URBAN OUTFITTERS Strategic Controversy or Detrimental Decline Jessica

URBAN OUTFITTERS: Strategic Controversy or Detrimental Decline? Jessica Bellis, Abbie Dobbertin, Perri Ripps, Malinda Scott, Alex Sullivan BUSMKT 1411, Dr. Geylani, Tu. Th 3: 30 PM

COMPANY BACKGROUND • Urban Outfitters: founded in 1970 by Richard Hayne • Headquartered in Philadelphia, PA • Retailer for clothing, footwear, and housewares • Predominant styles: bohemian, hipster, ironically humorous, bizarre, retro, and vintage • Operates in the US, Belgium, Canada, Denmark, France, Germany, Ireland, the Netherlands, Sweden, and the UK • Manages 5 separate brands: Urban Outfitters, Anthropologie, Free People, Terrain, and BHLDN • Combined has more than 400 locations worldwide

MARKETING STRATEGIES • Seeks to create a “differential shopping experience” • Emphasis on creativity and a compelling environment • Popular retailer among the millennial generation • Ability to understand customers -- connect with them on an “emotional level” • Does the company really understand it’s target market? “The Urban customer, we always talk about, is the upscale homeless person, who has a slight degree of angst and is probably in the life stage of 18 to 26 … The Anthropologie customer is a bit more polished, a bit more older and she has much less angst … She tends to be a homeowner and she tends to be in a relationship and more likely than not, married with children. ” — Chief Executive Officer Richard Hayne, September 2012 Analyst Day

SALES Annual Sales continue to rise • January 31, 2012: $2. 473 billion in sales • January 31, 2013: $2. 794 billion in sales • January 31, 2014: $3. 086 billion in sales Decline in overall sales: • Reported a 3. 7% decline in overall sales for first 6 months of 2014 • Fell 4. 2% in fourth quarter of 2013 - rough holiday season Retail net sales fell quarterly: • 9% fourth quarter of 2013 • 12% first quarter of 2014 • 10% second quarter of 2014 Graph above depicts revenue for year ended Jan. 31, 2013

CUSTOMERS AND COMPETITORS Target market: 18 -30 -year-old sector Direct competitors: Abercrombie and Fitch, American Eagle Outfitters, H&M, Forever 21, DSW Inc. Competition: Getting stronger or weaker?

DECISION SITUATION • Current issue: Recently, the brand has received continuous backlash for some of their controversial merchandise. • At the same time, Urban Outfitters has suffered a recent decline in business • If current and potential customers, as well as general society members, react negatively to the controversial products, Urban Outfitters could face continued sales declines as well as public outrage • Is the decline in sales related to societies backlash of their controversial merchandise?

CURRENT ISSUE

CURRENT ISSUE • 2011: “Eat Less” - eating disorder encouraging shirt • 2012: Jewish Star - Jewish Anti. Defamation League backlashes at Urban for selling a T-shirt by the brand Wood that resembled the yellow badges Jews were forced to wear during the Holocaust • January 2014: “Depression” Mocking depression and making light of mental health issues [released during Urban’s lull in sales during 2013 -2014 holiday season] • September 2014: “Kent State University” - 4 students killed in May 1970 after the Army National Guard fired on a group of anti-war protesters

CURRENT ISSUE • Urban Outfitters has released statements to the media to justify/apologize for their controversial clothing items. • In response to the Jewish Star t-shirt - They claimed, Urban somehow managed to include the wrong images on its site. “I am sorry if anyone was offended seeing the shirt, it was of course never our intention to hurt any feelings with this. ” • In response to the “Depression” shirt - The retailer said the tee wasn’t actually their fault — they bought it from a Japanese label called Depression. Either way, the shirt was taken off of Urban’s shelves. • In response to the “Kent State University” sweatshirt - "We are proud of the Urban Renewal concept and believe that the vintage buyers have done an outstanding job in giving our customers what they want. Customer feedback on this type of product has been consistently positive. We will continue to offer these one-of-a-kind items and feel the recent confusion over the Kent State sweatshirt is an unfortunate occurrence. " [CEO DIck Hayne’s in an e-mail to his employees] • Although Urban Outfitters made these statements defending their products, each controversial clothing item was subsequently taken off of the shelves • Urban is forced to address these issues whether they are admitting to intentionally offending people or not

EXPLORATORY RESEARCH • Focus Group • Participants: 7 homogeneous participants (college students: 4 male, 3 female) • Participants fit in Urban Outfitter’s target market range of 18 -30 years • We choose this method because it provides close scrutiny of the data collection process, as well as customization of data collected • Using our defined set of research problems, we developed a discussion guide with questions that started out very broad and general, and developed to become increasingly specific and designed around our research problem • Used moderator to guide the discussion, establish rapport, probe with questions, and ensure participation

Quotes from Focus Groups ● When prompted with the question: What do you think of Urban Outfitters as a whole brand image? ○ ● “It’s trendy. I like that they have different stuff there. It’s like you’re not just going for clothes, there’s all kinds of cool books and stuff to get for your apartment. It’s always a fun place to go to. ” When you are choosing a store to shop at, does the company’s public image effect if you chose to shop there? For example, if they were involved in a controversy or scandal in the news, would it change whether you chose to shop there or not? ○ “If I was aware of it and it was something that stood out to me, then possibly, but it has to kind of jump out. ” ○ “If it was something really bad then possibly” ○ “I know Urban Outfitters has that Kent State sweater and something about anorexia [on their clothing]” ○ “Maybe workers rights? It doesn’t really sway me in one direction though. Probably should. ” ○ “I definitely feel like all the clothing brands, Urban Outfitters is the most opinionated. I’ve heard of their controversies, but I would still go in there if I saw something that I liked. ”

LITERATURE RESEARCH • The claim is made in a Wall Street Journal article on August 18, 2014, that “sales did not fall because of controversial clothing items, but fell due to an 11% jump in selling, general and administrative expenses which the company attributed to increase in marketing and technology expenses. ” • Were these increased marketing expenses a result of the media backlash against Urban Outfitters?

PROBLEM DEFINITION • Decision Problems: • What changes should Urban Outfitters make to bring in more sales among 18 – 30 year olds (its target market)? • What should Urban Outfitters do to recover its brand image? • Should Urban Outfitters continue to pursue edginess and controversial issues in their current manner? Or a less controversial manner? • Research Problems: • Determine what people feel about Urban Outfitters • Determine what changes should be made to bring in more sales • Determine whether or not Urban Outfitters needs to reconsider the method it pursues “edge”

PROBLEM DEFINITION • Hypotheses: • If Urban Outfitters continues to sell controversial and potentially offensive products, then there will continue to be a decline in sales. • If the majority of millennial’s shopping patterns are unaffected by these controversies, then Urban Outfitters will stay the same (or potential increases). • However, if Urban’s choice to continue selling controversial items, even if sales are not decreasing marketing and administrative expenses to combat the negative publicity will continue growing - decreasing current profits. • There is a correlation between Urban Outfitter’s decline in sales and controversial products, but not enough evidence to establish causation.