Why Urban Outfitters Believes Bricks Are Synergistic With Clicks

Urban Outfitters, Inc. broke its first quarter record when its total company sales for the first quarter increased by 3% to $763 million for 2017. Within its retail segment comp, the direct-to-consumer channel continued to outperform stores, posting a double-digit sales increase, driven by an increase in sessions. However, the Anthropologie, Free People, and namesake chain fashion retailer, now turned restaurateur with its 2015 acquisition of the Vetri Family restaurants, says its brick and mortar shops are just as important as its e-commerce.

"Our brands were early direct-to-consumer adopters. And while we continue to invest more in electronic shopping capabilities, we also strongly believe that bricks is synergistic with clicks, and that a well-conceived and executed store strategy is a powerful competitive advantage," explained Chairman of the Board of Directors and CEO Richard Hayne.

In addition to a web presence, the company sought to create an in-store experience to support these categories, said David McCreight, President, URBN and CEO, Anthropologie Group.

"The goal is to provide enough representation of the expanded assortments to become a destination for in-store purchases, while driving her online where she can shop the broader assortment. Success will be measured by activating a larger assortment online, so that the combined store and digital spend of the surrounding area grows."

In the first quarter, the company opened its first two expanded footprint Anthropologie stores, in Portland and Newport Beach, featuring approximately two-and-a-half times more square footage than the typical Anthropologie store. The stores include a petite shop, expanded jewelry and accessories, an intimates boutique, an 800 square foot beauty shop, a full-service shoe salon as well as over 6,000 square feet of home products. Additionally, the company dramatically reduced the back-of-house in these locations to maximize the selling space.

"I can tell you in my almost 30 years in retail, I have never seen such an enthusiastic customer response," said McCreight. "She is traveling a greater distance, spending a longer time shopping in the store, shopping across multiple categories. We've seen this behavior from new, reactivated and existing customers. Average order value is up, units per transaction have increased and sales are exceeding our expectations."

The company plans are to open four or more locations over the next 12 months, which will range from 20 to over 30,000 square feet and some will include Terrain, BHLDN and a dining experience.

The Urban team has made excellent progress in reinvigorating the brand over the last two-and-a-half years, according to Hayne. Customers are responding to clearer and more appropriate marketing with better imagery and a bigger social media presence, and cleaner, less cluttered stores, that house a number of clearly defined shop-in-shops.

The company says it will continue to invest in more technology to better know and understand the customer and allow for more efficient operations;  new and enhanced capabilities, including better marketing, to support the rapidly growing and changing direct-to-consumer channel; expanded stores to house the larger assortments of non-apparel product; controlled international growth; and larger assortments and a higher penetration of proprietary products in all categories.

These investments will be focused on technology capabilities, logistics and data analytics, merchant and creative design talent, and hard and soft marketing.

"Rarely have I read so many negative articles about our industry," said Hayne. "Unlike much of what has been written, I don't believe the consumer is the problem. I think our customer is in relatively good shape."

Hayne attributed the retail industry's issue to being over-stored and overstocked, noting in America there is approximately "10 times more retail space per capita than our European counterparts and more direct-to-consumer choices too."

"Rather than trying to differentiate their products and experiences, many retailers try to drive demand by offering constant and ever-larger price promotions that erode not just the bottom line, but brand equity as well," said Hayne. "When that isn't enough, companies start closing stores in an attempt to right-size their fleets.

"The Urban brands have invested heavily in creative talent to make our products and shopping experiences unique and compelling, so demand isn't dependent solely on price-driven promotions. The success of the Anthropologie larger format stores is one example of how to win through creativity."