketers know that motivated teens will find a way to buy an item online--even if it means sending a check or money order to the company by snail mail. And credit card companies are trying to solve the problem, issuing cards that are connected to their parents' accounts or pre-paid credit cards such as Visa Buxx, which summarizes teens' purchases on their parents' monthly bills.
Some teen-oriented sites simply offer really popular products--notably games and other computer services.
"Gaming is such a passion center that people will do anything to get the money," said Elizabeth Drucker, director of investor relations and corporate communications for Brisbane, Calif.-based gaming site IGN.com. Their average visitor is 22 years old and 45 percent of users are under 18. The site charges $4.95 per month or $24.95 per year for subscriptions.
"We even have subscribers sending us cash--honest to gosh. They're so passionate that they send cash with a note saying, 'Please accept my cash and keep the extra 50 cents as a tip.' The finance dept has some pretty interesting stories."
Brother, can you spare some plastic?
Some teens get around the credit card issue by getting permission from parents or siblings to use their cards and pay them back, just as they might beg to borrow the family car for a Saturday night on the condition they fill up the gas tank.
Myung Kim, a 17-year-old from Dublin, Calif., said he frequently purchases computer parts online--thanks to his dad's Visa. He has built three computers with parts bought on the cheap from overstock electronics specialists online, and he recently bought a laptop in an eBay auction.
"Sometimes he gets surprised when he gets those $700 bills," said Kim, who's headed to the University of California at Berkeley in the fall. "But I just tell him to chalk it up to necessary expenses. I'm very selective about what I buy and I don't abuse the credit card, so he's been OK with it."
In part to overcome the credit card issue, IGN created an "Adopt an Insider" program so that subscribers may sponsor would-be members who are unable to pay on their own. Still, the company faces some interesting customer service issues because of its subscribers' payment woes.
"We do get calls from parents saying, 'I have this weird charge on my statement. What exactly is IGN?'" Drucker said. "They're worried it's some porn outfit, but once they realize that it's just a gaming company and their kids aren't doing anything unsavory, they're OK with that."