Few retailers have captured the attention of Gen Z quite like Urban Outfitters. While many other companies targeting a similar age demographic have gone out of business – such as TopShop, which closed all its stores in 2020 – Urban Outfitters (UO) is still going strong.
This success is partly due to the company’s embrace of e-commerce, which has been rising for many years. E-commerce’s share of retail sales revenue has increased from 14.4% in 2015 to over 18%.
Back when I worked in retail, I was shocked to see how many high street shops had to close each year because they didn’t have a website where they could sell products online. There wasn’t enough footfall to sustain a business based on physical stores alone.
However, digitization isn’t the only thing that has allowed UO to get ahead. The brand began as a hub for college-age customers, offering a retail experience that allowed them to be creative and hang out. Today, that sense of freedom and face-to-face experience is still crucial.
There are many factors at play in the evolution of the retail industry. In this Urban Outfitters competitors analysis, I will look closely at what they are and which other brands pose the biggest threat.
The Bottom Line Up Front
Urban Outfitters operates in the highly competitive fast fashion industry, which experts predict will reach a value of $133 billion by 2026. There is a lot of money at stake, and rivals like Zara have the added benefit of being part of the world’s largest retailer, Inditex Group.
Nevertheless, UO’s market cap of $1.99 billion proves that it is one of the leading companies in the industry, and it has seen positive growth in sales following the pandemic. I’ve spent many years consulting firms on sustainability, so if I had to point out one area of weakness UO should focus on improving, that would be it.
List of Urban Outfitters’ Main Competitors
Urban Outfitters Business Strategy
Urban Outfitters, Inc. (URBN) is a multinational retail corporation founded in 1970 with headquarters in Philadelphia, Pennsylvania. It began as a unique retail experience for college-age customers and quickly expanded; today, there are more than 200 UO stores in the US, Europe, and Canada.
UO typically sells a mix of men’s and women’s clothes, accessories, and home products, all chosen to reflect cultural understanding and creativity. Most products are designed and manufactured by the company’s wholesale division, working on numerous private labels. This structure is known as a production revenue model.
Several other well-known brands are, in fact, subsidiaries of UO; URBN has an extensive portfolio, including Anthropologie and Free People.
One of UO’s biggest strengths is its ability to please its target demographic. In 2011, it partnered with Austrian entrepreneur Florian Kaps to sell limited editions of the Polaroid One600 instant cameras and Type 779 instant film, which he had acquired the rights to manufacture.
These instant cameras appealed to college-age customers because of their retro, vintage quality. In many ways, UO was ahead of the curve with this decision; a few years later, the market for retro cameras was booming as more young people caught on to the trend.
In 2013, UO hired a lobbying firm called Abraham & Roetzel, led by a former US Senator, to advocate on its behalf in Washington regarding policy in the retail industry.
Since Urban Outfitters is a fast fashion brand, it has faced criticism regarding its business’s environmental and social impact. The challenges in this industry are ever-present and growing each year as more people become conscious of the problems it poses.
UO has sought to diversify its portfolio with several strategic acquisitions in response to these challenges. One such acquisition was of the Vetri Family group of restaurants, based in Philadelphia, for an undisclosed sum in 2015. This acquisition was a significant tactical move given the uncertain future of fast fashion and the rapidly growing hospitality industry.
UO’s athleisure line is one of its most potent, achieving 138% year-over-year growth in 2021, which is unsurprising in the wake of the pandemic. Working from home is now more standard, and formal attire isn’t needed as much, but it does prove the importance of keeping up with new and emerging trends in the retail industry.
Likewise, digital sales grew by 150% in 2021, and the company’s global net sales were worth around $4.25 billion. Digital is likely to become one of the most critical channels for UO in the future.
Urban Outfitters Competitors Analysis
Urban Outfitters faces competition from companies like Zara and GAP in the retail industry.
Zara is a fast fashion retailer founded in 1975 in Galicia, Spain. It sells clothing for men and women, accessories, perfume, and shoes, all designed and curated to reinforce the brand’s classy, stylish image.
Zara has a higher price point than some of its rivals, like H&M and Uniqlo. It is part of the world’s largest retailer, Inditex Group, which owns brands like Pull&Bear and Massimo Dutti.
There are 547 Zara stores in Spain alone and over 3,000 in 88 countries worldwide, including China, the UK, the US, Russia, and France, making Zara one of the most prolific retail brands today.
Zara’s business strategy is all about balance. On the one hand, the company wants to offer more available products than its rivals; on the other hand, it has to maintain its carefully curated image as a high-class fashion brand through digital marketing.
There is an element of exclusivity woven into Zara’s overall brand identity, and it’s this that sets it apart from other typical fast fashion companies like Missguided. It sells stylish clothes for fashion-forward individuals who aren’t willing to sacrifice quality for a lower price tag.
However, despite Zara’s unique approach to the industry, it still actively participates in fast fashion – a practice that results in more than 92 million tonnes of waste annually. As a result, ethical fashion activists have criticized Zara, leading to negative publicity.
Zara opts for a production revenue model, manufacturing and selling its products in-store and online. These products are updated very quickly to keep up with the latest trends.
In 2021, Zara achieved the highest net sales of any company in the Inditex Group – just under 20 billion euros – resulting in a brand value of 13.2 billion and a market share of 11% in the global apparel industry.
Mango is a close competitor of Zara because it is another Spanish clothing company founded in 1984 in Barcelona. It uses a production revenue model and is the second-largest textile exporter in the country.
Unlike Urban Outfitters, Mango operates primarily through franchising, which forms a large part of its plans for international expansion. So far, it has over 1,200 stores in 91 countries globally.
Mango used to sell garments it had produced exclusively, but the company recently announced a new strategy to add complementary brands like Rituals cosmetics into its stores. Doing so will allow Mango and Rituals to benefit from each other’s existing customer base.
In an interview with Fashion Network, the Global Head of UO’s parent company recently explained how competitive it is for brands that are neither budget (Primark) nor luxury (Gucci) but somewhere in between. Therefore, the decision to stock other labels in its stores may push Mango ahead of the competition.
Like most fast fashion companies, Mango has come under fire from activists who have accused it of using greenwashing tactics to appear more ethical than it is.
Crucially, rather than ignoring these claims or apologizing, Mango has taken action in numerous ways. For example, the Science Based Targets Initiative (SBTI) has approved its emissions reduction targets, proving they are both credible and achievable.
Mango’s sales increased by 21.3% in 2021 to $2.5 billion, and its annual profit hit 67 million euros, three times more than before the Covid-19 pandemic.
Hennes & Mauritz AB, also known as H&M Group or simply H&M, is a Swedish multinational clothing company. It was founded in 1947, and its headquarters are in Stockholm, Sweden.
It operates in over 75 markets globally, making and selling clothes for women, men, teenagers, and children. There are over 4,800 H&M stores worldwide.
There are links between Zara and H&M because Hennes & Mauritz AB is the international retailer behind Inditex; even so, the two brands are in fierce competition, and there are some critical differences between them.
Unlike Zara, which designs and manufactures its clothes, H&M outsources its production to under 1,000 independent suppliers, mainly in Europe and Asia. However, this doesn’t mean it has been able to avoid accusations of unethical business practices. On the contrary, 2018 research revealed that many people making clothes for H&M live in poverty.
Similarly, a report that came out in 2021 targeted H&M, in particular, for making misleading claims about its green credentials, which were non-existent. This practice is known as “greenwashing.” It is a problem in many industries, though more so in fast fashion.
While Mango’s sales skyrocketed during and immediately following the global pandemic, the reverse is true for H&M. In 2017, its sales were $27,696 million; this figure dropped to just $22,043 in 2021. In the first six months of 2018, H&M’s stock price plummeted, dropping an astounding 40%.
Whether or not H&M will fully recover is a contentious question. Online sales grew by 30% in 2021, but this reflects a global trend rather than the success of a specific company strategy.
H&M Executives recently announced a multichannel strategy to double sales by 2030, cutting the company’s carbon footprint in half. As such, it looks like there is still hope for H&M, but whether or not this hope will materialize into profit remains to be seen.
Uniqlo was founded as a textiles manufacturer in Japan in 1949; today, it is a well-known retail brand with over 2,000 stores in 25 markets. Like Urban Outfitters, Uniqlo is a fast fashion company, but it has a different style approach than most of its competitors.
I like to think of Uniqlo as the corporate embodiment of our evolving attitude to clothes in the post-pandemic world. By this, I mean that, instead of following new trends and worrying about style, Uniqlo sells casual, functional garments.
The company’s mission is to “inspire the world to dress casual,” and affordability is a crucial part of its business strategy. Uniqlo caters to customers across the economic spectrum, including those on lower incomes, which makes it a more accessible brand.
Another core part of Uniqlo’s strategy is the customer experience; it invests large sums of money in employee training and development to ensure excellence. In 2000, it even built Uniqlo University in Tokyo, where it trains thousands of store managers yearly.
The University reflects the visionary leadership of Uniqlo’s CEO, Tadashi Yanai, who came 54th on Harvard Business Review’s list of the highest performing CEOs in 2019.
Uniqlo has also tapped into the immense power of influencer marketing by acquiring six global ambassadors, including famous sportspeople like Swiss tennis champion Roger Federer.
In FY21, Uniqlo’s e-commerce sales increased by 20%, and it reported a total revenue increase of 10% to 930.1 billion yen.
The Gap Inc., known simply as Gap, is a clothing and accessories retailer founded in 1969 with headquarters in San Francisco, California. The company went public in 1969 with an initial offering of 1.2 million shares at $18 each.
Gap’s business strategy is to provide inclusive, affordable clothes to a broad range of consumers across the globe using a production revenue model. It has over 2,835 stores worldwide and is the largest speciality retailer in America. However, it has fewer stores than H&M and Inditex Group globally.
There are six primary divisions that Gap operates: Banana Republic, Intermix, Gap, Old Navy, Athleta, and Janie and Jack. By focusing on different divisions, Gap can reach more demographics with targeted products and advertising.
Affordability is central to Gap’s business strategy – it forms a significant part of the company’s mission and identity. Believe it or not, it hasn’t always been that way.
Millard Drexler, who led the company in the 1990s, tried to give it an upmarket identity by changing its inventory. Naturally, this approach was doomed to fail.
Gap removed Drexler after almost 20 years because he played a central role in overexpanding the company and causing a sales slump that lasted multiple years.
By returning to its original mission – to create a retail experience that fits all – Gap was able to get back on track until the global pandemic hit.
In 2020, the company announced it would be closing 225 stores, and a year later, it closed all UK stores.
However, there have been some positives for Gap, too. The same year it closed stores, it announced a collaboration with Yeezy, a brand by Kanye West. Through this, Gap earned $34.9 million in impact value. This route is one Gap should pursue in the future to ensure maximum brand awareness.
Gap made $16.7 billion in revenue in 2021.
Urban Outfitters SWOT Analysis
This SWOT analysis explores Urban Outfitters’ strengths, weaknesses, opportunities, and threats.
- Reliable and extensive distribution network
- Excellent go-to-market strategies for new products
- Strong brand portfolio
- Widespread brand recognition and established reputation
- A reasonably low-cost structure helps keep consumer prices down
- High-quality products compared to some rivals
- Successful partnerships such as with Florian Kaps have helped to boost revenue
- Strategic acquisitions have allowed UO to grow its portfolio
- Government lobbying power, thanks to Abraham and Roetzel
- Loyal customers
- Extensive social media presence and following
- Over-reliance on third-party brands
- Supply chain issues in 2020
- Logistics are expensive compared to competitors
- In-store sales slowed due to the pandemic
- Criticisms have been raised due to fast fashion practices
- The company has faced numerous controversies
- Target a broader demographic by introducing new products, such as a kidswear range
- Take advantage of the rise of e-commerce
- Branch into more international markets
- Greater innovation and new technology could help improve the customer experience
- Collaborations with famous people such as music artists could bring in more customers
- Consumer tastes change very quickly, and UO has a distinct style
- UO must compete with extremely successful multinational brands
- Decreasing popularity of physical stores
- Increased bargaining power of suppliers
- Changing regulations on international trade
- The rising cost of fuel has caused an increase in the price of distribution and logistics
Urban Outfitters Competitors Analysis FAQs
Question: Who is Urban Outfitters’ biggest competitor?
Answer: Based on revenue, Uniqlo (930.1 billion yen) and the Inditex Group (27.7 billion euros) are two of UO’s biggest competitors. However, all of the companies included in this article are powerful players in the retail industry.
Question: What makes Urban Outfitters unique?
Answer: Urban Outfitters has a clear sense of identity, making it appealing to the Millennial market. It maintains an online presence that is relatable and approachable, and its clothes are trendy without trying too hard. UO has achieved this by fusing the eccentric and the unconventional, an approach that sets it apart from rivals.
Question: How does Urban Outfitters promote its products?
Answer: UO uses various mobile applications, websites, social media campaigns, email campaigns, and catalogs. Its primary strategy focuses on digital marketing.
Urban Outfitters has achieved what many retail companies dream of; it has created a unique brand identity with popular and affordable clothes.
There have been struggles along the way – there always are in the fast fashion industry – but with a market cap of $1.99 billion, the future is looking bright for UO, mainly due to its strategic acquisition of the Vetri Family group. This acquisition will ensure that, even if consumer tastes move away from UO’s retail lines, it has another stable source of income.
Despite challenges during the global pandemic, 2021 was a largely positive year for the company, and it looks like this trend may continue in the coming years.
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