Catman: Does Urban Outfitters’ Strategy Of Opening New Stores Make Sense?

 

Foot traffic at malls has declined considerably in recent times, owing to a weak economy and the rise of omnichannel retailing, which is expected to grow to $1.8 trillion in the US by 2017, according to research firm Forrester.

Urban Outfitters has been a first mover in this space, and now derives about a quarter of its sales through e-commerce.

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While several retailers have been undertaking store closures, Urban Outfitters still seems to be in an expansion phase.

Foot traffic at malls has declined considerably in recent times, owing to a weak economy and the rise of omnichannel retailing, which is expected to grow to $1.8 trillion in the US by 2017, according to research firm Forrester. Urban Outfitters (NASDAQ:URBN) has been a first mover in this space, and now derives about a quarter of its sales through e-commerce. More significantly, it believes it has figured out what the shoppers want, and is making efforts to transform its stores to please its customers. The company is trying to create an unmatched in-store experience which would help it to capture a greater share by expanding its store format and providing a broader offering in categories such as home, beauty, and intimates, besides its BHLDN wedding brand, and the Terrain outdoor living brand.

While several retailers have been undertaking store closures, Urban Outfitters still seems to be in an expansion phase. According to its CEO, Richard Hayne, the US is overstocked in the apparel category, with approximately 10 times more retail space per capita than in Europe. A factor working in URBN’s favor is that it does not have a sprawling store footprint; instead, it undertook a cautious approach, which is serving it well now.


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