Urban Outfitters spent much of its earnings conference call discussing its robust ecommerce performance in the fourth quarter and investments it is making to keep its leadership position in this area.
With online sales an increasing focus for both industry retailers and brands, I thought the information was worth sharing.
In Q4, Urban Outfitters direct sales account for 30% of total sales, its highest penetration to date, vs. 24% during the same quarter the previous year.
Direct sales rose 44% during the quarter and customer visits increased 26%.
Mobile sales boomed. For all of its store banners combined, more than 25 million mobile sessions took place during the quarter, leading to 100% growth in sales via smart phones and tablets.
Investments a key to success
The company made several investments in the beginning of the year that helped drive online sales.
Urban opened a new fulfillment center on the West Coast, and it can now fill orders from any domestic location in two days by ground. Two-day ground shipments were 43% of online sales vs. 13% during the same time last year.
Urban Outfitters’ goal in the next two years is to ship 80% of online sales with two-day shipping.
Also driving sales is its new inventory system that allows the company to fulfill orders from any domestic location, including stores. During the quarter, orders filled from stores that would have previously been cancelled because distribution centers were out of stock accounted for $12 million in sales.
At the beginning of the year, the company also invested in more product, creative execution, other technology and online marketing expertise.
In the area of product, for example, the company offers a lot of web exclusives, especially at its Urban Outfitters chain. In North America, the Urban Outfitters banner currently has about 16,000 styles online, up from 10,000 last year, the company said.
Unlike many competitors, Urban said its various store banners have the ability to charge more online than in stores. They see the business moving to more full-priced and higher priced merchandise in the future.
See Page 2 for how online sales for Zumiez, Tilly’s, PacSun and Abercrombie & Fitch compare to Urban Outfitters
How industry retailers compare to Urban Outfitters
While Urban Outfitters has not yet released its direct sales penetration for all of 2012, I did look up some comparative data for 2011.
In 2011, Urban’s direct operation accounted for 20.4% of sales.
Zumiez direct sales accounted for 7.3% of total sales in 2011, and its stated goal is to grow that to 10% over the next few years.
PacSun’s direct sales accounted for 6% of total sales in 2011.
Tilly’s direct sales accounted for 11% of total in 2011, and its goal is to grow to 15% of total sales.
Abercrombie & Fitch’s direct sales accounted for 13.3% of sales in 2011.
While Urban Outfitters is a market leader in this area, it is not alone in investing in ecommerce platforms. Nearly every large retailer has said it is also investing in omni-channel strategies.
However, because it is pretty far ahead of other brick-and-mortar retailers, Urban Outfitters said it benchmarks itself against pure online retailers.
Urban Outfitters will continue to make significant investments in its online operation, and believes that the technological disruption that is fundamentally changing how consumers shop is in its infancy.
Edward Yruma, a stock analyst with KeyBanc Capital Markets who follows large retailers, put it this way in a report about Urban:
“One of our secular themes in 2013 is the growing divergence in performance between those that are/can invest in multi-channel growth vs. those that do not/cannot. URBN’s systems investments, new DC, and integrated inventory put it in the camp of a long-term online winner.”
