Why Do U.S. Teens Have 'Spending Fatigue?'

Why Do U.S. Teens Have 'Spending Fatigue?'

Teenagers are a big market, with $91 billion in annual income of their own, $203 billion spent each year on teens by themselves and their parents, and decades of earning and spending power ahead of them. So why are teens spending less money on everything from games to jeans? And when they do spend, why are more of them going online rather than hanging out at the mall?

The economy is partly to blame, as teen unemployment remains near 16%. But according to the latest semi-annual teen spending survey by Piper Jaffray, more than two-thirds of teens are optimistic about the economy. They also, according to survey results, like shopping on their phones and mobile devices -- but on their own schedule and not as frequently as in the past. And while they told surveyors last April that they planned to spend more on clothes and status items, they haven't. Maybe these kids are especially frugal by nature, but there are other issues driving them to sit on their cash, including one thing that retailers could do something about.

The drop in teen spending is not great news for brick-and-mortar stores, which are already bracing themselves for a less-than-stellar holiday shopping season. They may need to scale back the square footage and inventory they devote to the teen market, according to Piper Jaffray. Longer-term, brick-and-mortar stores are at risk for losing a generation of customers. Here are four reasons teens are turning away from real-world retail.

Always-on online shopping

Eighty percent of teens surveyed by Piper Jaffray say they shop online, and at least 60% say they prefer the online versions of their favorite stores. Online stores are always open, making it easy for kids to browse late at night after homework and soccer practice are done — and when most real-world stores are closed. To a demographic known for its inability to get to bed at a reasonable hour, the availability of round the clock shopping is critical.

Easy comparison shopping is important, too, because paying full price doesn't appeal to most teens. They've grown up in a deal-rich environment where retailers compete on price rather than cachet, and more than half the teens surveyed (including more than 70% of the girls) say they shop at discount stores. Add in the fact that categories like music and movies have gone mostly digital, and it's easy to see why kids, like a lot of adults, prefer Internet shopping.

Money matters

There are fewer teens with their own lines of credit since 2010, when the CARD Act limited the ability of anyone under 21 to get a card without a parent cosigner or a verifiable income. According to a recent study of young credit card users published by the Federal Reserve Bank of Richmond, 18% fewer people under age 21 have credit cards now than before the CARD Act took effect — and today's teens and young adults with cards have fewer lines of credit per person and are 44% more likely to have a cosigner who may be monitoring their spending.

Between that reduced access to credit and the experience of seeing their parents cope with the Great Recession, today's kids are more focused on value and less able to indulge in recreational shopping, contributing to the overall downward trend in spending.

No ride

There are fewer teens with their own wheels these days, meaning there are fewer ways for them and their friends to get around. Whether it's because teens are too busy, too broke, or too engaged in online pursuits to get a license, the statistics don't say for sure. But from 1983 to 2010, the percentage of American 17-year-olds with a license dropped from 69 to 46. That's a whole lot of joyrides to the mall that aren't happening, and between the cost of fuel and increasingly strict teen driver requirements in most states, it doesn't look like that trend is going to reverse itself any time soon.

Where's the welcome mat?

When teens do decide to spend their cash and get a ride, their efforts may not be rewarded. Trayon Christian, a 19-year old New Yorker, is in the headlines after police questioned him for buying an expensive belt at Barney's. Last month, a Rue 21 employee in Eugene, Oregon, allegedly told 14-year-old Shelby Buster to leave the store because she was "too big" to shop there.

It's tempting to see these incidents as rarities. Even if they are, they send a message that teenagers and their money aren't always welcome in some stores. When shopping without your mom opens you up to fat-shaming or when buying luxury goods might get you arrested, online shopping seems like a smarter alternative.

The reception they give to teens is the only factor on this list that retailers have direct control over. It's up to retailers to treat teenagers in their stores like potential long-term customers — or see even fewer of them.

Instead of shopping...

Millions of Americans have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk. Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal-finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

The article Why Do U.S. Teens Have 'Spending Fatigue?' originally appeared on Fool.com.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Originally published