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Urban Outfitters group, A new way of thinking Brand Retail ? - Case study
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Helixa16, rue Brey - 75017 ParisCreative Commons License
Urban Outfitters group,A new way of thinking Brand Retail?
July 2012
2
Why Urban Outfitters group?
3
Outstanding business results for many years facing the double challenge: - Gloomy Fashion Retail Industry - Saturated western markets
But Urban Outfitters group sales keep on growing +23% of CAGR over the past 10 years
Urban Outfitters group not only succeeds in increasing its sales it keeps on improving its operating margin (18,2% in 2010)
4
Outstanding business results for many years facing the double challenge: - Gloomy Fashion Retail Industry - Saturated western markets
But Urban Outfitters group sales keep on growing +23% of CAGR over the past 10 years
Urban Outfitters group not only succeeds in increasing its sales it keeps on improving its operating margin (18,2% in 2010)
What is the secret of Urban Outfitters group?
5
As an introduction:Urban Outfitters group at a glance
6
Richard Hayne opened The Free People Store, located on the Upenn’s campus in Philadelphiafocusing on «funky» fashion and household products
Anthropologie was founded by a small group of innovators with a common goal: “inspire the imagination”
The Free People Store became Urban Outfitters
1970
1992
1976
7
1st Terrain garden center in Glen Mills, a sophisticated outdoorliving and gardening concept
1st Free People store opened in Paramus, targeting young
contemporary women
1st BHLDN store opened in Houston, with a curated
collection for weeding
2008
2002
2011
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Urban Outfitters
group2011
urbanoutfitters
$b 1.2197 stores
free people$m 250
62 stores
anthropologie$b 1
168 stores
terrain~ $m 15
2 stores [test phase]
BHLDNNC (2011 launch)
1 store [test phase]
+15% CAGR (2006-2011)
430STORES
$b 2.5SALES
9
Urban Outfitters,the historic pillar of the group
visionmission
targetstores & internet
Unique concept, funky mix of merchandise for both home and wardrobe
Not only a shop but a place to live
- Young adults from 18 to 28, men & women- “Metropolitan hipsters”, creative and tech-savvy- With a funky and unique sense of style
840 m² (in average) located in large metropolitan areas, 2011 : 187 stores - 161 North America, 26 Europe -Target: 350 stores - 300 North America, 50 Europe –Internet: US, UK, France and Germany, worldwide deli-veries
10
Anthropologie,the precious gem of the group
visionmission
targetstores & internet
“Inspire the imagination”
High end luxury casual, unique assortment ranging from women’s apparel and accessories to home goods
Sophisticated & contemporary women aged 28 to 45
670 m² (in average) located in upscale street locations2011: 164 stores - 161 North America, 3 Europe -Target: 350 stores - 300 North America, 50 Europe –Internet: US, UK and Germany, worldwide deliveries
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Free People,the rising star
Nurture the young people who are looking for a little of their own freedom in the clothes they wore.
Offer a line of clothing for young women that catered to their intelligence, creativity and individuality,
Women aged 25 to 30, creative, confident, free and adventurous. Likes to push life to its limits, with traveling and hanging out and everything in between
130 m² (in average) located in upscale street locations2011: 62 stores (North America)Target: 200 stores (North America)Internet: US
visionmission
targetstores & internet
12
Terrain,the future growth opportunity
visionmission
targetstores & internet
Transform the local garden center into a celebration of nature and create an experience for the senses,
Curated assortment for the home and garden in a compelling shopping environment inspired by the greenhouse.
Men and women Interested in a creative, sophisticated outdoor living and gardening experience
1860 m² of enclosed selling space 8000 m² of outdoor seasonal selling space2011: 1 store (North America)Internet: US
13
BHLDN,the brand new concept
visionmission
targetstores & internet
A voice and inspiration that celebrates a woman’s most anticipated milestones, her wedding, and that gives tradition a twist.
Offer a curated collection of heirloom wedding gowns, bridesmaid frocks, dresses, jewelry, headpieces, footwear, lingerie and decorations
Bride that are looking to create an event that reflects her own unique perspective
340 m² of selling space Located in a specialty retail center2012: 2 stores (Houston and Chicago)Internet: US, worldwide deliveries
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Top business results in a gloomy market:Is Urban Outfitters group the new rising star
of Fashion Retail?
15
Urban Outfitters group, exceptional results in a very challenging market
Exceptional growth rate in a gloomy market
Market sales growth: +1% of CAGR [2000 – 2010]
ANN: Ann, IncBEBE: Bebe Stores, Inc.CHS: Chico’s FAS, Inc
KWD: Kellwood Company TLB: The Talbots, IncCWTR: Coldwater Creek, IncLIZ: Liz Claiborne, Inc
EXPR: Express, IncGES: Guess, IncJCG: JCrew Group, IncJNY: Jones Group, Inc
0
9
8
7
6
5
4
3
2
1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
URBN
women’sindex
CAGR:+23%
CAGR:+1%
Urban Outfitters group has increased sales by 8x compared to Women’s index over the past 10 years
Source: Company data, Credit Suisse estimates
Women’s index :
16
LULU L TD URBN ARO ANF AEO ANN EXPR GPS PLCE
An original model:few stores but highattractivity
L
LULU: Lululemon Athletica, Inc.LTD: Limited Brands, Inc.ARO: Aeropostale, Inc
ANF: Abercrombie & Fitch Co.AEO: American Eagle OutfittersANN: Ann, Inc
EXPR: Express, IncGPS: Gap, IncPLCE: Children’s Place Retail Stores
URBN sales per square foot compared to other specialty retailers, 2011e
Source: Wells Fargo Securities estimates, December 2011
0 $
200 $
400 $
600 $
800 $
1000 $
1200 $
1000
612
537
Top sales productivity compared to its peers
17
-5%
0%
5%
10%
15%
20%
URBN ITX GES JCG CHS ANF JNY TLB ANN CWTR LIZ
Urbn Operating Margin compared to other women’s specialty retailers, 2010
ITX: Inditex. SAGES: Guess, Inc.JCG: JCrew Group, Inc
CHS: Chico’s FAS, IncANF: Abercrombie & Fitch Co.JNY: The Jones Group, Inc
TLB: The Talbots, IncANN: Ann, IncCWTR: Coldwater Creek, IncLIZ: Liz Claiborne, Inc
A more responsive and well-fitted approach to Fashion
Source: Company data, Credit Suisse estimates, December 2010
The highest operating margins in its peer group
18
URBN sales breakdown by chanel, 2011e
Online business � 17 % in turnover
Source: Wells Fargo Securities estimates, December 2011, Helixa estimates
Wholesale Direct-to-consumerRetail stores
Ahead in online business
5%
21%
74%
e-commerce
catalogs20%
80%
19
A sustainably more efficient business model:Is Urban Outfitters group the next Inditex?
20
Highly attractive customer value proposition…
With an efficient cost structure…And a multi-profit formula
21
“Fashion cycles are good for our business,we are early adopters merchants
selling to early adopters customers”
Glen Senk, ex-URBN group CEO data
driven process
designers to take risks
on new trends
Identify the next
successful trends
for 10 products:
Products Science and Art
22
“We design products with the changing world in mind”
Assortment: constantly renewed collectionsUrban relies on small but frequent inventory flows Broad versus Deep: no large bets in a few select items but broad assortment across a range of categories and styles
Glen Senk, ex-URBN group CEO
1 week1 week 1 week 1 week 1 week 1 week
23
Assortment: beyond apparel and accessoriesUrban Outfitters and Anthropologie sources and sells products matching their clients’ aspirations with no category boundaries
24
“We want to create stores that exceedpeople’s expectations”
StoresDifferenciated and experience-enriched
Stockholm
Glasgow
Stockholm
London
London
25
49,95 € 54,00 € 59,00€ 59,90€ 68,00€
Urban Outfitters: low-end price category ($10 - $100)Free People: mid range ($50 - $200) Anthropology: higher range ($100 - $400)
A well-fitted Pricing Strategy Each brand covers a distinct price category
26
A peculiar Value PropositionHybrid between luxury and massmarket
mass marketfashion retailers
premium& luxury brands
mass uniqueProducts
basic exclusiveSelling proposition
low enrichedRetail experience
fonctionnal emotional &aspirational
Customer relationship
cheap expensivePrice range
URBN
27
Highly attractive customer value proposition…
With an efficient cost structure…And a multi-profit formula
28
Few storesUnited StatesUnited KingdomCanadaBelgiumDenmarkGermanyIrelandScotlandSweden
but international deliveries
29
Encouraging impulsive shopping through a scarcity model
“Scarcitybreedsvalue”Richard HAYNE, URBN group founder and CEO
less markdowns and promotions
higher productappeal and sales
30
Less markdowns thanks to a responsive approach to
Fashion
“At Urban, we have more tools and a rigorous approach to managing Fashion cycles”
Glen Senk, ex-URBN group CEO
demand
The company uses quantitatively driven processes to recognize and forecast...
Thanks to its flexible organization, it can adapt constantly its merchandise inventory and assortment to major
More accurate forecasting = a higher percentage of full price merchandise and less product markdowns...the next emerging patterns and so
limiting high-risk
merchandiseinventory
& assortment
100 %PRICE
shift in demand.
31
Urbn inventory turnover compared to other specialty retailers, 2010
JNY : Jones Group, IncGES : Guess, Inc.ITX : Inditex
CWTR : Coldwater CreekCHS : Chico’s FAS, IncJCG : JCrew Group, Inc
LIZ : Liz Claiborne,IncTLB : The Talbots, IncANN : Ann, Inc
0.0xURBN JNY GES ITX CWTR CHS JCG LIZ TLB ANN ANF
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x Inventory turnoverAn outstanding inventory and supply chain managementURBN’s business model has two key features: lean inventories and high product turnover
Source: Company data, Credit Suisse estimates.
jan feb mar apr may jun jul aug sep oct nov dec
URBN delivery schedule Typical retailer delivery schedule
New collections’ arrivals
32
“We spend the money that other companies spend on marketing and advertising,
to magnify our store experience”
Richard HAYNE, URBN group founder and CEO
No spend on marketing and advertising
33
Urban Outfitters is uniquely positioned
thanks to its mix of own-label and
third-party branded assortmentsUrban not only sells its own
brand, but also
exclusive products and external
brands
A highly flexible assortment thanks to third parties
34
An highly attractive customer value proposition…
With an efficient cost structure…And a multi-profit formula
35
High margin x High volume
OwnBrands
ExclusivePartnerships
ExternalBrands
Low-end / Mid-range pricesInternal Production
= High Margin
Numerous BrandsFew categories= High Volume
Few PartnershipsFew categories= Low Volume
Numerous BrandsNumerous categories
= High Volume
High pricesInternal Production
= High Margin
Low-end / Mid-range pricesExternal Production
= Low MarginMar
gin
Volu
me
High margin x Low volume Low margin x High volume
Urban Outfitters group revenues: a multi-profit formula
36
Is Urban Outfitters group the next Inditex?
Customer Value proposition
Profit Formula
Key resources
Give to a customer segment
the latest Fashion trends
at affordable prices
= Product Focus
high volume x low marginExternal Brands
X
X
low volume x high marginPartnerships
very high volume x high margin high volume x high marginOwn Brands
# 1. Trend chasing
# 2. Fast speed to market
# 3. Low cost structure
= Process Optimization
Give to a customer target
all the products associated
with their lifestyle
= Customer Centric
# 1. Customer Expertise
# 2. Lifestyle Development
# 3. Responsive approach
= Brand Building
From product focus to customer-driven approach
From maximizing profit to a multi - profit formula
From processesOptimizationto brand building
37
From product focus to customer-driven approach:
A new way of thinking Brand Retail?
38
“In my experience, retailers spend most of their time looking atthings from the company’s perspective or the marketer’sperspective…they talk about trends and brands but rarely about the customer in a meaningful way.
At URBN, we’re customer experts. Our focus is on always doing what’s right for a specific customer we know very well.”
Glen Senk, ex-URBN group CEO
A differentiated approach to
Fashion World
39
Urban Outfitters group key pillar:Customer Expertise
“At URBN we see ourselves as customer specialists, with a collection of brands each one specializing in one particular customer group and lifestyle”
Richard HAYNE, URBN group founder and CEO
Create a relationship and that relationship then translates into sales
Interacting with their customers
Creating a special link
40
URBN success relies on having brands so strong that they are today lifestyle symbols
More than just brands…“lifestyle symbols” !
41
With more than just customers…“communities of soul-mates”
“I envisioned Urban as being a team of peers
looking for cool things to sell to their peers.”
Richard HAYNE,
URBN group founder and CEO
42
Sourcing
Operations
Retail
e-commerce
International
Real Estate
Shared servicesLogisticsFinance
HR/Talent Management
own executive team / sourcing function
/ designers
own executive team / sourcing function
/ designers
own executive team / sourcing function
/ designers
The ability to build and manage brands independently...
Source: Company data, Credit Suisse estimates.
43
... that allows Urban Outfitters group to innovate consistently
What’s next ? ?Source: Company data, Credit Suisse estimates.
44
1ProductsDesign
2Raw materials
Sourcing
3Large Scale
Manufacturing
4High Investment in Marketing &
Ads
5Push
Selling
5Demand-fitted
Selling
4Large Scale
Manufacturing
3Products & Brands
Test Phase
2Products Design
& Brands Selection
1Customer Lifestyle
Analysis
USUALRETAILERS
URBN
From pushing products to adapting to cus-tomers, a new way of thinking Brand Retail
45
To conclude
46
Urban Outfitters group has deeply reshaped brand retail. It has opened the way for new modelling and operating
The very essence of Urban Outfitters group’s success is lifestyle
The lifestyle mission is to feed the aspirations and needs of a target group or community whatever product categories and distribution channels
47
In a constantly changing world, companies can no longer do business in the same way as in the past. Indeed, companies now have to steer a course through a world where everything is changing at a high speed . It is forcing them to rethink their strategic choices along completely different lines. Those firms able to rapidly identify disruptive innovation and take up adequate strategies can gain the upper hand on competitors and become the next winners.
To build such strategies, Helixa has devised a series of new tools and proceeds by combining creativity with analysis to imagine for its clients what has as yet never seen light of day. With its wealth of experience in such sectors as luxury goods, media, retailing, chemistry, energy and internet and given its design thinking inspiration, Helixa can offer highly effective tailor-made solutions. Helixa’s team mixes engineers, strategists and designers.
Strategic Innovation to reinvent businesses
48
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