The venerable brick-and-mortar retailers have worked to redefine themselves as they adjust to competing in a rapidly changing landscape. The process though, hasn’t been easy.
Richard Hayne, formerly the COO of retail Free People was appointed Urban Outfitters’ first chief digital officer in August 2016, marking a strategic and very intentional shift in the brand’s relationship with digital. Hayne leads Urban Outfitters’s digital strategy, which has already seen a powerful surge this year. An increased focus on digital efforts resulted in an increase in online sales in Q2 2016, boosting the value of the company’s shares by 8 percent, according to Diginomica. The group posted profits of $76.9 million at the end of Q2 in 2016, increasing from $66.8 million from the same period in 2015.
Chief Financial Officer Frank Conforti attributes the growth to Urban Outfitters’s shift toward an omnichannel strategy focusing on improving the customer experience. Urban Outfitters has seen its direct-to-consumer sales rise to outpace store sales, largely because of a steady increase in online conversion rates. Let’s dig into what made this omnichannel strategy a success for a retailer one analyst calls “the quintessential apparel business for our time.”
Multimedia and Personalization: A Powerful Combination
Using a savvy mix of media, including videos, slideshows and drop-down boxes, the Urban Outfitters website is both rich and easily navigable. Indexing is straightforward and intuitive, allowing shoppers to drill down to the items they want according to price, brand or ratings, along with other standard categories. Smooth gestural navigation and full functionality cater to mobile users, and exclusive premium offers keep long-time customers feeling welcomed.
The feature that truly places Urban Outfitters on the cutting edge of retail, however, is the fact that it has taken a major step beyond marketing and selling its own products. Under Richard Hayne’s guiding hand, Urban Outfitters has entirely redefined the meaning of content, and that’s been a stunningly successful move.
A Fresh Take on Content
It’s been clear for some years now that you need to offer content with unique value in order to attract and retain your website visitors. Most retailers post blogs and videos to keep up the flow of new content, providing visitors with insights that go beyond mere product and purchase advertising. Urban Outfitters, however, has taken a quantum leap forward with its concept of retail content, by focusing on music and emerging talent for its “Urban Outfitters Community.”
The brand has built out a video streaming channel and music series, “UO Live,” and its music-focused Instagram channel offers exclusive releases and giveaways. CEO Trish Donnelly points out that the video series now has tens of thousands of subscribers. In addition to its store and online product offerings of vinyl, headphones and other music-related accessories, the retailer has expanded within the category to deliver a true omnichannel “surround sound” experience to its festival-going fanbase.
While marketing and technology-related expenses are anticipated to grow, Conforti believes these investments will drive significant online sales for the year. As marketing blogger Anna Wickham writes, “It’s clear that Urban Outfitters has content marketing figured out to a science. We can glean so much by simply looking at what avenues they’ve built to make themselves so successful.”
Instagram’s Power as a Branding Tool
While becoming a source for interesting new music, Urban Outfitters has also used Instagram to refocus its marketing for an older demographic. During former CEO Glen Senk’s time at the helm, the retailer’s shoppers started to skew as young as 14 and 15 years old. Urban Outfitters’s branding filled up with discount offers, and store racks featured an abundance of T-shirts with slogans on them. This didn’t mesh well with how Urban Outfitters saw itself in the long term, and incoming president Trish Donnelly was tasked with adjusting the brand’s focus. Instagram was one of the tools that Donnelly used to make this change, cleaning up the imagery and presenting higher quality products that would appeal to an adult market. The brand’s Instagram channel now has more than 700,000 followers and has received more than 19 million individual “likes” in Q2 2016 alone. Bloomberg notes that Urban Outfitters’s ads even took on an appearance reminiscent of Instagram.
E-Commerce Impact Spreads Across Retail Landscape
The growth of e-commerce has had significant impact on traditional department store retailers such as Nordstrom, Bloomingdale’s and Macy’s. The venerable brick-and-mortar retailers have worked to redefine themselves as they adjust to competing in a rapidly changing landscape. The process hasn’t been easy.
“These legacy players are having a terrible time navigating through that shift successfully,” notes Mark Cohen, director of retail studies at Columbia Business School, in the New York Times. While Urban Outfitters may have made a digital splash, it’s certainly not the only cutting-edge retail brand that creates competition for the traditional apparel companies. Other fast-moving competitors include Topshop, ASOS, Zara and H&M. Each of these stores has set the bar slightly higher by its sophisticated use of social e-commerce and new digital networking tools.
In response to a broader shift toward online shopping, Macy’s announced in August the closure of 100 stores. The retailer aims to achieve a positive return on investment for existing locations and to “strike the right balance between stores and digital.” Macy’s digital business saw strong double-digit growth in 2Q, and the company aims to be “tomorrow’s leader in omnichannel retailing.” Macy’s CFO Karen Hoguet has emphasized the importance of digital growth in an era of evolving customer shopping habits: “We are benefiting from new releases on our mobile apps and other technology improvements that are driving increases in conversion. Our investments are focused on removing points of friction, and our Net Promoter Score has improved on our digital business two points year over year. For example, we’ve been able to auto-provision our customers’ wallets to make it easier to use coupons and other promotional offers. We’ve also improved navigation to make it easier and faster to shop.”
Omnichannel as the Answer to Declining Foot Traffic
Nordstrom also recognized the need to adapt to a rapidly changing retail landscape in order to meet consumer expectations and to stay profitable. The legacy retailer has seen e-commerce growth significantly impact its financial model, with expenses in technology, marketing and supply chain operations increasing faster than sales. In an attempt to keep up with shifting consumer expectations, Nordstrom is working to streamline its operating model and modernize its internal and external platforms.
Nordstrom co-president Blake Nordstrom articulates the current strategy: “To meet their evolving expectations, we are making digital enhancements to better serve customers no matter how they choose to shop with us. We have several initiatives underway that include new mobile features, improvements to our website, and enhanced selling tools … We view it together, both the stores and the online, as one business. And it’s, over time, becoming more and more merged, because the customer doesn’t view that as two different experiences.”
Urban Outfitters has even turned its attention to that same opportunity to merge the physical and the digital as part of an in-store experience recently, wrapping its bridal brand BHLDN into a Anthropologie outpost in Philadelphia. Urban Outfitters’s effort to create experiential retailing — something lost in a rote digital transaction or perhaps even offered more readily during a multi-channel online engagement than in an ordinary trip to your local department store — has a significant test case, further pushing the company’s boundaries when it comes to omnichannel engagement.
Increased Mobility in the Digital World
The changing nature of the retail sector demands a new approach to winning loyal customers, as shoppers of all ages are browsing, researching and ultimately purchasing more consumer goods on their devices than ever before. There are approximately 241 million mobile phone users in the United States, and about 177 million of them used their phones to directly engage in shopping in 2016.
U.S. mobile commerce sales are estimated to be about $123.3 billion this year alone, up 39 percent from 2015, according to eMarketer. By 2020, mobile commerce is expected to account for 45 percent of all online sales, amounting to worldwide sales totals of $284 billion. These figures indicate a major change in buyer habits, as mobile devices continue to provide higher-resolution screens and ever-increasing functional integration. As Forbes points out, “2016 will be a year when a larger portion of the general public becomes comfortable paying with their mobile phones rather than their credit cards.”
Social Media Is Integral to E-Commerce
According to IAB, more than 60 percent of mobile buyers in North America discover products through social media platforms, with 68 percent of retail e-commerce traffic coming from Facebook and 12 percent from Instagram in the first half of 2016. MediaKix figures indicate that millennials account for more than 70 percent of Snapchat’s 150 million users, and Snapchat reaches 11 percent of the online population in the United States.
Facebook continues to lead the field in social media. This year, according to eMarketer, 162 million people in the United States will log onto Facebook at least once a month, and for the first time, more than half of the entire U.S. population are now users of the platform.
As consumers increasingly engage with brands online via social channels, your company will find it essential to maintain an active presence on several platforms. If you seek to resonate with younger audience segments, you’ll stay connected with them via Instagram, Facebook and Snapchat. These channels provide you with a way to convey your brand aesthetic while engaging your potential customers in a two-way conversation.
Meanwhile, you’ll be having these conversations on a wide array of mobile devices, as consumers expect to be able to stay connected with your brand. Watching the way in which Urban Outfitters and other retailers are adapting to the new social e-commerce landscape can provide you with a roadmap for your own marketing innovations. Creating a relevant, thoughtful presence across the social platforms used by your key audience will have a significant impact on your company’s bottom line in seasons to come.