Hot Topic is moving into neutral territory.
With fewer teens defining themselves as gothic or a metal head, Hot Topic, who once took pride in catering to these alternative groups, is looking for ways to appeal to a diversified consumer.
The new “Downtown” prototype creates a genre-free zone that management hopes will attract customers who describe the store as being too dark and intimidating.
As technology advances, teens who once pledged allegiance to one band or genre, are now forming eclectic tastes in music.
“There use to be the declaration of music – what genre of music a teen listened to dictated how they looked, what they wore, who they hung out with,” Elizabeth McLaughlin, chief executive officer, said at Roth Capital Partner’s annual conference last month.
For Hot Topic, whose music business has been comping negatively and is the weakest performing division within the company, they are looking for ways to play defense against iPods, the Internet, movies and television.
The new prototype puts a greater emphasis on music, with listening stations, a 42-inch LCD television that serves as the storefront window and more prominent displays of their rock t-shirts and band paraphernalia.
The company has also created a digital download site and relaunched their Web site to include more band content, with the goal of becoming a primary destination for music information.
“The music business has significantly changed and with it we have to wean ourselves off at the large bands and large releases that have historically driven the music portion of our business,” McLaughlin said in a fourth-quarter earnings call to Wall Street.
Instead of focusing on one or two big releases, the company plans on being the first to discover new, smaller, local bands to introduce to their customers throughout the year. But in reeling in a more mainstream teen, Hot Topic does not want to alienate their core shopper.
“We still kept a lot of elements that are familiar to the Hot Topic customer. There is still a focus on red that is in the Hot Topic logo, we left the same fixturing, but just updated it,” said Darrell Kinsley, vice president of visual marketing and store design.
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While the new stores may be brighter and less edgy, analysts believe Hot Topic is not in danger of pushing away their goth customers.
“Hot Topic is as edgy as you get. It is not as though there is another retailer who will swoop in and take away those customers,” said Kimberly Greenberger, specialty analyst at Citigroup.
“I think there will always be that teen customer, the one who doesn’t exactly fit in and is rebelling from their parents and society,” said Liz Pierce, specialty retail analyst at Roth Capital Partners.
Currently there are 18 stores in the new prototype and the company is planning on remodeling between 60 and 80 stores this year.
“We are late. I would have done this two years ago,” McLaughlin said at the conference.
Half of these remodeled stores will be located in high visibility, high performing centers.
While management is not releasing the results for the stores in the new design, they said the new prototypes are performing better than the control group.
But according to analysts, even with the new design, a turnaround is not likely during the year.
“I don’t have high expectations for 2007. I don’t think that these new ideas and concepts will manifest themselves and I have been disappointed in the past,” said Pierce. “Conceptually, I think there is still a place for them, but a lot of work still needs to be done to show the customer Hot Topic can still be edgy and quirky, while opening up the store to a more diversified group.
For related stories on Hot Topic and other specialty retailers, see the following archived articles:
March 15, 2007 Sales Boost at Specialty Stores https://martav.shop/article/print/113960%3C/a%3E
March 09, 2007 February Comps Dogged by Weather https://martav.shop/article/print/113732%3C/a%3E
Feb. 12, 2007 Citigroup Research Report: Liz Might Be LBO Target https://martav.shop/article/print/112722%3C/a%3E