BUSINESSWEEK ONLINE : FEBRUARY 15, 1999 ISSUE
COVER STORY

'We Are Going to Own This Generation'


The morning after the Delia's catalog arrives, the halls of Paxton High School in Jacksonville, Fla., are buzzing. That's when all the girls bring in their copies from home and compare notes. ''Everyone loves Delia's,'' says Emily Garfinkle, 15. ''It's the big excitement.''

If you've never heard of Delia's, chances are you don't know a girl between 12 and 17. The five-year-old direct mailer has become one of the hottest names in Gen Y retailing by selling downtown fashion to girls everywhere. Already, the New York cataloger, which racked up sales of $98 million over the past three quarters, has a database of 4 million names, and its fastest growth may still lie ahead: Gen Y's teen population won't peak for five or six years.

TIGHT FOCUS. A lot of thriving Gen Y companies fell into the market by accident. Not Delia's. Founders Stephen Kahn, a 33-year-old ex-Wall Streeter, and Christopher Edgar, his ex-roommate at Yale University, realized that few retailers had taken the trouble to learn this market. So they carefully honed the Delia's concept: cutting-edge styles and mail-order distribution with a Gen Y twist.

Delia's trendy apparel is definitely not designed with mom and dad in mind. ''I think the clothes are too revealing,'' says Emily's mother, Judy. ''I tell her I'll buy her anything she wants at the Gap (GPS).'' But Emily dismisses the Gap as ''too preppy,'' preferring Delia's long, straight skirts and tops with bra-exposing spaghetti straps. Delia's order form even includes tips on how to order pants so they conform to the parentally despised fashion of drooping well below the hips, with hems dragging. In keeping with Gen Y preferences, the catalog illustrates these fashions with models who look like regular teen-agers, not superglam androgynes.

Delia's youthful image isn't just a facade. Most of the company's 1,500 employees are well under 30. And its phone reps--mostly high school and college students--do more than take orders: They offer tips and fashion advice. ''Delia's speaks the language of its consumers,'' says Wendy Liebmann, president of consultant WSL Marketing.

Instead of mass-market advertising, Delia's gets the word out in the ways Gen Y prefers: with local campaigns such as catalog drops in schools and with hot Web sites. In 1997, the company bought gURL.com, a popular fashion, chat, and game site for girls. It also launched its own Web site, with news and entertainment stories, catalog-request forms, E-mail, and online shopping. That effort helped buy some buzz for Delia's stock, which has gyrated between $4 and $32 a share over the past year. In December, buoyed by news of an online shopping venture, the stock shot up more than 50%, to a recent 15.

So far, the company has sold mostly clothing, but it has recently branched out into home furnishings, such as bean bag chairs and throw rugs. ''Girls like to do their rooms,'' says Kahn, who defines his business by its customers rather than by a product category. He foresees a day when Delia's will get these girls their first credit card, first car loan, and first mortgage. ''We'll follow them and broaden our offerings,'' says Kahn.

Next up: boys. The company recently bought TSI Soccer Corp., a sportswear catalog and launched Droog, a catalog for boys. ''We are going to own this generation,'' Kahn says. Or at least a sizable portion of its members' wallets.

By Ellen Neuborne in New York

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