Urban Outfitters Invests in West Coast Fulfillment, Online, Mobile

By Nicole Giannopoulos — November 27, 2012

Urban Outfitters recorded record results for Q3 ending October 31, 2012 with net sales up 14% to $693 million. During the quarter, the retailer also invested in technology systems, grew its online and mobile efforts and launched a new Anthropologie brand website.
In mid-September, the retailer opened its Reno West Coast fulfillment center. Operating for about two months, about 15% of the retailer's total online demand now comes from the West Coast, but the goal is to be around 30%. Over the next couple of months, the retailer will ramp up until volumes get closer to these 30% being fulfilled from the West Coast. The benefit is Urban Outfitter's ability to provide next-day delivery to its six westernmost states in a faster, more cost-effective way.
One learning area discovered was that the stores needed some additional payroll in order to handle the pick, pack and ship function. This had been underestimated that and the retailer has since caught up and added the payroll needed. There was also a bit of confusion at the initial launch that has been worked out due necessary organization within the store. There are also metrics that are used to determine where and when the pick, pack and ship will be accomplished, which has been tweaked as well.
Overall, the pick, pack and ship process has been improved in stores and each store is equipped with the supplies needed. Urban Outfitters sees this opportunity to be even more meaningful in the fourth quarter than it was in the third due to the holiday season.
"With the growth of mobile and online sales that can occur anywhere, including inside one of the stores, combined with the offer to customers to return products to any store or to the fulfillment center, the line between store sales and direct-to-consumer sales has become increasingly blurred," said Francis Conforti, chief financial and accounting officer for Urban Outfitters.
Total company marketing expense rose by 21%, compared to last year's third quarter. The result of reallocating and increasing the marketing budget was a 32% increase in total Web traffic, a 200% jump in sales coming from mobile devices, a 50% increase in sales coming from social media sites and a 36% growth in total direct-to-consumer sales.
The third quarter total Web-based marketing spend almost doubled on a year-over-year basis, while the marketing spend on catalog operations decreased by 3%. The creative execution of all the brands, catalogs and websites was improved, as was the in-store visual presentations. The Anthropologie brand also launched its website redesign on October 1, and customer response been positive, with conversion rate, average order value and sales growth all improving.
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