Young Consumers Pose Tech Challenges for Retailers

Retail clothing chain PacSun's customers are mostly under the age of 16, which presents different kinds of technology challenges.

Running the technology operations for a billion-dollar retail clothing chain is difficult enough during the holidays, let alone if most of your customers are too young to get their own credit cards, or even drive.

Just ask Ron Ehlers, vice president for Information Systems at Pacific Sunwear of California Inc., which runs 743 PacSun stores in 50 states and Puerto Rico. The company officially positions itself for customers who range in age from 12 to 22 and who prefer a casual clothing style, but it estimates that most of those customers—a little more than 60 percent—are in the 12- to 16-year-old neighborhood, which creates several atypical IT issues.

Historically, e-commerce has had to battle with its brick-and-mortar cousins and was forced to play to its strengths. Web sites often require days to deliver products and charge for shipping, and customers have to buy without being able to personally examine the merchandise. As a result, online retailers have had to be creative in order to prevent customers from simply getting in their car and driving to a store to buy the product they want immediately.

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That doesnt really apply to PacSun, as most of its customers are not yet old enough to drive. "They may not drive, which means they may not have ready access to the mall," Ehlers said.

The hassle of having to ask for a lift changes the alternatives—and therefore the consumers purchase-decision dynamics—involved in buying online, said Stacy Clark, PacSuns director of E-Commerce. PacSun still has to compete with every other clothing Web site out there, but not having to worry about one entire class of rivals is helpful.

Typical PacSun customers are also too young to get their own credit cards. One popular remedy is debit cards, which allow the customers to access a bank account through the cards. The catch: Dollar amounts are limited to what is in the account, as opposed to a credit card, which allows debt.

/zimages/2/28571.gifThe CIO for the Discover Card sees new retail trends as an opening to take advantage of the high rates charged by market leaders Visa and MasterCard. Will retailers buy it? To read more, click here.

Ehlers said PacSun is seriously exploring eBays PayPal program. Why? First, his customers are very fond of eBay itself and are therefore very comfortable with the idea of using PayPal. Secondly, it also has a debit-card-like cap feature to limit how much can be spent, but it needs to be tied into a full-fledged credit card. That means that a parent or guardian must—presumably—sign off on the card.

PayPal "is a prepaid account without supervision," Ehlers said.

"eBay is a top site for our customers so PayPal looks like a great option," Clark said. "Its something were researching more and more. More teens are using it on eBay."

At PacSun, one out of four purchases is from a branded debit card from either Visa or MasterCard, Ehlers said.

Next Page: How PacSun has such low merchandise-return rates.