Urban Outfitters Plays it Differently
March 2, 2009,
Urban Outfitters and its expanding divisions view home as a key vehicle for creating its individual brands’ DNA.
Trends in home as well as apparel change every six months and are global in reach. “We don’t go where others go,” Senk noted. As an example, he pointed to South Africa as being “on trend” and the company was there in ’08. “It’s just sensational — just the most exciting trend,” he said. At recent designer fashion shows, South Africa was a significant inspiration. As for trend changes, Senk admitted, “Some are a commercial success, some are not,” but in aggregate they are critical.
The company’s design team is now in Australia where they are deriving inspiration for new product ideas. The next trend? Perhaps, he said.
Looking at the overall marketplace and the macro economy, Senk calls this a “transformational time. It will never be like this again. Those who come through it will be stronger than ever.”
Among the changes in general, he believes, is that “Luxury without value is over. The luxury business is very tough.”
Another concern for Senk is real estate — both site value and the placement of retail locations. “We’re better off with strong competition, and only 20% of our real estate is in malls,” he noted. Another point: “What is exciting today is very different from 20 years ago,” which also impacts real estate locations and prices.
Clearly, Senk considers Urban Outfitters one of the strong players in terms of both retailing and wholesaling. The company finished 2008 down a scant 1% in comp sales for the fourth quarter. “We were pleased even with that slight drop,” he said.
The company posted a sales increase of 22% for 2008, with comp sales for all retail divisions including direct-to-consumer channels up 12%. Comp-store sales were up 8%, direct-to-consumer up 32%, and Free People wholesale sales climbed 13%.
The company operates Urban Outfitters with 142 stores in the United States, Canada and Europe, as well as a catalog and two websites; and 121 Anthropologie stores and a website, catalog plus Leifsdottir, the Anthropologie division’s new wholesale concept targeted to a young designer market in apparel, Senk explained. In addition, it operates Free People wholesale, which sells products — not including home — to about 1,500 specialty stores and select department stores, 30 Free People stores, a catalog, website and one Terrain garden center.
Terrain, the newest member of the company’s retail family, occupies 10 acres and offers everything for the gardener and outdoor life, Senk related. “It’s a home lifestyle business offering a complete fantasy in presentation and product.” Merchandise includes “plant stuff” — both decorative and everything for growing — and outdoor living merchandise including furniture.
“It’s just one store for now,” Senk said; the company plans to monitor its progress for an indeterminate time.
Senk said broadly of the business, “Our place is supporting artisan, handcrafted merchandise and trends rather than competing with the commodity market. We love making limited editions.”
This differentiation extends to the stores. “Every store is different, and it’s intentional. We give a lot of autonomy to store teams. We push the inventory to the stores and they communicate each store’s needs and wants based on their customers. It’s a very personal business. A well-run retail store has the personality of a person.”
In the Anthropologie division, the stores are directed to the 30-something customer, “but they also draw strong 20s and 60s,” highly educated and travel driven. The unit does 20% to 30% of its business in home, with furniture the weakest “because we’re not good at selling it — but we sell a phenomenal amount of textiles and prints.” Rugs are key, “but because of space we do a better job of selling them direct.” One interesting point, Senk said: “Customers love buying on the internet vs. speaking to a person.”
For this year, in addition to Australia as a theme, the iconic Vera brand will be revived for both home and apparel. “We will be doing our own program,” rather than with the new licensees, he said. Marimekko also is an important direct brand. And Tracy Reese is doing well: “It’s one of the better designer programs.”
But Senk also emphasized, “Change drives the business, and it’s a lot more profitable. We’re constantly in a replenishing cycle.” For home, this means the lifecycle is typically less than a year, more like six to nine months. Bedding, he said changes every three months for some 50% to 60% of the assortment.
The company also is tech-oriented. “We’ve done a good penetration into the technology world,” a move that enhances non-store action. “I see concepts like cash registers extinct in five years,” said the 52-year -old retailing veteran.
The web/catalog business will soon hit 20% of total sales, “and 93% of direct is online,” Senk said. Home is very good online, where the assortments change daily, he noted, and harder to find products also do better online.
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