Urban Outfitters Case Study
Urban Outfitters has defined a highly differentiated and unique shopping experience, supported by the eclectic and highly varied store layouts and merchandise strategy. This approach to retailing appeals to the individuality and uniqueness every consumer also sees in themselves, allowing the consumers to define themselves by what they like. INA actuality, Urban Outfitters is more aligned to key marketing concepts and strategies than its much larger and less differentiated competitors including Sears and Wal-Mart. Appearing non-conformist and counter-culture within its image, Urban Outfitters is actually providing an escape for consumers to use their purchases to define who they really are and what they actually care out. Retailing that appeals to the values and individuality of a consumers are highly effective in creating loyalty and continued repurchase (Puccinelli, Goodstein, Grewal, Price, Raghubir, Stewart, 2009). The intent of this analysis is to explain why Urban Outfitters continues to be successful with this counterculture image vs. its larger and more well-distributed competitors, why their exclusivity is so critical to their success, and how shopping really is a form of entertainment as it is a very personal customer experience (Grewal, Levy, Kumar, 2009). The basic components of the marketing process will also be assessed.
Analyzing the Performance of Urban Outfitters
To fully appreciate how differentiated Urban Outfitters is, consider how effective their supply chain is in gaining access to highly unique products, how unique their stores designs are, and how widely varied their marketing and advertising is. The entire value chain of Urban Outfitter is what differentiates the store chain relative to their much larger, slower-moving yet much more vertically integrated competitors (Patton, 2008). The supply chains for Sears and Wal-Mart would never be able to sustain this same level of product uniqueness and sourcing, nor would they be able to set as a goal the sourcing of one-of-a-kind items not found anywhere else. Both of these stores and the superstore competitors they regularly compete with have supply chain specifically designed for high efficiency, low variability, and a strong focus on inventory turns. In short, Sears and Wal-Mart are looking for products with as little variation in them as possible to ensure they can be managed through distribution, logistics and to stores with as little cost as possible. This is the biggest operational difference between Urban Outfitters and their larger, more diverse competitors. The operational focus and supply chain operations in Urban Outfitters look to continue on the value proposition of every consumer having a very unique item purchases, which also contributors to the development of a unique shopping experience that cannot be easily replicated in larger store operations (Verhoef, Lemon, Parasuraman, Roggeveen, Tsiros, Schlesinger, 2009). For Urban Outfitters the unique merchandise they purchase, their design of new stores, and the launch of stores in international locations all contribute to the image of a store that promotes diversity and non-conformity of its customers’ purchases of products (Slater, 2004). Sears and Wal-Mart cannot compete in this area of retailing due to their pricing structures for suppliers as well. Not only are these chains designed for high levels of inventory velocity and minimizing the levels of product variation, they are also designed to support very low cost structures where suppliers are expected to continually drop prices over time. This approach to managing suppliers is how Sears and Wal-Mart continue to drive down their prices over time. For Urban Outfitters whose suppliers are smaller and more interested in an eclectic, unique and highly differentiated products, this approach would never work. Urban Outfitters instead partners with suppliers and attempts to anticipate the needs of its customers and create products of interest (Arndt, 2010). Sears and Wal-mart does this with Proctor & Gamble on special bundling programs of products that are very inexpensive to produce already including soap or detergent yet could never scale to do the type of collaborative product planning that Urban Outfitters does with its smaller suppliers (Arndt, 2010).
Analyzing Exclusivity and the Customer Experience
Where Urban Outfitters excels relative to its larger competitors is in how the customer experience is planned, executed and sustained through the combining of each element of the marketing mix. Each aspect of marketing strategy, including the product strategy of sourcing from smaller and more eclectic suppliers, to the pricing strategy that also conveys affordability, to the structure and layout of its stores, all convey uniqueness and a focus on a nonconformist shopping experience (Patton, 2008). Promotions at Urban Outfitters are also highly differentiated through the use of non-standard marketing channels and an increasing reliance on social media which is the best possible communications channel for the demographics of customers the store needs to reach (Arndt, 2010). All four aspects of the marketing mix are galvanized around the message of unique, non-conformist shopping and merchandise that allows a consumer to be who they are by what they own.
Exclusivity is what Urban Outfitters is also striving for in its definition of each aspect of the marketing mix. The three most critical factors in defining exclusivity for a product include the development of a unique and defensible value proposition that other stores will have a very difficult time replicating. Exclusivity of products and the shopping experience is a powerful differentiator of stores, brands and the merchandise they carry. A second reason why exclusivity is so critical is that when it is executed throughout the supply chain of a business, it can galvanize the entire value chain, making the expectations created with customers much easier to turn into positive experiences (Verhoef, Lemon, Parasuraman, Roggeveen, Tsiros, Schlesinger, 2009). Urban Outfitters has successfully done this across all their channels, from the online ones to the in-store locations. The third factor as to why exclusivity is so critical is that it can serve as the catalyst for stores becoming hubs of social activity and events, not just a place customers come to buy products. The use of exclusivity conveys high value to a brand and can act as a galvanizing force in unifying consumers into events they enjoy together (Puccinelli, Goodstein, Grewal, Price, Raghubir, Stewart, 2009). Exclusivity then creates a highly defensible and unique value proposition, unifies multichannel selling operations in retail by creating a strong brand and reason to keep returning to the store, and also can act as a catalyst of events that unify members of the same market segments. Exclusivity can also sustain higher prices over time, making products capable of supporting a premium price relative to competitors. The price of an item in a Saks’ Fifth Avenue will be several times more than in a Wal-Mart, yet both products, take a sweater for example, deliver the same warmth in winter. The one from Sak’s however will have a designer label and most likely will have been worn by a celebrity as the marketing teams at the high-end sweater manufacturer had that as part of their marketing strategy. This same allegory holds true for Urban Outfitters relative to its competitors. It is not the snob appeal that is the catalyst in this instance; it is the opportunity to have apparel and accessories say that the consumer is different, non-conformist and proud of it.
Exclusivity and the customer experience also support each other strongly as well, as exclusivity connotes a specific set of values and orientation within the customer experience that customers either embrace or reject (Grewal, Levy, Kumar, 2009). Shopping then really is entertainment; it is the opportunity to define who one is while at the same time enjoying the selection and trail process of products (Verhoef, Lemon, Parasuraman, Roggeveen, Tsiros, Schlesinger, 2009). Shopping is also entertainment from the context of how stores are decorated and the sensory experiences of being within them. All of the factors of the marketing mix also contribute to the shopping experience, which is in itself entertainment. A realization of this fact can be found any Saturday at a local Mall, where the parking lots are full, the Malls have people walking through them and less than 5% are actually carrying bags indicating they bought anything. From personal experience, the higher-end the Mall the more this dynamic occurs. Shopping really is entertainment.
Urban Outfitters has successfully defined a unique niche in the retail industry by concentrating on a unique value proposition of non-conformist, exclusive merchandise, all supported with a unique shopping experience as well. Competitors including Sears and Wal-Mart are not able to compete with Urban Outfitters as these larger chains cannot scale their supply chains across the many smaller suppliers necessary to create such an eclectic mix of products and merchandise. Further, the positioning and messaging of Urban Outfitters would not be appreciated and even rejected by the more mainstream customers at Sears and Wal-mart who are looking for bargains and deals, and how to make their money go farther.
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Verhoef, P., Lemon, K., Parasuraman, A., Roggeveen, A., Tsiros, M., & Schlesinger, L.. (2009). Customer Experience Creation: Determinants, Dynamics and Management Strategies. Journal of Retailing: Enhancing the Retail Customer Experience, 85(1), 31-41.