Inside Urban Outfitters Bold Plan to Reignite Growth // Shea Jensen (UO) and Melissa Gonzalez (MG2)

Yeah, thank you. All right. So on that note, you know, tell us a little bit about how you bring together that shop girl and your experience in retail but also being customer-centric.

Yeah. Well, it is a time of great change at Urban Outfitters. For those of you that don't know, we're a brand that's been around for quite some time. We were founded in Philadelphia, Pennsylvania, just right up the street from University of Pennsylvania. Today, we have 177 stores. We operate a website. We have a mobile application. And as I said earlier, we serve youth that are coming of age in America. I think that it's fair to say we lost our way a bit again during that time of transformation and the population shift. And when I entered the brand a year ago, I think we saw a funnel that had slightly dried up, and we had lost some topline revenue. And so we set forth to identify five pillars of a strategy to rebuild our brand. And there was two goals that we had. One, to get to know our customer and to rebuild that funnel, and two, to rebuild and restore our profitability and topline. It's probably no different than most retailers today. But there's five things that we're focused on. First and foremost, back to question number one, we let the customer guide everything that we do. We stay focused on being curious and learning from them every single day. But for Urban Outfitters, that means something different than what it meant a year ago. Traditionally, we have been known as staying focused on an urban customer who potentially in years past was likely grungy, potentially counterculture. And I think that was founded in the idea that counterculture was cool back in years past. What we learned from customers in our research is that today's customer, today's young customer does not see that counterculture is cool because all cultures are welcome to young customers today. And so we needed to adapt that principle into our strategy. And so we recognized that we needed to reach and serve a broader audience of customers. We didn't want to serve just a niche audience of counterculture or urban customers. So today we serve all young customers across North America, whether you're urban or suburban, whether you're counterculture or all culture. And we've identified three segments of customers: pre-college, college, and post-college. And it's really just that simple. Second, we want to adapt our product strategies to reach and serve our broader customer, which means we needed to have a broader product strategy. And I can talk about that in a little bit as well. Third, we needed to invest in marketing to reach and serve this customer. May sound simple, but we hadn't been doing that. And we certainly hadn't been reaching this customer where they shop and live their lives. Fourth, and I think interesting to this group, we needed to adapt the channels, particularly our retail channel, to be more relevant to the way this customer shops. And then fifth, but very important and something I know that this group will also understand, is we need to operate the business with more discipline. And that comes through with both inventory management but also our expense management.

Yeah. So, for retail, there's a couple things that we're really focused on. First, not only was there a generational shift, but that brought with it a population shift. People moved around, as you probably know, and so we need to look at our real estate strategy with the goal being to be more available and accessible to youth across America. Second, we want to look at our environment in the store. Traditionally, we've had a very post-industrial, potentially grungy even environment in our store and we need to look at evolving that to be more upbeat, to be more welcoming, and to welcome a broader range of customers into our environment. Third, we need to adapt our environment to be more akin to our product strategies, which may seem pretty obvious to those of you in this room. Fourth, we needed to adapt our service model, getting better leverage out of our people who are probably our greatest asset. And so our team has been working really hard at that and we've seen some great results with respect to that. We're excited about partnerships that we've been building with some of the world's best brands, both traditional retail brands, but also some untraditional brands and platforms that we've been building. And we want to celebrate those and bring those to life for our customers. We think that part of our role is to celebrate brand curation for our customers. We're not just a house of our own brands, but we're a house of the world's best brands and we want to celebrate those to our customers. And so those are some of the things that we're looking at. And last but not least, I think experience is important to this customer. We learned that these customers started high school in their basement. And so the idea of shopping in real life was a very novel concept to them. And so they look at the idea of in-real-life retail as an experience in and of itself. It's something that they enjoy doing. It's maybe a little bit different than millennials who found digital shopping to be an enjoyment. The opposite is true for this generation. And so we needed to make our stores more experiential and more rewarding for them. And so that's some of the things that we're looking at.

Yeah. So first and foremost, similar to how I described our customers traditionally being more urban than suburban, similar is our real estate strategy. I think we're typically known as being an urban brand with street retail in great cities like New York City. But there are young people across this country and some of our best stores happen to be in some of this country's best suburban malls. And we want to be in more of those and so we're looking at making sure that we can access more of those customers. So, I think data is a great tool for us as we look at population density data and we look to make sure that we're in some of the best centers, malls, and even street retail to get more access to young customers across the country. We have 177 stores. In some cases, this means relocations. In some cases, this means outright closures, not a lot of them. And in some cases, it means new openings. And some of the best centers we were not there. One example just in Los Angeles is Century City. We think that's a great center. We're not there and we think we need to be there. And in some other areas, the population has shifted. So, we're looking at that. In terms of localization, localization is really, really important for us. One thing that we're really proud of is the real estate that we have in college towns. We feel like it makes us really unique. The college customer is our core customer. Like I said earlier, we were founded on a college campus, University of Pennsylvania. We have about 23 or so college town stores where we are literally at the doorstep of tens of thousands of college students. They could wake up and roll outside of the door of their dorm or their apartment and find Urban Outfitters. And we are literally one of the only specialty retailers in town. It is a huge asset we believe and it's something that we are working really hard at. And I think just this past back-to-school season, we learned that not only was this the first time some of these incoming freshmen left their home and had to find a new community and a new network of friends because again they were in their basement for the start of high school, but they were looking for a new home and for a new neighborhood and they were looking for a bit of stability. And so I think we believe that it's our responsibility to help them find that. So whether that's through the things we sell such as dorm accessories and bath mats, or whether it's through the employees that are there to create a sense of community, or whether that's through some of the events and activations that we provide, or whether that's through some of the brands that have now stepped up and said, 'We're really excited about partnering with you in these stores to bring to life great activations, events, and maybe even special product.' Because we believe that these stores are exciting and special, too. And so, we think it's one great example of localization that's real important to these young college customers.

Yeah. So, if you didn't hear, Melissa, I'll just say it again. 20% of our business is done in this great state of California. Show of hands, who's from California? A lot of you probably. Yeah, plenty of you. And yet we're a Northeast brand. It might even surprise some of the folks back in Philadelphia. Because a lot of people think Urban Outfitters is a New York brand. They might know that our headquarters is in Philadelphia, but again this Urban Outfitters legacy can be a bit misleading. Some of our most profitable and highest revenue stores are actually California malls, suburban malls at that. And so, I think it's a real challenge and focus for our team to consistently be curious and get themselves outside of our headquarters and out to the West Coast to really understand some of the drivers of youth on the West Coast. There's one thing that we've learned about young customers, and that is the sort of 80/20 rule. That 80% of what they wear and purchase is about the same, but that 20% is wildly different. And a lot of the reason that's different is geographics, not just weather, but just sort of stylistically, what's happening. By the way, the 80% if you know any young people or maybe have them in your home like I do or if you've been around a college campus or a high school, it's like a lot of sweatpants and a lot of jeans. And that covers close to about the 80% and some tops. And then the 20% can be very, very different. Some of it can be weather like I said, but that 20% matters a whole lot in terms of gaining credibility with that customer and that's why our team has to really get out into the market. And so we do a couple things to make sure they stay focused. We get everybody out about once a quarter into a market, especially during the back-to-school season. We try to get everybody out to a college campus to attend a game on a college game day. It's one of the biggest occasions. Hopefully, it's a lot of fun for them, too. We try and give Friday afternoons as out-of-office days strictly under the guise that we're out studying the customer. And we are constantly doing customer research. It's the start of every season and it's the end of every season. Because again, we have new customers coming in every year. When Gen Z is out, Gen Alpha's in. And so we've got to keep our data and insights very fresh.

Yeah, well beauty is increasingly an important category for young customers today. And we continue to hear that skincare especially is really, really important to young customers. We've been growing beauty over the past year quite a bit and we're excited about introducing beauty as a category in our stores and are working on some new exciting concepts really anchored in four parts of our beauty strategy. The biggest of which will be skincare because we know that that's a really, really growing part of the beauty business for young customers, especially Gen Alpha. There's an example of Gen Alpha entering the chat in our consumer research. Fragrance is an important piece of our business. It's actually, just looking at fragrance, one of a substantially big piece of our business. I'll just say that nail is really important. And then a fun part is what we call glam, which is something like the face freckles or the fake tattoos and all that fun stuff that you might see popping up on social media. And so we're looking at establishing dedicated beauty areas of our store, sort of adding some color into our stores, which is very new for Urban Outfitters, creating destinations, and we think that will not only create a really fun and playful area of the store, but also hopefully drive some trips and traffic into the stores. It's a repeatable business. And I think also lend a feminine touch to our stores which can tend to lean masculine at times.

The first thing that I would say is we're adding the color pink into our stores. It's very, very new to Urban Outfitters. We're adding... I'm not real good at materials, Melissa, I'll tell you. But instead of using post-industrial steel and plywood across our stores, we are adding some new tile. We're adding some just coloring our walls different colors. We're adding just less post-industrial is what I would say and a lot lighter, more modern materials if that rings a bell to you. And I think trying to freshen up and warm up the environment a bit.

Yeah. So, I mentioned earlier the idea of us being a multibrand retailer and offering some of the world's best brands may or may not be a new concept. It's something that I think we definitely aspire to be. And that can be in traditional retail brands that Gen Z customers know and love. It also can be in very aspirational brands that look to partner with Urban Outfitters because they want access to our new young customer. If you haven't checked us out, we have millions of followers on Instagram and obviously serve youth across America. And I think for our customers, we want to provide access to some of the world's best most aspirational brands as well. And so our stores, 177 of them, as I mentioned, across this country and Canada are great touch points to those customers. I think we want to balance the predictability and the consistency of great brands that the customers know and love and the discovery of coming in and finding something new. Or maybe a popup of a brand that they might discover one day, but it might be gone the next. These customers actually love FOMO, something that when I was their age, I would have considered a bad experience. I think the idea of having more demand than supply is something that they actually consider to be a great experience. And so I think we aim to balance those two things: the consistency with the discovery a bit with some of the retail brands. And then I also think something that we're working really hard at is the untraditional brand partnerships. So brand partnerships with brands like Pinterest. So platform brands. Pinterest has been an example of a great partner where we've partnered to bring to life some of their known trends in our stores and even outside of our stores to build really immersive experiences. So imagine customers searching for the most popular trends of the season and then we're able to bring those to life in really, really immersive experiences in our stores, on our website, and even across Pinterest platforms. We're working with some really exciting food and beverage brands to bring really surprise and delight experiences across college campuses this fall for back to school. And I think we're just really open to bringing to life Gen Z's favorite brands in really unique ways that will serve them, excite them, delight them, and create great experiences for them.

Well, the first thing that we're thinking about is the responsibility that we have to deliver for this generation. It's invigorating. It's exciting. And to take us back where we started, it's also a responsibility. It's why I came to Urban Outfitters. The opportunity to serve a generation and to hopefully win with a generation is just invigorating to me. I think it's something that the entire brand shares right now. And I think it's something that we don't take lightly. This is a generation that has been through a lot. Let's say that. And I think they deserve to be fueled. As we say when we share our mission is to fuel the next generation of individuality. They're also a generation that strives to be individuals, but also they want to belong to a community. And it's that dichotomy that is extremely fascinating to us and we want to help provide a community for them and allow our products to help fuel their individuality. And so I think as we look down the next couple years, it's always hard to predict the future, but I think if we can emerge as one of the premier retailers of choice for Gen Z, I think that we will feel proud. If we can emerge as a retailer that continues to be turned to by youth in America, I think that we will be proud. And if we can continue to be a part of their community, then we will be proud as we look to Gen Alpha. I think if our team remains curious and if we can emerge as a place that Gen Alpha considers as maybe a destination that they want to shop, then I think we will feel like we're doing our job. If we can win with the next generation, we can be a place that they start to shop.

Yeah, it's... I think in a perfect world, Urban Outfitters would be the acquisition point for young customers. We're the youngest brand on our campus. Free People might be the next step. And for active customers, Free People Movement would be an adjacent very much adjacent brand and then our customers would graduate into Anthropologie. Of course, any one customer could shop all the brands at one time if they chose, but I think in an ideal world we would be the first acquisition point and we could move them through all brands. And as we think about serving customers in all the local communities, the opportunity for all of us to share knowledge and communicate and learn from each other about geographic intricacies and some of the dynamics across different markets is certainly something that we work to do because we are definitely stronger together.

I would say that retail is where it's at, people. Every sign from these customers tells us that they love getting up and going to a store and that's really exciting. We're back at it.

Thank you, everybody.