Urban Outfitters Continuing Case Study Part 1: The
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Urban Outfitters Continuing Case Study Part 1: The Business Environment 1 Urban Outfitters Continuing Case Study Part 1: The Business Environment I live in a constant state of terror, to be perfectly honest...I really think that you can’t be good at this business unless you...have just an otherworldly sensitivity to every cue, every day, in every part of the business, not just the product, but everything. –Glen Senk, CEO of Urban Outfitters Senk’s response to queries during a 2008 confer- ence call, quoted above, says much about making it in the retail apparel market. And he should know: Senk has been running all or parts of Urban Outfitters for nearly 15 years, and before that he worked at notable retailers like Bloomingdale’s and Williams Sonoma. The retail apparel market regularly coddles as much as it kills. The landscape is littered with victims: concepts and businesses that simply did not work, or did work for a while but then suddenly crashed and burned. Tastes change quickly, and economies expand and contract. Fashion markets can turn on a dime, both literally and figuratively. A loss of focus or simply being in the wrong market at the wrong time can force a retailer to close its doors. While the technical mastery of product line, distribution, and human resources is crucial, it takes an “otherworldly sensitivity” to what is selling, customer shopping preferences, or web site design to stay on top. The retail apparel market can be inscrutable and unforgiving, but success is possible with the right read of the market, a steady hand, and a technical mastery of market, strategy, and follow-through. Urban Outfitters definitely qualifies as a success. The company has been an industry standout almost since its rather unusual inception about thirty years ago. The first shop near the University of Pennsylvania was more a collection of “found objects”—used clothes and bohemian knickknacks—than anything resembling a typical retailer. And Scott Belair, one of the original founders, was more interested in using the experience to earn graduate credit rather than spending money. What began as a niche shop in a college town has grown into a global company, but the image is still that of a small shop. Thanks to the leadership of people like Senk and to founder and President Richard Hayne, the concept has paid off. The U.S. retail apparel market alone is roughly a $200 billion dollar per year industry. Urban Outfitters (including European sales) saw $1.5 bil- lion in sales in FY 2008 and has had double digit growth over most of its history. Oddities in the company’s very DNA seem to be at the heart of Urban Outfitters’ success in such a brutal market. The company’s creation and its approach to finance, product marketing, and management are in many ways counterintuitive to the expected business norm. But original thinking is what Urban Outfitters stands for, and what every business is ultimately look- ing for. Otherwise tightlipped about its financing, the company’s founder, Richard Hayne, has a reputation for avoiding debt. Given the expense of opening retail space and paying suppliers, this requires careful disci- pline and patience. On the upside, it can also give the company security when a new product line needs extra time to find the proper market footing or if the financial market goes into a spin. Urban Outfitters’ uncanny reading of their market is best summed up in a counterintuitive adage: “Big is the enemy of cool.” While some of Urban Outfitters’ approaches are quite conservative, that adage differenti- ates the company in the retail market. The retailer uses little advertising, print or otherwise, and expands with- out fanfare. Instead the firm markets itself through the management of its image. Urban Outfitters keeps its selections hip, but also broad and shallow. Large retail- ers typically look for the next popular product and then reproduce it in large quantities, whether that means product lines or storefronts. Urban Outfitters’ approach has been to sell the total experience of the brand—hip but not ubiquitous. Their appeal, including the shopping experience itself, is the perception of exclusivity. When Urban Outfitters finds a product with broad appeal, stores are not saturated with the product. Only a small quantity is produced and that quantity is spread out over many stores. Exclusivity commands a premium. So where a large retailer might typically flood the market narrow and deep and open 225 stores with the same look and prod- uct lines, Urban Outfitters would open four, all of them different, and order a small run of its best-selling item © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
Transcript of Urban Outfitters Continuing Case Study Part 1: The
Urban Outfitters Continuing Case Study Part 1: The Business Environment 1
Urban Outfitters Continuing Case StudyPart 1: The Business Environment
I live in a constant state of terror, to be perfectly honest...I really think that you can’t be good at this
business unless you...have just an otherworldly sensitivity to every cue, every day, in every part of the business, not just the product, but everything.
–Glen Senk, CEO of Urban Outfitters
Senk’s response to queries during a 2008 confer-ence call, quoted above, says much about making it in the retail apparel market. And he should know: Senk has been running all or parts of Urban Outfitters for nearly 15 years, and before that he worked at notable retailers like Bloomingdale’s and Williams Sonoma. The retail apparel market regularly coddles as much as it kills. The landscape is littered with victims: concepts and businesses that simply did not work, or did work for a while but then suddenly crashed and burned. Tastes change quickly, and economies expand and contract. Fashion markets can turn on a dime, both literally and figuratively. A loss of focus or simply being in the wrong market at the wrong time can force a retailer to close its doors. While the technical mastery of product line, distribution, and human resources is crucial, it takes an “otherworldly sensitivity” to what is selling, customer shopping preferences, or web site design to stay on top. The retail apparel market can be inscrutable and unforgiving, but success is possible with the right read of the market, a steady hand, and a technical mastery of market, strategy, and follow-through.
Urban Outfitters definitely qualifies as a success. The company has been an industry standout almost since its rather unusual inception about thirty years ago. The first shop near the University of Pennsylvania was more a collection of “found objects”—used clothes and bohemian knickknacks—than anything resembling a typical retailer. And Scott Belair, one of the original founders, was more interested in using the experience to earn graduate credit rather than spending money. What began as a niche shop in a college town has grown into a global company, but the image is still that of a small shop. Thanks to the leadership of people like Senk and to founder and President Richard Hayne, the concept has paid off. The U.S. retail apparel market alone is roughly a $200 billion dollar per year industry. Urban Outfitters (including European sales) saw $1.5 bil-lion in sales in FY 2008 and has had double digit growth over most of its history.
Oddities in the company’s very DNA seem to be at the heart of Urban Outfitters’ success in such a brutal market. The company’s creation and its approach to finance, product marketing, and management are in many ways counterintuitive to the expected business norm. But original thinking is what Urban Outfitters stands for, and what every business is ultimately look-ing for.
Otherwise tightlipped about its financing, the company’s founder, Richard Hayne, has a reputation for avoiding debt. Given the expense of opening retail space and paying suppliers, this requires careful disci-pline and patience. On the upside, it can also give the company security when a new product line needs extra time to find the proper market footing or if the financial market goes into a spin.
Urban Outfitters’ uncanny reading of their market is best summed up in a counterintuitive adage: “Big is the enemy of cool.” While some of Urban Outfitters’ approaches are quite conservative, that adage differenti-ates the company in the retail market. The retailer uses little advertising, print or otherwise, and expands with-out fanfare. Instead the firm markets itself through the management of its image. Urban Outfitters keeps its selections hip, but also broad and shallow. Large retail-ers typically look for the next popular product and then reproduce it in large quantities, whether that means product lines or storefronts. Urban Outfitters’ approach has been to sell the total experience of the brand—hip but not ubiquitous. Their appeal, including the shopping experience itself, is the perception of exclusivity. When Urban Outfitters finds a product with broad appeal, stores are not saturated with the product. Only a small quantity is produced and that quantity is spread out over many stores.
Exclusivity commands a premium. So where a large retailer might typically flood the market narrow and deep and open 225 stores with the same look and prod-uct lines, Urban Outfitters would open four, all of them different, and order a small run of its best-selling item
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engage Learning. All rights reserved. N
o distribution allowed w
ithout express authorization.
2 Urban Outfitters Continuing Case Study Part 1: The Business Environment
Review Questions
1. When considering the retail apparel industry, what barriers might a new entry have to overcome?
2. Does Urban Outfitters provide exclusivity or merely the perception of exclusivity? Why is this important to the retailer?
3. When entering the retail apparel market, what would you have to know about your customer?
4. Give examples of popular retailers who have understood their market and been successful.
5. What are some retailers that misjudged their market and failed?
6. Why is “big the enemy of cool”?
Sources
http://www.fundinguniverse.com/company-histories/Urban-Outfitters-Inc-Company-History.html
Q2 FY 2009 Urban Outfitters Earnings Conference Call, Thursday, August 14, 2008 11:00 a.m. ET, http://phx.corporate-ir.net/phoenix.zhtml?c=115825&p=irol-EventDetails&EventId=1908465
http://media.corporate-ir.net/media_files/irol/11/115825/Q2%20’09%20Conference%20Call%20Prepared%20Comments.pdf
Urban Outfitters Stands Out in Struggling Apparel Sector by Jeanine Poggi, 2008, WWD: Women’s Wear Daily 195, no. 10: 15-15, Business Source Premier, EBSCOhost, accessed October 31, 2008.
Urban Cowboy by Heidi Brown, 2004, Forbes 174, no. 9: 154-162, Academic Search Premier, EBSCOhost, accessed October 31, 2008.
which it would then scatter across all its stores. While the box stores dictate a uniform shopping experience, Urban Outfitters’ stores are mandated to be different, with a serious eye towards a genuine look. And as criti-cal as their selection, they have kept their original, day one shopping format — no two stores are the same. The shopping experience is painstakingly planned and executed to be “special” and “a mini-vacation.” They push out on the margins of their customer’s experi-ence, which adds even more value to their deliberately exclusive product. Combining that one-of-a-kind shop-ping experience with never allowing a short-term desire to flood their stores with “the latest thing,” they’ve not only succeeded in maintaining a well researched, unique product, but making the product almost subordinate to the brand.
The bones of their business, storefronts, distribu-tion centers, brand expansion, etc., have received their share of serious care and consideration in the process of executing a successful market presence. Storefronts are located on a regular route of a specific type of cus-tomer. Stores are carefully designed, each unique, with that customer in mind. Distribution and expansion are carefully handled to enhance the company’s image, always avoiding the look and feel of a big box retailer. But looking at the comments of Hayne and standout management personalities like Senk, it becomes clear that Urban Outfitters’ success really does come back to that “otherworldly sensitivity.”
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