AMM 2200 Project 2

Follow the Retailer: Urban Outfitters Part 2

By Michelle Hiller, Sarah, Macky, Huey Wong

December 3, 2020

AMM 2200

Urban Outfitter Retail Market Strategy

One of the Urban Outfitters merchandising 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). In addition, this merchandising strategy allows Urban Outfitter to stay on top of fashion trends, with the help of Urban Outfitter’s buying groups that help select and develop products that meet the target customer demand. In order to stay in touch with their target customer, Urban Outfitter’s buyers have been attending national and regional trade shows and keeping up with current media influences, including social media, music, video, film, magazines, and pop culture(URBN, 2020).

Urban Outfitters focus on the breadth of their merchandise rather than the depth; Urban Outfitters carry men’s and women’s fashion apparel, activewear, intimates, footwear, accessories, home decor, beauty, stationary, pets goods, and electronics (URBN, 2020). Urban Outfitter merchandise restock almost daily from their fulfillment centers (URBN, 2020). These merchandises include a combination of Urban Outfitters own brand which are designed in house, third-party brands, private label products designed as collaboration (URBN, 2020). The purpose of carrying so many different brands and a variety of merchandise is to mimic that of traditional department stores, and other successful specialty and digital retailers (URBN, 2020). The mix of merchandise offers their customers to be able to shop exclusively at Urban Outfitter without having to visit another store and because stocks are coming in daily it urges customers to visit the store often to find the new merchandise in the stores. Although Urban Outfitters made more profit on private label and exclusive merchandise they still carry third-party branded merchandise to help keep their inventory fresh and unique.

Currently on Urban Outfitter's website, there are about over 200 brands of merchandise they are carrying, but only very few items from each brand. Urban Outfitter will typically carry below 10 items per brand, exceptions are Urban Outfitter brand and Out From Under where they carry hundreds of items. Another uniqueness of Urban Outfitter is that they sell used clothes under the vintage section. Urban Outfitters merchandising strategy is what makes Urban Outfitter unique and stand out from the rest of their competitors.

Urban Outfitter pricing strategy is high low price and their products tend to be more expensive than competitor brands, however Urban Outfitter justified this price by marketing their products' uniqueness and higher quality. Urban Outfitter merchandise prices at their website range from under $25 to over $500, they carry products at many price points.

Advertising and Sales Promotion

Urban Outfitter mainly uses their social media as their main advertising and sale promotion strategy. This is highly effective due to their main target audience being young adults of age 18 to 30 or the highest age range to use social media. Urban outfitter social media include: Facebook, Instagram, Twitter, LinkedIn, YouTube, Blogs and Foursquare. Urban Outfitter is very successful in their social media platform, mainly Instagram with over nine million followers, forty thousand average likes for each post, and they have over twelve thousand posts. Urban outfitter is very active on Instagram they usually make an average of two posts per day.

Urban Outfitter also always has sales and promotion going almost at all times from 20% to 50% off depending on occasion and events. They also have membership programs called UO, where you can earn points by spending money at the store, the more points you have the more rewards you get. Some of these benefits include exclusive promotions, early access to sales and collections, deeper discounts during sales, bonus points, access to monthly giveaway, choose-your-own-sales days, surprise rewards, and seasonal shipping offers. Along with an extra discount if you use the Afterpay as payment, this additional discount can range from 20% to 40%. This strategy makes their customers think about the discount options from retail discount, promotional discount, and payment discount. This is an extremely effective sales strategy especially with Urban Outfitter's target audience, due to being students and low income.

Urban Outfitter, although made it seem like they always offer a good deal to their customers very frequently, many customers have come to realize that the original price of Urban Outfitter is extremely overpriced and will not purchase anything unless there is a sale going on. Complaints about high prices become extremely common and this company becomes common knowledge among customers, especially on vintage second hand selection, and subpar quality.

Financial Analysis

Do a financial analysis of your retailer and two to five of its top competitors. Include revenue growth, ROA, Gross Margin, Net Margin, GMROI, Inventory Turnover, etc. What does this analysis say about how your retailer operates and its profitability? What can your retailer do to improve its profitability?

The Gap, Inc, one of Urban Outfitters' competitors, has significantly higher numbers than Urban Outfitters had in 2020. Gap has 16,383 billion dollar revenue in fiscal 2020. (FTSE Russell, 2020). Urban Ouffiter’s revenue is comparably less than Gap. Gap has seen a revenue loss of 197 billion dollars in fiscal 2020. (FTSE Russell, 2020). Gap’s ROA is 2.57 which is less than Urban Outfitters by 1.19. (FTSE Russell, 2020). The Gross Margin is 37.44 and the Net Margin is 2.14%. (FTSE Russell, 2020) The GMROI of Gap is $7.69. (FTSE Russell, 2020)Gap makes a larger profit in inventory than Urban Outfitters by 4.67 dollars. Gap’s Inventory Turnover rate is lower than Urban Outfitters by 0.64, making their Turnover number 2.29. Comparing Gap’s fiscal 2019 and 2020 also shows that they have been heavily impacted due to the pandemic. In fiscal 2019, Gap had a Gross Margin of 38.13 and they had a GMORI of $20.89. In 2019, GAP was successful financially, but in 2020 the numbers decreased. As the pandemic restriction slowly easing, Urban Outfitters and Gaps, profits and financial numbers will likely increase back up.

Hennes & Mauritz AB or H&M, another one of Urban Outfitters' competitors, has less numbers than Urban Outfitters had in 2020. H&M has a 24,718.58 million dollar revenue in fiscal 2020. (FTSE Russell, 2020). Urban Ouffiter’s revenue is slightly more than H&M. However, H&M has seen a revenue growth of 333.22 million dollars in fiscal 2020. (FTSE Russell, 2020). H&M’s ROA is 11.16 which is almost double of Urban Outfitters. (FTSE Russell, 2020). The Gross Margin is 52.61 and the Net Margin is 5.78%. (FTSE Russell, 2020) The GMROI of H&M is $23.56. (FTSE Russell, 2020). H&M makes a larger profit in inventory than Urban Outfitters by 20.54 dollars. H&M’s Inventory Turnover rate is way lower than Urban Outfitters by 4.12, making their Turnover number 2.92. Comparing H&M’s fiscal 2019 and 2020 also shows that they have been heavily impacted due to the pandemic. In fiscal 2019, H&M had a Gross Margin of 52.70 and they had a GMROI of $21.61. In 2019, H&M was successful financially and through 2020 the numbers increased. H&M’s profits and financial numbers did not get hit as hard as Urban Outfitters due to the pandemic.

Revenue Growth: + 33,166,000

ROA: 6.14

Gross Margin: 31.12

Net Margin: 4.22%

GMROI:302.72% or $3.02

Inventory turnover: 7.04


Revenue Growth:

2020 - 24,718.58 Million

2019 - 24,385.36 Million

ROA: 11.16

Gross Margin: 52.61

Net Margin: 5.78

GMROI: 23.56

Inventory turnover: 2.92


Urban Outffiter’s primary strengths are their omnichannel and physical location. Urban Outfitter is known for their omnichannel as they have very cohesive and smooth user experience between physical stores and across all online websites, and social media platforms. Majority of Urban Outfitter’s physical store is also located in an area where there is a lot of their target audience, in urban areas and near college domestically and internationally. However, one of the biggest weaknesses to their brand is their image issues. There are many incidents of presenting or promoting their merchandise in an racial and event insensitive way; such as “St. Patrick's Day Apparel Featuring Irish Stereotypes, A T-Shirt Showing A Palestinian Youth And Reading 'Victimized', A T-Shirt With An 'Obama/Black' Option, A Seemingly Bloodstained Kent State Sweatshirt”(Najarian, 2020) and the list go down. These are in addition to being seen as pricey fast fashion retailers with subpar quality merchandise by many people.

The biggest challenges currently are adapting to the pandemic rules and regulations as many people choose to stay home and shop online rather than at the physical, which Urban Outfitter has pride themselves to be their biggest uniqueness in their branding. They have sustainably suffered financially this year as a result of the pandemic. Long term wise Urban Outfitter image issues have to be examined. Urban Outfitters are at risk of losing the future and current customers if they cannot keep their marketing and merchandise clear out of racial and insensitive controversy, it paints their brand in a very negative light. The controversy happens so often that people start to think that it is intentional as an attempt for Urban Outfitter to stay relevant and increase engagement in the social media platforms.

Overall, despite many controversies Urban Outfitter faces or creates, they are still looking to expand their brand by opening more store locations, the projection for 2021 is 13 new stores. Urban Outfitter has no plan to stop growing or expand as they've been continuing this trend for the last few years despite the hit caused by the pandemic. Urban Outfitter has not made an official statement on where their new stores will expand to thus we think Australia would be a good new market for them to get land on. They should also focus on capturing generation z as they are going to become Urban Outffiter’s new target audience, a campaign that would push the company toward activism, will be effective. Along with a team that goes over incoming merchandise to prevent future scandals like they have had many in the past.