CEO- Andrew King
CFO- Brandon Wright
CMO- Sierra Spadafora
To: Urban Outfitters Inc. Board of Directors
RE: The opening of Kings, a new clothing subsidiary in order to target the male market and to
create another segment for Urban Outfitters.
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Introduction
When Urban Outfitters was originally created in 1970 by Richard Hayne and his former
roommate, Scott Belair, the pair was simply looking for a project for their entrepreneur
workshop. After meeting one night, the two came up with the idea of a store for college and
graduate students, selling inexpensive clothing and miscellaneous items for dorm rooms and
apartments. After operating for six years in the stores original location, the Free People Store
moved to a larger space and at this time the company name was changed to Urban Outfitters, and
it was incorporated. The organization continued to grow, and today Urban Outfitters is all over
the Europe and North America in locations home to major universities. These stores all
maintained the traditional Urban Outfitters atmosphere, meaning they relied heavily on the
buildings and interior displays to entice customers to enter, explore its stores, and buy goods.
None of the business locations were alike with each store being unique in their own way
(Funding Universe).
Today, Urban Outfitters Inc. operates approximately 372 stores, in eight countries
worldwide. With the Urban Outfitters store owning a majority of the stores, Urban Outfitters Inc.
also carries the labels of Anthropologie, Free People and the Terrain label which all target
different markets. The large majority, 334, of our stores are located in the United States, while
fifteen are located in the United Kingdom, fourteen in Canada, and the balance located in
Ireland, Sweden, Denmark, Belgium, and Germany. Of the 372 stores owned by Urban Outfitters
Incorporated, 176 carry the “Urban Outfitters” label, 153 carry the “Anthropologie” label, 42
carry the “Free People” label, and one carries the “Terrain” label (which is a gardening store
located in Pennsylvania). We also have approximately 16,000 employees worldwide (Urban
Outfitter Inc., 2011).
Urban Outfitters Inc. has experienced tremendous financial growth over the past five
fiscal years. In fiscal 2011 alone, we generated approximately 2.3 billion dollars in sales, which
provided us with a sixteen percent compounded annual sales growth over the past five years. Our
net income has increased by more than two-hundred percent over the past five years. During
fiscal 2011, it was approximately 273 million dollars, compared to only 116 million dollars in
2006. Our organization has approximately 600 million dollars in working capital which provides
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us with the ability to undertake nearly any recommended implementation (Urban Outfitters Inc.,
2011)
Finally, although we have a very established product, with good customer feedback, we
believe Urban Outfitters Inc. can further diversify its product line in order to reach additional
markets and increase brand awareness, popularity, and profit. As a result, we are asking the
Board of Directors at Urban Outfitters Incorporated to provide us with their full support, and 10
million dollars in order to launch a men’s contemporary, business casual clothing store label to
be named “King’s”.
Competition
King’s will focus on contemporary, business casual, men’s clothing, which has limited
competition. There are many stores that offer men’s clothing; however there are limited specialty
stores that offer clothes exclusively to men, which is what King’s is committed to doing. There is
a considerable range of quality and price variety available in this market, from high class,
expensive clothes, to low quality and cheap clothing. The market King’s will target is the mid-tohigh quality and price market. The competition that we believe will threaten our chances of
success includes, but is not limited to: Tiptop Tailors, Le Chateau, Banana Republic, Tommy
Hilfiger, and Ralph Lauren. The brands of Tommy Hilfiger, Le Chateau and Ralph Lauren are
more directed to men that are older and more established. This type of demographic is described
as the “club guy” making clothing purchases consisting of polo shirts and “dockers”. However,
the Banana Republic brand is more similar to the King’s brand as it is more youthful then the
other competitors and will be most similar to the King’s Brand. Overall all these brands focus on
the same market King’s will focus on, but are already well established, and have good
reputations.
Justification
Of our four retail stores: Urban Outfitters, Anthropologie, Free People, and Terrain, our
main target is women with the exception of the department store Urban Outfitters; which targets
young adults aged 18-28 who are culturally sophisticated, self-expressive and concerned with
acceptance by their peer groups” (Urban Outfitters, Inc., 2011 ). Our store Anthropologie is
tailored to attract sophisticated and contemporary women aged 28-45. These stores carry
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everything from clothing and shoes and accessories to home décor, gifts and lighting items. Free
People is our store targeted to young contemporary women aged 25 to 30 offering unique
clothing, accessories and gifts. Finally, Terrain, is designed for both men and women who are
interested in a creative sophisticated outdoor living and gardening experience. Considering we
currently do not offer a wide selection of clothing for men, we would like to expand our
offerings by opening a retail store specifically targeted to men interested in the newest business
casual trends, aged 21-45.
According to the January 6, 2011 edition of Women’s Wear Daily a nationwide survey
was conducted of men earning 100,000 dollars or more, stated that men do not want to be
ignored when it comes to their clothing options (Does the Men's Wear Industry Matter?, 2011).
Men are beginning to gain more interest in more conservative clothing styles. Forbes pointed out
“an interesting but small change from 2010 is the increase in men’s entry into the world of
fashion trends. 14.8 percent of the men surveyed (up from 12.2 percent in 2010) stated they are
interested in the newest trends” (Does the Men's Wear Industry Matter?, 2011). Men are also
beginning to realize that well fitted clothing can make them appear smarter, nicer, wealthier and
more successful.
In February of 2011 The NPD Group Inc., a leading market research company, analyzed
the men’s fashion industry during a three month time period and discovered that “the men’s
apparel market finished +3.3 percent from the previous three months, which is ahead of total
apparel (+1.9 percent) and ahead of women’s apparel which was only up +2.9 percent from the
previous three months” (NPD Reports on the Men's Apparel Market, 2011). In total, the men’s
clothing industry was up 12 percent compared to the same time as the previous year (NPD
Reports on the Men's Apparel Market, 2011). “Men’s business apparel showed over a 30 percent
increase for the three months ending February 2011, dress shirts were up 9.7 percent and men’s
neckwear was up 26 percent” (NPD Reports on the Men's Apparel Market, 2011). This
demonstrates a strong and steady growth rate for men’s fashion industry as they are starting to
spend more money on other things besides the basic socks and underwear. Men are starting to
want a healthier lifestyle which in turn makes them aware of how they look, what they wear
therefore, they are starting to rebuild their wardrobes. Stores that are specifically targeted
towards men are limited, therefor this is where Kings will come in by offering a specialty store
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that men can feel comfortable in while they shop for business, casual comfortable clothing. It has
been proven by the NPD Group Inc. that 30 percent of men are purchasing their clothes in
specialty stores, 16 percent are making their clothing purchases from mass merchants and 15.7
percent are buying from department stores (NPD Reports on the Men's Apparel Market, 2011).
We are opening a specialty store rather than a department store because a lot of men’s
clothes need alterations in which we are also going to offer our customers. We believe that a
specialty store will be able to focus more specialized attention on the customer’s wants and
needs, and it won’t be so intimidating for men to come into the store. “Some men shopping in
department stores look (a) terrified, (b) dazed or (c) hopeless, which is why we are focusing our
attention on specialty stores, it offers a more personalized shopping environment, and items
specific to what men are looking for. Men will be able to get in and out of the store within 30
minutes, rather than them having to sift through hundreds of different clothing articles and be
there all day. (Does the Men's Wear Industry Matter?, 2011) Men and women are two very
different shoppers, for one, most men don’t like to shop, they are buyers, and focus on searching
for what they need or want. This is the type of environment we will provide our customers.
Operations
Opening the King’s store will be similar to our other stores and we will keep the same
kind of comfortable free atmosphere. Our King’s stores will be located in large populated cities
that provide us with the kind of demographic we want and a market that is lacking a selection of
men’s business casual clothing. Each location will have its own emotional bond to the customer
and create an environment that is tailored to the demographic. Through the creative design much
of the space is modified to incorporate many different fixtures, finishes and architectural detail.
The King’s concept at each store is to create an individualized and tailored shopping experience
for each customer. By providing an inviting and pleasant shopping atmosphere and an attentive
sales staff, including in-store customer care managers, we will create a sense of community in
our King’s stores that encourages our customers to linger and spend time exploring our stores
and product offerings. This is something that our competitors have not seemed to a grasp, and
provides King’s a great opportunity.
The stores located in both the United States and Canada will be in specialty retail centers,
upscale street locations and enclosed malls. King’s will be located in New York, Chicago, LA,
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Toronto, Vancouver, and San Francisco. These cities are all home to a large demographic who
will be attracted to the King’s line of clothing. The locations will be, on average, approximately
7,300 square feet of selling space and will typically carry 25,000 to 30,000 stock keeping units
(SKUs). King’s will have apparel ranging from dress shirts, polos, blazers, dress pants to casual
shirts, sweaters and jeans as well as basic needs such as underwear and socks. The continuously
changing and updating of our merchandise will allow King’s to stay on top of the latest fashion
trends and encourages our core customers to visit out store frequently.
As a company we have organized our retail stores into geographic areas with each area
having their own district manager whose responsibility is to manage their stores and supervise
the individual store managers. Each store will have their own manager whose job is to manage
the part time and full time employees. The stores will also include a visual manager, and a full
and part time sales and visual staff. Some locations will also have a customer care manager who
helps tailor the shopping experience to the needs of King’s target customers. The stores will also
have a seamstress to hem the clothing that the men purchase to further provide customer service.
Further information on the staffing and the hiring process will be discussed in the Human
Resources Section.
The King’s stores will have the same suppliers and distributors that Urban Outfitters
currently employees. The vendors of King’s will be both foreign and domestic and expanding on
the approximately 3,300 vendors that we currently have will be a must in order to receive the
products that we need at the stores to reach the demographic. Furthermore, with the recent
expansion of our distribution space in Trenton, South Carolina and Reno, Nevada along with the
purchase of land it creates a 468,000 square foot fulfillment center will allow King’s to store
their merchandise.
Human Resources
At King’s our philosophy is the customer and providing them with excellent service the
moment they enter into the store to the time they leave. As a result, we are committed to hiring
experienced staff that have knowledge in the retail field and have worked in an environment
similar to King’s. The manager positions at the stores will hired from within the organization.
Hiring experienced staff members will allow King’s to reduce the amount of training needed and
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training expenses. Job postings will be posted for each store, and full time and part time
employees will have the opportunity to apply with experience and customer service a main area
of focus. The Human Resource Department, along with store managers, will be in charge of the
hiring process and will hire the best candidates for the vacant positions. After the hiring process
has concluded, store managers and district managers will begin training staff immediately. Each
store will hire approximately 20 employees (both full time and part time). This figure is subject
to change based on store need. At King’s, customer service is our focus. If hiring additional staff
is necessary, we are committed to doing so.
Marketing
In order to successfully establish the “King” brand name, we plan on launching an
extensive marketing campaign aimed at informing potential customers about our company, and
persuading them into purchasing our products.
Our marketing campaign will begin in approximately six months, and will run
indefinitely. Based on our marketing and promotion experience at Urban Outfitters, we believe
marketing can be a highly effective tool for King’s as well.
Our marketing campaign will be delivered through traditional mediums such as television
commercials, internet advertisements, Facebook, Twitter, catalogs, a blog, and a website. In
order to ensure our marketing messages incorporate our company’s most up-to-date and cutting
edge fashion products, they will be reviewed on a weekly basis by our corporate marketing
department. In addition to the traditional marketing mediums mentioned above, we also believe
it is important to select “visible store locations, creative store design, broad merchandise
selection and visual presentation” (Urban Outfitters Inc., 2011) in order to attract customers to
enter our stores, and purchase our merchandise.
Although much of King’s marketing will be done through the Urban Outfitters corporate
headquarters, we plan on having each King location perform some of their own marketing as
well. This marketing will largely be done “through special event promotions and a variety of
public relations activities designed to create community awareness of our stores and products”
(Urban Outfitters Inc., 2011).
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As far as marketing through social media (specifically Twitter, Facebook, and a blog), we have
determined, through our experience with Urban Outfitters, “that the traditional method of a oneway communication to customers is no longer enough. We believe that by starting a conversation
and interacting directly with our customers, we are more effective at understanding and serving
their fashion needs. We also believe that our blogs continue this conversation. Not only do we
communicate what inspires us; it allows our customers to tell us what inspires them. This fosters
our relationships with our customers and encourages them to continue shopping with us” (Urban
Outfitters Inc., 2011).
The budget for our marketing campaign during our first year in operation is currently set
at one hundred thousand dollars. Although this seems like an insignificant budget, the fact is,
according to our 2011 annual report, advertising expenses for Urban Outfitters were 58,336
dollars, 46,827 dollars and 45,561dollars for fiscal 2011, 2010 and 2009, respectively. Although
King will operate on a much smaller scale compared to Urban Outfitters, we have the additional
challenge of establishing ourselves, whereas Urban Outfitters is already well established.
Finally, we will also utilize current Urban Outfitters and Anthropologie locations to
advertise for us. This will be done through signage, brochures, and catalogs. These stores were
specifically chosen because they incur significant foot traffic, and generally, attract many of the
same customers King’s is targeting. It will be free, or very cheap, as well.
How we will attract customers
Men are typically categorized under one of three different stereotypes when it comes to
shopping. First, the “grab and go” guy. This is the type of man who simply wants to get what
they need, and get out, spending as little time in the store as possible. Second, the “wait and/or
whine” guy. He is the type of man who goes shopping with a woman, but does not have any
active role in the purchasing process. Finally, there is the “fear of shopping” guy. The “fear of
shopping” man views shopping as a threat to his masculinity.
Although these stereotypes may not be true for all men, they do give us a glimpse into the
male mind’s thoughts about shopping (An Anatomy of the Male Shopper, 2010). Men are
categorized under these stereotypes because they shop differently than women. Exhibit six shows
the differences between both men and women’s shopping behavior.
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According to “An Anatomy of the Male Shopper” by Steven Conway, there are three
motivations and meanings behind the male shopper. They are: “Men are Buyers, Men shop for a
good Solution and Men shop to win” (An Anatomy of the Male Shopper, 2010). Men enter stores
with purpose, to buy something they already have in mind. As Urban Outfitters, we must provide
what they are seeking, and make it easy for them to find. Unlike women, they do not consider
shopping entertainment; they consider it a job. One of our duties is ensuring that the items men
are looking for are in stock and ready for them to buy. “Forty three percent of all men report out
of stock items as a reason to never return to a store” (An Anatomy of the Male Shopper, 2010),
which is why each King’s store will be fully stocked at all times with 25,000-30,000 items.
Men’s actions are driven by success, if we can ensure our customers leave King’s with the
feeling they successfully got what they wanted at a great price, it will ensure we receive their
continued support. Exhibit 7 explains how we will tap into men’s motivations in order to attract
them to our store and ensure they enjoy their buying experience.
“An Anatomy of the Male Shopper” by Steven Conway also argues there are four male shopping
personas we must consider. These personas include: The Tag Along, The Task Master, The
Passion Pursuer, and the Style Master.
1) The Tag Along shows no interest in shopping, and will usually never shop alone. These
consumers are typically older and value comfort, relationships, belonging sharing, family,
and friendship. This male persona will enjoy our comfortable waiting area. King’s
employees are expected to help these shoppers as they will seek our advice and we will,
in all likelihood, be their primary decision makers. (An Anatomy of the Male Shopper,
2010)
2) The Task Master’s main focus is convenience. This fits the grab and goes stereotype and
values convenience, access, simplicity, practicality, time and empowerment. This is
where the simplicity of our store layout comes into play. They will be able to easily find
their way around the store and get what they need. (An Anatomy of the Male Shopper,
2010)
3) The Passion Pursuer seeks products that fulfill what they want and have a passion for;
they do not fear shopping but are more comfortable buying items they are interested in.
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This male values identity, adventure, experience, aspiration, fulfillment and selfexpression. (An Anatomy of the Male Shopper, 2010)
4) The Style Master is the male shopping persona that enjoys shopping and is at ease
shopping in any category with no fear. They develop their own personal style and are
confident in their shopping skills. This male values style, design, fun, and experience.
(An Anatomy of the Male Shopper, 2010)
By Understanding male shopping personas, we will be able to develop the correct techniques to
attract males to our store and to keep them coming back to Kings for the comfort, style, and
entertainment.
Expected Results
By the year 2017, we expect King’s to be fully establish and have twenty six stores
throughout North America. We believe twenty six stores will provide King’s with at least some
type of presence in nearly every major North American metropolis, which is where the majority
of our target market is concentrated. Additionally, it provides us room to expand if need be,
while also painting a picture of what should or could be improved upon in the future. In essence,
these twenty six stores will act as a pilot program.
Assuming the average King store is 7,300 square feet in size, which is an appropriate size
based on the inventory we plan on carrying, we believe it is a realistic to estimate that King’s
will generate roughly 460,000,000 dollars in revenue over a five year span. This projected figure
is based on several assumptions. First, it is assumed that by the year 2017, we have twenty six
stores throughout North America, which by all accounts, is very realistic. We are also assuming
the average store is 7,300 square feet in size, we are marking up our merchandise by an average
rate of fifty six percent, and the inflation rate until 2017 is two and a half percent.
Furthermore, we are projecting King will generate an after-tax income of approximately
42,000,000 dollars in 2017 alone. This figure is based on the information mentioned above, but
also takes the Pennsylvanian corporate tax rate and other expenses into account. We believe this
is a very lucrative project as the average King store will generate more than 1,600,000 dollars in
revenue annually, whereas the average Urban Outfitters store generates only half that amount.
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This is largely due to the increased markup on our merchandise, which is fitting considering we
are targeting a more affluent and professional audience compared to other Urban Outfitters
stores. Finally, by expanding our services into the men’s contemporary clothing market, we
expect demand for our stock to increase, and as a result, so will its share price.
Conclusion
In conclusion we believe King’s Clothing has the potential to be very lucrative for Urban
Outfitters Inc. It provides our organization with the ability to expand into a new and growing
industry which can further develop our corporate image. The men’s clothing industry is
increasing and it offers Urban outfitters a significant market opportunity that we currently do not
have a share in. As we stated, King’s has the potential to increase our net income and profits. We
hope you will accept our proposal and make King Clothing a reality for Urban Outfitters, and for
our consumers.
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Exhibit 1
SWOT Analysis
INTERNAL
Strengths
-
Weaknesses
Moderately priced
Recognized and respected brand name
Loyal customer base
Variety of selection
Strong market share
- A lack of presence in some areas of the world
- Viewed as a primarily female brand
-
High quality products
EXTERNAL
Opportunities
-
Production of men's contemporary clothing
Expand into new countries
Expand current product lines
Threats
- Competition
- Weak economy
- Low cost substitute products
Implement pricing tiers
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Exhibit 1 (Continued)
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Exhibit 2
Key Success Factors
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Exhibit 3
Porter Analysis
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Exhibit 4
PEST Analysis
PEST ANALYSIS
Political
Government
regulations must
be followed in
order to be able
to sell products
Economic
The strength of
the economy
will affect
Urban
Outfitter's sales
performance
Labour costs
are
continuously
increasing
Socio-cultural
Most consumers
will focus on the
quality of King,
not the price
Technological
Increase in e-commerce
The number of
professional men
will drastically
affect sales
The growth in
men's
contemporary
clothing will
affect Urban
Outfitter's sales
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Exhibit 5
Programs
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Exhibit 6
Men VS Women shopping behaviors (An Anatomy of the Male Shopper, 2010)
Men…..
- Shop Solo
- Aim for specific aisle
- Focus on searching, purchasing and going home
- Are achievement oriented – look to return home with an item
Women…
- Sop Socially
- Evaluate the store
- Are Skillful Shoppers – browsing, examining and paying more attention to detail
- Get pleasure out of looking and are happy buying nothing
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Exhibit 7
How retailers can tap into Men’s Motivations (An Anatomy of the Male Shopper, 2010)
1. Create Easier Ways to Buy
This includes making the shopping experience less congested with easy paths for them to find
what they are looking for. The design of the store layouts will be very important where similar
items are going to all be grouped together instead of all over the store. Example, dress shirts,
polo shirts etc. will be in one area, and pants and jackets in another. Items that are grouped
together make the path much more easy and logical for men to navigate around the store. Below
is an example of a floor design.
This floor design consists of a checkout in the center of the store which will have four stations for men to
make their purchases. We don’t want one checkout as they won’t want to wait in line forever. Multiple
checkouts will help the flow their buying process. When they walk in the store, most of the clothes are
going to be to the right; suits will be along the side wall hung up showing the types and styles we offer.
All pinned collared shirts will be along the back wall sorted by colors, sizes, regular fit, slim fit and semi
tailored. Other dress shirts and pants will be on the main floor. To the left of the store will be men’s basic
needs such as socks, and men’s underwear. At the back left of the store we will have our fitting rooms
where alternations if needed can be measured in private behind a curved wall. Each store will also offer a
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waiting area with comfortable leather couches and chairs along with two televisions for men to enjoy if
they do have to wait.
1. Allow Men to feel like Winners
Retailers need to find strategic ways to make men feel like they fulfilled their achievement. This can
be done through point of sale discounts. We will offer promotions of scratch and save where men will
receive 10 to 50 percent off of their purchase. Men look for what they want at the best deal, by giving
them this extra discount after they are already satisfied with their purchase, it will make them feel even
better about buying their clothes at Kings.
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Exhibit 8
5 Year Forecast
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Works Cited
An Anatomy of the Male Shopper. (2010). Retrieved 02 26, 2012, from SlideShare:
http://www.slideshare.net/saconway82/male-shopping-behavior-final
(2011 ). Urban Outfitters, Inc. Pennsylvania.
Does the Men's Wear Industry Matter? (2011, 03 14). Retrieved 02 26, 2012, from Forbes:
http://www.forbes.com/sites/prospernow/2011/03/14/does-the-mens-wear-industry-matter/
NPD Reports on the Men's Apparel Market. (2011, 04 05). Retrieved 02 27, 2012, from PRWeb:
http://www.prweb.com/releases/2011/4/prweb8271585.htm
"Urban Outfitters, Inc. Company History". Retrieved 02 29, 2012, from Funding Universe
<http://www.fundinguniverse.com/company-histories/Urban-Outfitters-Inc-company-History.html>.
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