Urban Outfitters acknowledges its struggles in catering to Generation Z. It aims to achieve a transformation similar to Abercrombie's.
During their latest financial discussion, the corporation acknowledged its inability to connect with the demographic that made it popular – young people. Now, Urban Outfitters is aiming for a comeback, aiming to emulate the success of rivals such as Abercrombie & Fitch.
The company admitted to missing the rapid and significant transformations occurring between millennials and Gen Z during the global pandemic. Shea Jensen, Urban Outfitters Brand's president in North America, admitted that the company misplaced its focus on its clientele and misunderstood how to compete in the contemporary retail landscape.
As a consequence of this blunder, Jensen stated that the company was unable to capture Gen Z customers while losing millennials. Nevertheless, the company remains hopeful about its ambition to become the prime brand for young adults.
Urban Outfitters, which is part of a group that includes Anthropologie, Free People, and renting site Nuuly, experienced a 9.3% decrease in sales during the second quarter of 2024. Urban has become a problem area for the overall business, as the overall sales increased by 6% to a second-quarter record of $1.35 billion.
Simeon Siegel, managing director of equity research at BMO Capital Markets, stated, "It's the job of any business to know their consumer, and I think there are plenty of businesses that are still growing revenues."
As the Covid stimulus era comes to an end, "We're back to a winners and losers environment. We're back to market share," Siegel added.
In the fashion-conscious retail market catering to young people's fickle preferences, the competition is intense – especially for a retailer established in the 1970s. Urban Outfitters' pricing lies between fast fashion giants Shein and H&M, but it fails to reach the exclusivity-driven luxury category.
The company follows in the footsteps of companies like Abercrombie & Fitch and American Eagle, which have both seen sales surge while Urban Outfitters has struggled. Abercrombie & Fitch accomplished a remarkable brand revival, boosting its stock by more than 144% during the previous year. While Urban Outfitters may attempt a similar transformation, Abercrombie's approach differs significantly.
Northwestern University marketing professor Jacqueline Babb mentioned to CNN that while Urban Outfitters only reconsiders its customer base, a retailer such as Abercrombie overhauled its core values and principles, adapting to its customers' evolving preferences as they matured.
Urban Outfitters, on the other hand, has retained its youthful image without effectively marketing to high school and college students of today. Despite this, Urban Outfitters has an advantage over Abercrombie: it is not burdened by Abercrombie's history of race and sex discrimination lawsuits and a damning documentary on Netflix.
Urban Outfitters' plan for revival
The company outlined five key areas for its brand revitalization, emphasizing understanding its target customer and catering to their preferences.
"The Gen Z consumer is significantly different than the Millennial generation before them: from size, ethnicity, tastes and occasions, to how they view and interact with the world," Jensen stated during the August earnings call. Jensen also added that the company has fortified its leadership team and introduced new products.
The brand initially targeted an "aspirational 22-year-old customer living in major metropolitan cities," but now it aims to tap into a broader audience: suburban teenagers, college students, and post-college young adults.
"We welcome and want to serve today’s population of young customers, across more prices and sizes, more categories and occasions, and across more aesthetics and sensibilities," Jensen said, hinting at a move beyond an exclusive, grungy aesthetic.
And while "US malls are filled with dying department stores," Urban Outfitters declared that the in-store experience remains crucial to Gen Z – but alterations are necessary, such as closing underperforming stores, relocating others to be nearer to its target customers, and resizing some brick-and-mortar locations.
Visibly, changes have already begun online. College students have long complained about Urban's pricey streetwear, but the website now prominently displays many of its staples with a "New Lower Price" label.
A banner on the homepage stated, "We were a lot," along with an individual holding an "I'm sorry" sign. "We’re lowering prices on over a hundred of your favorite styles."
However, Gen Z has a discerning eye – and on social media, some have pointed out that the actual prices have not decreased. But Urban Outfitters may simply be presenting the impression of lower prices.
"Half of the job of a retailer is marketing," Siegel said.
Urban Outfitters did not respond to a request for comment on its pricing strategy.
Urban Outfitters recognizes the need to adapt its business strategy to better connect with its younger demographic, as the company's sales decreased during a specific quarter while its competitors saw growth. Siegel emphasizes the importance of understanding and serving one's customer base, suggesting Urban Outfitters may be falling short in this area.
In its plan for revival, Urban Outfitters aims to understand and cater to the preferences of its target Gen Z customer, aiming to tap into a broader audience while keeping its youthful image. The company is making changes to its pricing strategy online, prominently displaying "New Lower Prices" on staple items, but some Gen Z consumers have noticed that the actual prices haven't decreased.
