Come for the small-batch craft soda, stay for the high-rise skinny jeans.

Teen brands are struggling. This is the refrain we’ve been hearing for years. In 2014, Delia’s filed for bankruptcy, followed by Wet Seal in 2015, and Aéropostale in 2016; Wet Seal filed for bankruptcy again last week. For the last two years, Abercrombie & Fitch has tried to stave off that same fate through a series of rebranding exercises. There is one teen retailer, however, that is actually managing to turn itself around: American Eagle.

The brand has once again found its footing thanks to an old mainstay — denim — and also through Aerie, the lingerie concept it launched in 2006. Unlike its peers, American Eagle has shown a willingness to experiment with sub-brands like Aerie and the vintage-inspired Tailgate, which is aimed at college students. It’s also made headway with retail experiences, like the long-running Don’t Ask Why pop-up shop in New York City that made a play for the Brandy Melville shopper. It’s been rewarded, in kind, with positive sales growth in a difficult retail environment.

American Eagle’s newest brand extension isn’t about clothes at all, though. It’s about drinks. And fancy ones at that, like maple water, sparkling matcha tea, and fair trade kombucha.

A corner of American Eagle’s 30,000-square-foot Times Square flagship is now devoted to Drink, a beverage concept the retailer developed with venture capital firm Cleveland Avenue. There are no alcoholic drinks (this is a store for teens, after all), but instead a collection of “small batch, regionally-relevant entrepreneurial beverages from across the country.” While pitch almost reads like hipster self-parody, it’s also fairly accurate.

There’s cayenne Up Mountain Switchel from South Londonderry, Vermont and elderflower Cannonborough Beverage Company soda from Charleston, South Carolina. Everything from the bottled water (courtesy of Louisville, Kentucky’s Unify) to the marshmallows (by Sanford, Florida’s Wondermade) you’ll put in your hot chocolate (made with Wells River, Vermont’s Silly Cow Farms milk) is considered.

But will teens bite? Or sip?

One recent weekday afternoon, 18-year-old Mina Kim stopped by American Eagle after visiting her mom who works in the area. Walking through the store, she discovered Drink. “It’s cute, it’s a good idea,” she says, sipping a blackberry hibiscus iced tea.

It helps that while the drinks are highly specialized, the price point is accessible, with most offerings falling in the $3 to $4 range.

“Teens really like ordering specialty beverages,” says Bonnie Riggs, a restaurant industry analyst for NPD Group. “Especially frozen coffees and smoothies, yogurt drinks, non-carbonated soft drinks, and slushies.”

This is something you might know if you spend any time on teen Instagram, where photos of drinks, pink and not, litter feeds. And it’s no surprise then that slushies from Brooklyn’s Kelvin Slush Company were among the most popular options at Drink during January, its first month of operation, despite the cold weather. Colorful slushies offer an Instagrammable moment, as does the cafe’s “tap wall” lined with 10 beverage taps.

Kim’s friends like to get their social media-ready drinks at Starbucks and Dunkin’ Donuts, and she thinks Drink could be a hit. “It would be a good chain thing to start,” she says. “If people knew about it, it could be popular like Starbucks.”

In an increasingly dire retail climate, stores are finding experiential elements are key to their success, a lesson that’s perhaps even more applicable to teenage shoppers than it is to older consumers.

“While teens will shop online and like the convenience of it, they also do crave physical interaction,” says Neil Saunders, CEO of retail research agency Conlumino. “They like visiting places and spaces, and they want to interact with brands. For teens, it isn't a static experience. It's not just about going to the store, picking something up, buying it, and coming out again.”

Saunders adds that concepts like Drink “allow teens to socialize more, both with the brand, of course, but also with their peers while shopping.” They also offer brands the chance to try something new. “Denim is denim and tops are tops,” he says. “You can certainly do new, innovative things in there, and American Eagle has, but’s it’s very difficult. You need something else to keep it a bit more edgy.”

In-store coffee shops are becoming more and more common, and Drink is the first retailer-developed concept of its kind. Saunders points to Urban Outfitters as another youth-centric brand that’s looking to the food and beverage space to inject it with some newness, and cites Nordstrom as a company that’s leveraged a variety of onsite dining options as a way to differentiate itself: “It’s a very important way of creating stickiness around a brand by taking it beyond what it does as the core business.”

And Drink’s pilot location isn’t just targeting teens: Hundreds of thousands of tourists and office workers pass through Times Square every day. “You have a captive audience of people that are here constantly,” says Cleveland Avenue’s Zoe Feldman, who led the project and previously worked at Pepsi Co. “The coffee program has been very successful. Something like coffee or tea is clearly very universal. We're learning every single day about what people like or don't like, what people think is weird or what people don't understand.”

Two of Drink’s regular customers are a pair of middle-aged New York City police officers who patrol the area. They, like many others, come for the SuperCrown coffee. “The drinks are really good, and the people are even better,” says one of the officers. He isn’t authorized to speak with the press, but is happy to explain why he comes here every day, so long as his name isn’t printed.

He can hole up at the space’s chairless bar to do administrative work — today he’s logging a pile of pink tickets — and still see his patrol area thanks to the floor-to-ceiling windows. “I can get things done and stay warm for a bit,” he says. “And the prices are reasonable.” The current panorama features an unobstructed view of the Naked Cowboy. “Robert, he’s a good guy,” remarks the officer, before returning to his work.

Whether Drink is rolled out to other American Eagle stores remains to be seen, and Feldman is tight-lipped about the prospect. Regardless of whether it succeeds, it’s yet another indication of American Eagle’s forward motion.

“In terms of its peers, it puts American Eagle one step ahead,” says Saunders. “It's already doing comparatively better, but this kind of thinking is one of the reasons that it stays ahead.”

Source: http://www.racked.com