To paraphrase Mark Twain, the death of the retail store has been greatly exaggerated.
That’s the view of Richard Hayne, CEO of Urban Outfitters, who makes the case for bricks-and-mortar retail experiences. This is an interesting view for two reasons.
Firstly, the demographic for Urban Outfitters is heavily youth-oriented, exactly the type of audience that should - in theory - be demanding online shopping, ideally from their smart phones.
Secondly, there’s a harsh reality for Hayne to face up to here in that the firm’s online sales channel are turning in double digit growth, outperforming store sales growth.
Certainly Hayne is aware of the need to get the balance right between online and offline, although getting the right mix is a challenge:
Granted, North America is over-stored and many retailers underperforming units will have to close, and it certainly is true that the role of the store in the digital age is changing. But I envision the bricks-and-mortar store as an equal partner with the virtual store in this new omni-channel world. There's no better proof of this than the current rush by most pure-play retailers to open their own retail stores.
Urban Outfitters has been talking about this mix for a few years as part of its Vision 2020 strategy, Haynes reckons that this vision is turning into deliverable realities in many cases:
We spent a lot of time at Vision 2020 talking about the different concepts that we were going to expand and enlarge and we have done that and the reaction with the customer has been, I think, extraordinarily strong. We think that there is lots of opportunity to develop it further. To that end, we talked about the importance of having an omni-channel strategy, because not only did we want to have larger stores that house some of these enlarged concepts, but we wanted those stores to be marketing vehicles to help drive traffic to the web.
But there’s the rub - traffic has declined across all the stores and all the brands, including the larger format stores that Urban Outfitters is now experimenting with. Hayne admits:
I don't think that we can say that right now, the larger format stores, which really only have been opened at Free People, I don't think we can say that that has increased traffic. Ratio wise, I don't know. I think as we open the Anthropologie stores, the larger expanded stores will get a little bit more information, but I still believe that overall street traffic, foot traffic is decreasing relative to the traffic that's going on the web. And I think it's fairly direct, meaning as web goes up, store traffic goes down.
Still, that omni-channel investment has to be made. Hayne confirms:
In order to drive additional direct and omni-channel sales, we will continue to make investments in technology, marketing and new infrastructure. Consumers' expectations continue to rise with regards to functionality and experience in the direct and omni-channel worlds.
She wants to shop any time, any place and on any device and have an equally compelling and seamless experience. She wants product information, including what is available and where it is, in the size she needs. Once her purchase is made, she expects her shipments fast and free, delivered where and when it's most convenient for her.
To live up to these expectations, we are in the process of improving our functionality around check out, payments, search, inventory visibility and speed on all of our brands' web platforms. Additional site functionality that is scheduled to be rolled-out later this year includes, in-store pick-up, ship through store, and enhanced mobile application capabilities.
Other technology investments this year include new software to mine our current data and provide our brand teams with more predictive analytics to improve demand forecasting for purchasing and allocation, and new programs that will allow for better customer segmentation and personalization.
The firm has also given David McCreight, CEO of Urban Outfitters Anthropologie brand, additional responsibilities to oversee global direct-to-consumer initiatives for the entire chain. He says:
We are in an environment where the pace of soft and hardware innovation has engendered more and evolving ways to shape brands. With the point of influence and transaction shifting, it makes sense that we align our resources across brands to ensure that our investments are strategic and coordinated. Of course the brands will remain the customer and creative expert, but well executed. This approach will help the brands and [Urban Outfitters] perform at an even higher level with greater resources than if each brand were researching and investing on their own.
We plan to more aggressively expand all channels and brands into underdeveloped markets globally. [We will] explore launching new digital platforms, opening stores, creating partnerships or entering into licensing agreements for our brands and products, in regions and countries where we have little or no presence currently.
We're trading in over 130 markets. Digitally, we have been in international markets of our own branded stores for several decades and so we've learned a great deal…we’re very confident that we've got opportunity, we know our brands resonate in many of those larger marketplaces already, based on the number of people looking to partner with us to explore these markets.
Last week the boss of TV network ITV was proclaiming that the rumors of death around TV as an advertising platform were greatly exaggerated; this week Hayne takes a similar tack. That elusive right balance between bricks and clicks is a major challenge for any retailer with significant offline real estate to manage. I recognise Hayne’s argument about the in-store shopping experience, although I’m unconvinced by his thesis that online pure plays are lining up to open bricks-and-mortar stores.