AMM 2200

Retailer Overview:

Urban Outfitters is a specialty store retailer (Levy, Weitz, & Grewal, 2012) with an emphasis in apparel, that operates as part of the portfolio of the parent company URBN. Because it is a specialty store retailer they are focused on a very specific market (Levy, Weitz, & Grewal, 2012). In the case of Urban Outfitters, they are targeting young adults in the 18-28 age range (Hayne, 2020). Specialty stores offer fewer categories of products however they offer a large variety in the categories they sell (Levy, Weitz, & Grewal, 2012). For Urban Outfitters they focused on men’s and women’s fashion apparel (Hayne, 2020). They also offer some other products such as activewear, footwear, and accessories (Hayne, 2020).

Urban Outfitters is mainly thought of as a specialty retail brand however they also have a wholesale segment to their business operations. The purpose of retailers is to buy a product in bulk that they then break up and add value to sell in their stores, most products found at Urban Outfitters fall in this category. However, Urban Outfitters also design and produce their own line called BDG (Hayne, 2020). This line is sold by Urban Outfitters in their stores and they also sell it in bulk to other retailers. Some of the retailers that sell the BDG line are Macy’s, Nordstrom, Dillard’s, and Selfridges (Hayne, 2020).

This company is a member of the retail rector of the economy. Historically retail sales are a fairly good indicator of overall economic health. The better the economy the more consumers are willing to spend and the more they buy no essential goods. During 2019 and the first few months of 2020 the retail sector was doing well. According to the National Retail Federation retail is growing, retail sales have grown almost 4 percent annually since 2010” (National Retail Federation, 2019). They also saw that the obsession over store closures is unwarranted as it has less to do with the overall decline of retail as it is changing demographics. Consumers now are shopping at different stores then they used to cause a shift in what companies are successful. The National Retail Federation says that for every company that is closing a retail store there are 5.2 who is opening a store. At the end of 2019 and the beginning of 2020, Urban Outfitters was doing very well having what they called an “outstanding quarter” (DiStefano, 2020). During this period Urban Outfitters’ stock price reached a high of 31.4 (Forbes, 2020).

With the new year came the COVID-19 pandemic which has had major impacts on the retail industry. The pandemic resulted in social distancing orders and mandatory lockdowns all over the world making it impossible for people to go out to shop. In an effort to stop the spread of COVID-19 there was a mandatory closure of all nonessential businesses, which includes the retail sector that Urban Outfitters is a part of. Because of this, all retailers had to close their in-store operations and rely on online purchases. Urban Outfitters decided to shut down their stores on March 14^th (DiStefano, 2020) which put an end to the success they were having during the winter season. When the stores closed Urban Outfitters’ stock price fell to 12.28 on April 4^th2020, (Forbes, 2020). Retailers are relying on increases of online orders from people at home to try to make up for the lack of in-person shopping, but this doesn’t seem to be the case (DiStefano, 2020). Even with some of their stores reopening Urban Outfitters is only seeing around 50% of their usual sales in the United States and sales in Europe are down 30% overall (DiStefano, 2020). Urban Outfitters CEO Richard Hayne expects that overall sales will still be down 20% at the end of the year and it will be a long time till they get back to normal sales numbers (DiStefano, 2020).

The pandemic is also affecting consumer behaviors. Consumers are changing what they buy, where they buy it, and how much they are willing to spend. For Urban Outfitters categories like “dress and party clothes” are not doing as well as previously expected (DiStefano, 2020). On the other hand, they are seeing an increase in sales in the loungewear, athleisure, and homewares categories (DiStefano, 2020). This is because consumers are not able to go out or even leave their houses, so they are investing more in clothes to wear at home and be comfortable. Consumers are also being more conscious of what they buy, they want to shop more sustainably (Accenture, 2020). This has caused Urban Outfitters to see an increase in sales of their Urban Renewal line (DiStefano, 2020). Urban Renewal is a line sold at Urban Outfitters that is made or repurposed vintage pieces (URBN, 2020). Another behavior that is changing because of the pandemic is how much consumers are willing to spend on items, especially those that are not a necessity. According to Accenture, 64% of consumers are worried about their job security (Accenture, 2020). This will cause an increase in the amount of money people put into savings and a decrease in spending money.

Urban Outfitters is also facing a change in their target demographic. They name young adults in the 18-28 age range as their target consumers (Hayne, 2020). Currently, that age range is experiencing a turnover from millennials to gen-z consumers. According to Accenture gen- z is anyone who is age 20 or younger (Accenture, n.d.). Consumers who are in the gen-z demographic are heavily involved in social media and let it influence their purchases (Accenture, n.d.). Another important factor about gen-z consumers is that because they are so young, they have not formed major loyalties to brands yet (Accenture, n.d.). Urban Outfitters is trying to gain loyalty from these young shoppers by becoming more of a lifestyle brand. They are expanding their electronic and homewares sections in order to appeal more to those consumers and make Urban Outfitters a one-stop-shop (Hayne, 2020).

Many consumers are becoming more socially conscious and are now looking at the values the company and its employees hold before shopping with them. This could cause a problem for Urban Outfitters. The brand likes to market themselves as being socially aware and inclusive, but a long list of recent controversies has put that image into question. Their most recent controversy took place in June of 2020 and involved the company’s policy to reduce shoplifting in their stores. The policy had employees identify possible shoplifters by calling them “Nick” and “Nicky” (Wallace, 2020) and then employees would watch these individuals’ shop. Many people spoke out against this policy and boycott the brand because it is abused by employees to racially profile POC who want to shop there (Wallace, 2020). Another controversy that has plagued Urban Outfitters is repeated accusations of cultural appropriation. In 2012 the Navajo nation sued the company for using their name to label products being sold by the brand (Woolf, 2016). Another controversy was when Urban Outfitters sold tapestries and shirts with designs that were almost identical to the prison uniforms gay men were forced to wear during the holocaust (O'Reilly, 2015). The CEO of URBN has also com under scrutiny for repeted large donations to well known anti-gay rights politician Rick Santorum (Judkis, 2012).

Growth: Urban Outfitters

Urban Outfitter was originally founded as Free People in 1970 by three roommate college students, Richard Hayne, Judy Wicks, and Scott Belair for Belair’s entrepreneurship class project at The Wharton School of the University of Pennsylvania (Wernick & Stansell, 2005). The first Urban Outfitter’s store was known as Free People’s Store and was located in a small space conveniently across from the University of Pennsylvania (URBN, 2020). Their primary business was a second-hand retailer from clothing, furniture, accessory, and dorm decor, given their location, their merchandise is directly targeting college students. The project was a success, continued to operate, expanded the store, changed the name to Urban Outfitter and incorporated the company in 1976 (Wernick & Stansell, 2005).

Urban Outfitter was so successful that it operated with sales around $3 million dollars, thus the second store was opened in 1980, in Cambridge Massachusetts, again near colleges (Wernick & Stansell, 2005). The second store kept the same concept as the first one which was the transformative store’s atmosphere, unique products, and fun environment (URBN, 2020). The originality of this business and their focus on the original target audience, college students, made them snowball into a big business (Wernick & Stansell, 2005). By 1995, Urban Outfitter was all over the big American college and university towns from Boston, Chicago, Minneapolis, New York, Portland, Seattle, Washington D.C., and five locations in California (Wernick & Stansell, 2005). In 1998, Urban Outfitter opened their first international store in London, following that year Urban Outfitter launched their website (Wernick & Stansell, 2005).

Today, Urban Outfitter is a multinational lifestyle specialty retailer under URBN with over 640 stores around the world. The number one big contribution to Urban Outfitter’s success is due to their investment in young fashion buyers and college students to report on hot trends (Wernick & Stansell, 2005). They also hire recent college graduates, whose company training to become a departmental, assistant, or store manager (Wernick & Stansell, 2005). The store ended up becoming a cool place where young people work and shop.

Urban Outfitters is a store brand under URBN which operates into three segments of retail, wholesale and subscription (URBN, 2020). Retail segments include products and services that are sold directly to the customers through physical stores, websites, mobile applications, catalogs and customer contact centers and franchised or third-party operated stores and digital businesses (URBN, 2020). The Retail segment is following an omnichannel strategy which enhances their customers’ experience by providing a fully-integrated shopping experience, physical store to mobile application, and website (URBN, 2020). URBN retail segments include Anthropologie, Bhldn, Free People, Terrain and Urban Outfitters brands and Menus & Venues (URBN, 2020). Wholesale include Free People, Anthropologie, and Urban Outfitters brands that sell other department, specialty stores, digital, and Retail (URBN, 2020). The Wholesale segment primarily designs, develops and markets apparel, intimates, activewear and home goods. Lastly, the subscription segment includes Nuuly brand, which is a monthly women’s apparel subscription rental service that just launched on July 30, 2019 (URBN, 2020).

One of the core Urban Outfitters corporate strategies that they still follow till today is to focus only on one targeted audience and not expand into other markets that would lose interest of that core audience, college students. Not until recently have they launched wedding segments to their business, which is a smart move because they could capture their older audience who may feel that they are too old for their young trendy clothing retailer.

Urban Outfitters’ second strategy is to actively diversify their vendors and manufacturers, Urban Outfitter made sure that their vendor or manufacturer never accounted for more than 10% of their whole inventory (URBN, 2020). The purpose of this is to keep their inventory levels lean and lower inventory on hand, by ordering inventory frequently in low quantity, Urban Outfitter can quicken their turn over rate of inventory, stary on trend, lower left over stocks, and prevent any disaster or political movement from preventing distribution of inventory (URBN, 2020).

Urban Outfitters third strategy is vertical integration, they owned distribution and fulfillment centers for their retailers. Distribution and fulfillment center in Gap, Pennsylvania stores and distributes to over half of Urban Outfitters retailers in North America, another half was stores and distributed by a distribution and fulfillment center in Reno, Nevada (URBN, 2020). Urban Outfitter also just recently finished building a fulfillment center in Indiana, Pennsylvania which will store and distribute home goods, furniture, and electronics products (URBN, 2020). Another fulfillment center in Bristol, Pennsylvania to deal with the subscription segment (URBN, 2020). Urban Outfitters also has distribution and fulfillment centers in Rushden, England which operate for the whole Europe region, and one center in China for Asian regions (URBN, 2020).

Urban Outfitter have planned to expand their business by opening more stores here in the U.S. and internationally. Urban Outfitter is also looking to expand the Anthropologie Group, Bhldn and Terrainstore, to include a bridal (URBN, 2020). They plan to sell dresses and service from the event manager, appointment stylist, a bridal category specialist, merchandise care, and maintenance staff (URBN, 2020).

Urban Outfitter also will continue to support their digital marketing and social media to better communicate with their audiences to be able to understand and serve their customers' fashion needs (URBN, 2020). Notably the social media platforms they will be working on are Instagram, Facebook, Twitter, Pinterest, YouTube, Snapchat, Tumblr and their mobile applications (URBN, 2020). As we continue into the digital age, URBN wants to foster their relationship with its customers to inspire each other and encourage customers to stay with the company (URBN, 2020).

Anthropologie Group is a leading profit business for URBN followed by the Urban Outfitters brand not too much behind. Overall URBN have a very distinct revenue trend that happens every year, each new cycle or year, their first quarter revenue always dipped down below peviouse 3 quarters then increased back up in ascending order to peak at 4th then dropped down again. However, the drop is never more than the last first quarter of last year's exception of 2020 due to global pandemic. Although overall URBN is growing, their growth rate has been steadily declining since the great recession around 2009.

Corporate Analysis:

Urban Outfitters parent company is Urban Outfitters, Inc. (URBN). URBN was created in 1970 by three college students named Richard Hayne, Scott Belair, and Judy Wicks. According to their website, they state themselves as a “Passionate, creative, entrepreneurial bunch who think outside the box and are about providing a unique shopping experience while inspiring and connecting with our customers.” (“Who We Are,” 2020) URBN began as Free People, a small retail store in Philadelphia. Their goal was to “provide second-hand clothing, furniture, jewelry, and home décor for college-aged customers in a casual fun environment.” (“Who We Are,” 2020) The three of them ended up changing Free People into Urban Outfitters a year later after opening the store.

URBN has multiple retailers in its portfolio: Urban Outfitters, Free People, Anthropologie, BHLDN, Terrain, Menus & Venues, and Nuuly. Urban Outfitters was the first retailer to be a part of their company. After changing their name to Urban Outfitters in 1971, the company only had one small store in Philadelphia. With increasing popularity, the store expanded into a small department store that offered an arrangement of products. Now Urban has many product lines such as women’s fashion, men’s fashion, home décor, music products, beauty products, and an intimate line. Urban appeals to their community, stating their products are made with, “an eye toward creativity and cultural understanding.” (“Who We Are,” 2020)

Free People, which was originally the name of the first store, came back into the world around 1984. Meg Hayne created a private label for Urban Outfitters which would be exclusively sold in Urban Outfitters stores. The label became so popular that she and Richard Hayne decided to turn it into a wholesale line. By 1984, the label took the name Free People. In 2002, the first Free People store opened. “It’s intimacy and uniqueness resulted in an unwavering bond with customers. (“Who We Are,” 2020)

Anthropologie came into the portfolio in 1992. Richard Hayne realized his original customers were entering a new part of their life, as they were becoming older. Urban Outfitters was made to appeal to college students, so Anthropologie was created to appeal to those who were older. Their target market was women who were in their 30s to mid-40s. Since their target market is an older generation, they decided to expand their merchandise to “furniture, kids’ and babies’ apparel, and wellness/beauty products.” (“Who We Are,” 2020)

In 2008, URBN obtained J. Franklin Styers Nurseries which is “a popular garden center in Glen Mills, PA…one of America’s most respected names in horticulture since 1890.” (“Who We Are,” 2020) URBN created a retailer that specializes in merging garden and household items to create a wider variety of products to sell to their customers. They named the store Terrain, which is now a retail store, event space, and café all in one.

BHLDN was added to the list of retailers on their portfolio in 2011. The company wanted to add a line of bridal wear to their stores to create more customers. They offer items such as wedding gowns, bridal party dresses, accessories, and gifts and décor. BHLDN first started as an online store but grew in popularity resulting in its brick-and-mortar stores.

Menus & Venues started at the URBN office, where both employees and the public could go to eat during the day. The restaurant was named Shop 543. Eventually Terrain, their sister company, created Terrain Café in their retail stores. In 2015, URBN wanted to expand its food business by purchasing The Vetri Family Restaurant Group, which was an Italian theme. URBN grouped these venues together and now owns all of these businesses.

Lastly, in 2019 the URBN company created Nuuly, an online shopping website that allows you to rent clothes for an $88 monthly subscription. Nuuly offers many of its other brands’ clothing items and third-party labels. They state that Nuuly “seeks to further shift consumer shopping behaviors by giving subscribers access to a wide assortment of current fashion at a substantially lower cost-per-wear than retail.” (“Who We Are,” 2020)

URBN uses multiple market strategies to attract customers. Their statement on their website under their brands states, “We are passionate, creative, and entrepreneurial. We create unique retail experiences with an eye toward creativity and a singular focus on pleasing our customer.” (“Who We Are,” 2020) The company brands itself and its other retailers as a unique and creative approach to help others express their identity through their different merchandise. Since they offer many types of merchandise, they have multiple stores to sell their products. With their stores Anthropologie and Free People, they use the pronouns she/her/hers in their descriptions to attract women consumers. Their retailers also attract those in all different stages of life. They sell merchandise for children, teenagers, young adults, soon to be brides, older adults, and furniture and home décor. They use this as a strategy to keep those consumers using their brand throughout their lifetime. They have expanded to stores outside of the U.S. into countries in Europe and also Canada.

Competitors:

Urban Outfitters recognizes that specialty fashion stores for retailers and online are very competitive both domestically and internationally (URBN, 2020). Urban Outfitters praise themselves in their broad range of fashionable merchandise, digital experience, and the uniqueness of their retailer store (URBN, 2020). Urban Outfitters not only have to compete with other big fashion stores but also smaller boutique stores who could provide customers with more individualized shopping experiences (URBN, 2020). Also, due to their corporate strategy of diversifying their vendors and manufacturers, Urban Outfitters lacks exclusivity with many of their merchandise.

Urban Outfitters competes with other businesses by providing personalized experience and keeping communication through many online channels as much as possible. Online communication channels seem to have been working for them as Urban Outfitter faces a lot of media attention during the mid 2010s of their struggle to understand their customers needs and wants.

Urban Outfitters has numerous competitors, but one of their major ones is Gap. Gap currently has 3,200 stores across the world, while Urban has 248. Gap has multiple retailers as part of their portfolio like Urban Outfitters. However, Urban Outfitters sells more merchandise compared to Gap. Urban sells items in home décor and furniture, while Gap does not. In an article titled “Gap plans move into non-apparel categories,” the author states that during COVID-19, Gap claimed to want to start selling items in the home décor category to expand their business, since they have been struggling since the lockdown. (Stern, 2020) Gap also recently made a ten-year deal with Kanye West to start the line “Yeezy Gap.” They are set to introduce the line in the first half of 2020. Gap is hoping this will generate a billion-dollar revenue from the line. (Maheshwari, 2020) Urban Outfitters, on the other hand, has not stated any new lines or merchandise being added to their retail stores. However, Urban Outfitters has deals with other brands to sell their items, like Levi’s, Nike, and Dr. Martens. They sell other brands other than their own. Both of these retailers have struggled due to the pandemic.

One of Urban Outfitters competitors is Reformation. Reformation is a specialty retail brand that is based in Los Angeles. Reformation is not as large of a brand as Urban Outfitters with only 20 stores, 18 of which are in the U.S. one in Canada and one in the United Kingdom (Reformation, 2019). Reformation is also available at Nordstrom’s. The brand has the same target market as Urban Outfitters, young women who want stylish clothes. Reformations prices are comparable to Urban Outfitters. Where Reformation beats Urban Outfitters is in its commitment to sustainability and how transparent they are with their production process. Sustainability is becoming a big influence on consumer buying habits and Reformation centers their entire brand on this ideal. This makes the brand a good substitute for Urban Outfitters shoppers who want a more environmentally friendly alternative.

References

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