Hot Topic Stores

HOT TOPIC (2005)

Hot Topic is an American based company focusing on apparel, accessories, and gift items related to pop culture.  More specifically, the company, whose tagline is “everything about the music,” sells items directly related to or influenced by ‘alternative’ music.  Started in 1989, Hot Topic was one of the first and most successful stores relating the lifestyle represented through the new media form MTV to potential youth consumption.  Though popularly considered a Goth subculture-oriented store, the company caries music oriented lifestyle genres ranging from punk to rave to industrial.  Items previously unavailable, or at least unavailable in a pre-made form, in suburban areas were brought into the mall setting.  The seeming contradiction of ‘alternative’ genres within a mainstream venue is carefully policed by the company, trying to draw the largest possible number of consumers while simultaneously maintaining its identity as an ‘alternative.’
The company has been successful enough in this balance to be ranked number four on Forbes Magazines “Hot Shots: 200 Up & Comers” in 2003 (McClintock).  With store productivity ranging from roughly $579 per square foot in 1996 to $602 per square foot in 2004, with a high of $650 per square foot in 2003 the retailer has higher productivity than most other stores within its competition.  The success of the store has led to rapid expansion to all 50 states and Puerto Rico with 668 stores by February of 2005, 115 of which are under one year old (“10K 05”).

CONSUMERS
The targeted consumers have remained from its inception men and women between the ages of 12 and 22.  Though the teen customer is not considered loyal (Shinkle), Hot Topic has reported customers continuing to visit the store through their 20s (“FD Q4 03”).  Partially perhaps due to the customers’ ages and items carried, the average transaction as of 2003 was approximately $22.50.  The company argues that their customer is socially and economically varied due to the media forms MTV, music distribution, television, movies, and magazines; however that the result is a more homogenized fashion market (“10K 97”).  Should a new form of subculture emerge, it would quickly be picked up through such media, feeding an increased interest in ‘alternative’ music items, and capitalized upon.

STORE DESIGN
The design of the store is carried out in order to create an ‘alternative’ space within the mall and draw in the teen consumer.  A smaller space than many other retailers, the average size of a Hot Topic store is approximately 1700 square feet (“10K 05”).  ‘Alternative’ music is played more loudly than in most stores within the mall setting.  In contrast to a brightly lit mall in pastels and creams, Hot Topic distinguishes itself through general dim lighting and the use of red filtered lights.  Its primary colors used with the logo, shopping bags, and wall colors are red and black.  The entrance is an industrial looking partial circle with sometimes faux brick along the sides.  The store has transitioned its look over time, however, with a general move within the last five years away from a more thematic and genre-specific “gothic-rich design” to a more general modern “warehouse-like space of post-industrial materials” (Chain Store Age: 2001).

“STREET UP” RESEARCH
Hot Topic argues that it does not determine fashion trends, but instead keeps a close connection to what is happening within various ‘alternative’ music settings through a multitude of means.  Music videos, music magazines, music sales, radio, and fashion and music trade journals are consulted in order to find the next large trend.  In addition comment cards are collected both in store and online from customers and the opinions of store employees collected through internet communications.  Store employees also are reimbursed for concert tickets in exchange for fashion reports (Chain Store Age: 2000).  An example of success with this system is Faygo soda:

This year employees noticed the feverish response to Insane Clown Posse band members spraying liter after liter of Faygo–a cheap pop from their hometown of Detroit–on concertgoers. Three weeks later Hot Topic had one-liter bottles of Faygo soda in its stores for $1.99. That’s twice what it sells for in Detroit. But for a rabid ICP fan in, say, suburban Iowa, it’s worth it.  (Allers)

Because trends pass quickly, the store also is able to change inventory quickly with a roughly six to eight week time from conception to in store, as compared to other retailers requiring six to nine months (Allers).      

PRODUCTS
The merchandise carried consists primarily of apparel, accessories, and gift or novelty items for both men and women.  Products vary from hair dye, make-up, body jewelry, compact discs, corsets, books, stationary, t-shirts, skirts, pants, intimate wear, and shoes.  Roughly half of Hot Topic’s products are licensed, many of which are short term, and many other products are music influenced.  Clothing lines consist of licenses for film, television, and music copyrights as well as private label items from Hot Topic.
One of the store’s most consistently strong areas of sales are music licensed t-shirts.  While sales have remained strong overall, there has been a recent trend reported by Hot Topic to a broader array of artists being carried, with each individual artist sales going down slightly.  Some replica vintage shirts are carried, such as Led Zepplin, Jim Morrison, and Jimi Hendrix, however, stronger sales occur with recent ‘alternative’ bands including NIN (Nine Inch Nails), Linkin Park, HIM (His Infernal Majesty), Good Charlotte, Newfound Glory, Slipknot, ICP (Insane Clown Posse) and The Used.
Other popular culture licenses have also been quite profitable for Hot Topic.  West Coast Choppers (a motorcycle related line), The Nightmare Before Christmas (a Tim Burton film), Napoleon Dynamite (an MTV production), Office Space, Harry Potter, The Punisher (films), Happy Bunny and Family Guy (cartoons) have all at one time been popular lines of merchandise.  Hot Topic’s policy of short term licenses has been quite successful in allowing them to temporarily carry new items.  Once these items become older or enter into license agreements with other companies, such as Wal-Mart, Hot Topic discontinues the product.  Hot Topic has also looked to licenses from previous decades, particularly within toy items.  Ghostbusters, Rainbow Brite, Smurfs, Teenage Mutant Ninja Turtles, and My Little Pony are all licenses the retailer has carried (Tkacik).
Private label items by Hot Topic consist of roughly 25 % of sales (“FD Q4 03”).  Some labels include Morbid Metals (body jewelry), Morbid Makeup (cosmetics), Morbid Threads (men’s and women’s apparel), Morbid Adornments (accessories), MT:2 (men’s and women’s apparel), and Ugly Shirt.  Hot Topic plans to expand private label accessories in the future due to weaker brand association than apparel.
Concerning apparel influenced by pop culture, women’s has thrived, while men’s has struggled within the last two to three years.  Two primary influences in women’s fashion are punk and feminine gothic styles.  Punk style pants and skirts, typically consisting of plaids or solid black with zippers and straps, have sold well, with musical artists such as Gwen Stefani of No Doubt wearing similar items in recent music videos.  A new line called Dark Romance has also proven quite popular.  This line is made up of primarily dark and feminine items, such as corsets, with musical artists such as Amy Lee of Evanescence as an inspiration. Men’s music influenced clothing has struggled; however, with some funding and floor space being pulled for unisex items.  Music t-shirts make up most sales within men’s apparel.
While Hot Topic is receptive to following trends within music and popular culture, it does draw limits in its defining of ‘alternative’ and what its core customers would want.  In doing so, the company maintains its boundary as not that which is ‘mainstream’.  This has proven to be a particularly difficult problem for trends in men’s bottoms.  Hot Topic identifies the current trend as “plain, basic…non-descript…doesn’t have a fashion element to it” (“FD Q4 03”) and has therefore been forced to wait and test products over the last two years until another trend is found.  Hot Topic has also had difficulty carrying denim along with what they feel their core audience would purchase.  Concerning trends towards bohemian and hip-hop styles, Hot Topic has stated these are not “appropriate” for their core customer and has no plans to approach either (“FD Q4 04”).

COMPETITION
While Hot Topic competes with other stores for teenage customers, the store has limited competition within the mall setting.  Rags and Gadzooks are two mall-based retailers also focusing on popular culture items; however studies have shown their presence to not effect the sales of Hot Topic (“FD Q4 03”).  Other stores include Abercrombie & Fitch, American Eagle Outfitters, Pacific Sunwear, Spencer’s Gifts, and Claire’s.  Unlike many of these stores, however, Hot Topic’s products are roughly 80% exclusive to the store, limiting its competition for such items (“FD Q4 03”).  And while larger chains, such as Wal-Mart, carry some basic items that may be used by teenage consumers, Hot Topic faces little competition over its music inspired fashions.
Limited competition leads Hot Topic to spend little on advertising.  Some local radio and print advertising is employed when a new store is opened (“FD Q1 03”) as well as sponsorship the second stage at Ozzfest, and annual tour featuring Ozzy Osbourne and many other metal, Goth, and industrial bands.  However, in comparison to other mall based chains, such as The Gap and JC Penny, advertising expenditures are relatively minute.

TEEN RESPONSE
In placing a business on the fine line between youth rebellion and mainstream consumption, an inherent risk is built into Hot Topic.  Not only do youth need to be interested in the popular or ‘alternative’ objects being sold and have the purchasing power of money, but they also must accept this seeming contradiction in order to purchase an item.  Some youth are repelled by the themes of the space; “‘[i]t scares me,’ said [a] 19-year-old student…‘They tend to sell a lot of Goth, and that’s totally not my style’” (Earnest).  Others may find Hot Topic to be too mainstream and not ‘alternative’ enough.  Even if Hot Topic is considered an acceptable venue for purchase, some consumers also attempt to purchase items that are not obviously from Hot Topic.  In the text What is Goth?, which is sold at Hot Topic stores, Voltaire cautions to “[c]hoose [purchases] wisely—you don’t want to look like a Hot Topic store exploded on you while you walked through the mall” (Voltaire 19).

Allers, Kimberly L.  “Retail’s Rebel Yell” Fortune. 27, Oct. 2003.

Chain Store Age.  76.11. (Nov 2000): 72-74.

Chain Store Age. 77.3 (Mar 2001): 148-150.

Earnst, Leslie.  “Cooling Trend at Hot Topic”.  Los Angeles Times. 13, Dec, 2004. 

Hot Topic.  Annual Report on Form 10-K For the Year Ended January 29, 2005.  (“10K 05”)

Hot Topic.  Fair Disclosure Wire Q1 2003. (“FD Q1 03”)

Hot Topic.  Fair Disclosure Wire Q4 2003. (“FD Q4 03”)

Hot Topic.  Fair Disclosure Wire Q4 2004. (“FD Q4 04”)

Hot Topic.  Form 10-K For the Fiscal Year Ended February 1, 1997.  (“10K 97”)  

McClintock, Jamie.  “Hot Topic hits No. 4 on Fourtune’s Latest List”.  Pasadena Star-News. 13 Oct, 2003.

Shinkle, Kirk “Give Us Your Hipsters, Your Punks And Goths”.  Investor’s Business Daily. 3 Sep, 2003.

Voltaire.  What is Goth: Music, Makeup, Attitude, Apparel, Dance, and General Skullduggery.  Boston: Weiser Books, 2004.

Tkacik, Maureen.  “Many 1980s Icons Still Have Toy Appeal”.  The Wall Street Journal.  11, Jun, 2003. 

 

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