Urban up of Terrain and Bhldn brands.

Urban Outfitters Inc. (Urban) is a lifestyle oriented retail company specializing in unique merchandise catered to young adults aged 18-28. Urban operates Retail and Wholesale. Retail is composed of the flagship Urban Outfitters brand, Free People, and the Anthropologie Group which is made up of Terrain and Bhldn brands. These brands are sold in retail stores, websites, and smartphone applications. Wholesale is made up of the Free People brand which markets and sells through specialty chain and department stores. Urban Outfitters offers both men and women’s clothing, as well as home goods, beauty, electronics and footwear.  Anthropologie sells women’s apparel, home provisions and specialty gifts including furniture and rugs.  Free People sells casual women’s apparel and jewelry in both the wholesale and retail divisions. Urban has been fairing pretty well, despite challenges posed to traditional retailers.  But revenue growth has been much slower and even negative at times throughout the past few years.  Urban has continued to open new stores (at a slower pace) while others have shut down completely.  Urban may be less vulnerable to trends of reduced foot traffic and emergence of gigantic online retailers, but the company still needs to pursue a strategy for growth. This investigation was carried out by researching and analyzing a variety of sources, market trends and data. I also referred to publicly reported financial reports and publications.  This has therefore led me to the following research question: Given that Urban Outfitters currently operates 607 retail stores across all of its brands, should the company continue to pursue growth in revenue and profitability through expansion of its brick-and-mortar stores? Main Results and FindingsApproximately 250 words, actually 260There continues to be a shift in retail. Online sales have increased and people use more technology, such as computers and cell phones. There’s been a drop in foot traffic (about 6%) at apparel focused stores. This is due to spending shifts away from clothing and the continued problems retailers face with overbuilding. (Source: Urban Outfitters CEO Says Retail Carnage Proves Bubble Has Burst, Fortune.com)An estimate was made in 2013 that US retail growth by 2018 would average 3 to 4 percent annually, well below the 5 to 7 percent yearly growth seen in the within the ten years prior to that. (Source: How Retailers Can Keep Up With Consumers, Mckinsey.com). According to BigCommerce.com, 51% of Americans prefer to shop online, 96% of Americans with internet access have made an online purchase in their life, 80% in the past month alone. These are strong statistics that retailers need to continue focusing their sales efforts online. Also, total spending of Millennials (ages 13-30) is growing by 3% per year and will account for nearly 1/3 of total spending by 2020. Since Millennials are all about the digital age, it’s clear that Urban must continue to focus on this and less on opening new stores.Urban’s most recent financial results support this. Total sales for the quarter ending October 31, 2017 increased 4%, but this was due to only a 1% increase in Urban retail stores and a much larger increase of 9% in the Free People wholesale business. Also, “direct to consumer channel continued to outperform the store channel,” meaning their online sales really drove the growth.The SWOT analysis gives me a complete picture of both the positives and negatives of the company from both an internal and external perspective. Upon analyzing the information, it is clear to me that Urban has opportunities to grow its revenues and become more profitable since it has established a strong customer following and strong brand awareness among its target market. Urban is also in a good position to pursue opportunities beyond opening stores because of the diversity of its revenue stream – retail, wholesale, online.  The emergence of its online business reflects the fact that Urban should continue expanding this sector. Urban’s wholesale business, through the Free People brand, is also gaining momentum. There is also potential for the company to expand internationally, which I think can be done via online.On the weaknesses and threats side, the retail market is shifting and there continues to be a deterioration of in-store shopping and foot traffic. In addition, opening new stores requires a significant amount of capital investment. I believe this capital could be put to better use and they should de-emphasize opening new stores and take advantage of opportunities within their existing stores as build on the momentum of the wholesale and online businesses.  This will cost them less and drive sales, while increasing revenue and profitability.CONSUMER PROFILING:Consumers can be identified in different categories, such as preference, lifestyle, stage of life, attributes.  By using this tool, it helps me to understand the target market for Urban and how they can adjust their operations and strategies according to the characteristics of their typical consumer profile.The Urban consumer is within range of 18-28 which is considered the millennial. Often millennials are characterized as being tech savvy, highly educated, not as influenced by advertising, politically focused and brand loyal, to name a few. Knowing this type of information about the Urban customer helps me with my assessment of how they should approach revenue growth going forward. All of this research into the Urban consumer helps me to conclude that opening new stores is not necessarily the right approach for Urban. PEST:The PEST analysis focuses on the company’s external environment, including socio-cultural, technological, environmental and political. Understanding these external forces as it relates to Urban Outfitters will help me understand if certain operating strategies would bode well in its external environment.The socio-cultural piece relates to Urban’s customer base and the competitive environment it operates within. Urban’s customers are millennials, so they tend to be socially conscious and brand loyal. Urban’s customers want to be ahead of the curve on fashion and style, so it’s important for them to innovate and move with the trends. Urban’s price point is high, so the target customer should be willing to spend more on basic items, but will be more discretionary about their selections. For technology, it’s all about the online business and its presence among social media and other outlets where customers share information. The e-commerce business needs to improve as technology improves, as that is what the customer would want. Technology is less a factor with brick and mortar stores.Economic factors will always impact traditional retailers, such as Urban. In fact, Urban is more likely to be impacted when the economy takes a downturn, as their price point for merchandise is relatively high.Political factors will also impact the business. For example, the current administration is proposing sweeping changes to tax laws, which will undoubtedly impact retailers. There could be advantages from the changes and disadvantages; the answer is unknown at this point but Urban will be impacted one way or another.Analyzing all of these factors is helpful for me to come to the conclusion about whether or not Urban should open new stores. It helps me understand the mindset and buying habits of its customers, as well as the environment in which it operates. Although the economy is considered strong right now, Urban would benefit more from capitalizing on the success and prospects of its current stores, its online business and its wholesale prospects rather than investing significant capital in opening new brick and mortar stores during an ever-changing retail landscape.Urban Outfitters is doing well in a challenging retail market. They have loyal customers, strong brand awareness, multiple sources of revenue and a competent management team. But, as with any business, there is a constant need to evaluate growth strategies and adapt to changes in the market.The key question about whether or not Urban should continue to open new stores is important. Their recent financial results indicate that their online and wholesale business segments are driving the company’s sales. Because of these financials, their customer profile and the continued trends in the retail market, I believe they should not open new stores, but focus more on building their online business.I also recommend Urban take advantage of opportunities within their current brick and mortar stores. Urban can increase revenues by possibly expanding the size of them or repurposing them with a new feel and new merchandise. Another recommendation is to continue building the wholesale business because it is less capital intensive and still growing at a faster past than the brick and mortar stores.A limitation to my research is that trends are unpredictable. The market is leaning one way now, but things can change.  I personally enjoy walking into stores, trying on clothes and seeing them in person. I know others feel the same way, so there could be a limit to the downturn of brick and mortar stores.Another type of research I could have benefitted from would be spending time in the stores and talking to customers. I was unable to do this, but instead utilized the information I gathered online, and also talked with several of my friends, who are typical Urban customers.

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