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Urban Outfitters: Risky Business

Glen Senk asserts there’s no ‘playing it safe’ at Urban Outfitters.

Appeared In
Special Issue
WWD/DNR CEO Summit issue 11/11/2008

In periods of economic uncertainty, many chief executive officers cleave to convention, seeking to avoid risk and rely on the tried and true.

This story first appeared in the November 11, 2008 issue of WWD.  Subscribe Today.

For Glen Senk, ceo of the $2 billion Urban Outfitters Inc., that constitutes a recipe for disaster.

“Creativity is the foundation of our company,” Senk said. “Playing it safe is probably the most unsafe thing you can do. Change and change alone is the only thing that’s eternal. I live  in a continual state of terror that the other shoe’s about to drop. In order to be a good merchant and run a retail business, you have to live like that. There is no sense of discovery when you’re comfortable. It’s often the things that we fear in organizations that are the primary sources of creativity.”

Senk sees continued demand for Urban Outfitters, Anthropologie and Free People, despite the economic crisis, even though consumers are shopping selectively. “Women shop to feel good,” he said. “They shop to look beautiful.”

Anthropologie’s success comes from its ability to entice shoppers of a broad age range. With a sweet spot in the 25- to 40-year-old demographic, the business caters to a wealthier customer,  who is slightly more immune to economic downturns.

A former Bloomingdale’s executive, Senk joined Anthropologie in 1994 when it was a single store in Wayne, Pa., with sales of less than $2 million. Senk spoke of his time at Bloomingdale’s under the tutelage of former chairman Marvin Traub as a time of creativity and personal growth. He recalled the elaborate events staged by the retailer, comparing them to Broadway openings. He was appointed ceo of Urban Outfitters Inc. in May 2007.

Urban has delivered strong results this year. Sales for the third quarter ended Oct. 31 rose 26 percent to $478 million, from $379 million in the same period last year, and same-store sales advanced 10 percent. Earnings shot up 79 percent and same-store sales rose 13 percent in  the second quarter ended July 31. Urban’s earnings jumped 45 percent and same-store sales increased 10 percent in the fi rst quarter ended April 30. The company operates 140 Urban Outfitters stores, 118 Anthropologie units and 27 Free People locations. Retail analysts have said the company could eventually have 750 stores in the U.S. With less than 400 units for the  three concepts, Urban still has a long way to go.

Six months ago, Senk said he couldn’t have imagined the current state of the economy. But there were rumblings of trouble in the retailing industry long before the downturn. “We were already in the midst of our own crisis before this economic upheaval began,” he said. “A crisis of too much retail development, too many stores, too little differentiation and not enough talent. I have concerns about malls and lifestyle centers. There are some very sick patients out there.”

Urban is experimenting with new concepts such as its own mini-mall, Space 1520, a  26,000-square-foot building in West Hollywood. Space 1520 may bear some similarities to The Lab, in Costa Mesa, Calif., which bills itself as the antimall with its collection of trendy shops, eateries and art galleries. At Space 1520, Urban Outfitters will occupy 11,000 square feet and act as the landlord to other retailers it selects. Food, entertainment, beauty and art are complementary businesses being considered. “Space 1520 is very experiential and tied to culture, commerce and community,” Senk said.

Senk spoke about Urban Outfitters’ employees as if they are a breed apart. He sees hiring as part skill, part art and part science, and has a checklist of attributes that includes intelligence, sensitivity, empathy, curiosity, creativity, passion and honesty.

Although Urban celebrates individual achievement, it values teamwork and the collaborative spirit even more. “I want people who appreciate the strength in others,” he said. “Our company has never been about creating hero products, nor is it about the marquee designer or the marquee merchant. It’s about putting the needs of the organization first and committing to the belief that a collective and shared vision is superior to an individual effort. It’s not about any single person. It’s about the group.”

Some of the company’s most important employees are the sales associates who interact with the customers, providing feedback to headquarters about what women love and what they aren’t responding to.

The company’s success has been its ability to create unique shopping experiences for the flagship Urban Outfitters, Anthropologie and Free People. There’s also Terrain, the newest retail concept, a high-end garden center. Senk explained that Terrain grew out of founder Richard Hayne’s frustration with shopping for plants and garden supplies at Home Depot and local mom-and-pop shops. The company’s other brands were born in the same organic way. Urban Outfitters was founded by Hayne when he was still in college. His wife, Meg, developed Free People and Senk said evidence of his own hand can be found all over Anthropologie.

“It’s critical to avoid a dogmatic view,” Senk said. “We tend to see things through the industry’s eyes and that’s bad. You need to see things through your customers’ eyes. Of course, we compete with Nordstrom and Banana Republic on a garment-for-garment basis, but that’s not who we’re [really] competing with. We’re competing with the restaurants, with travel destinations, with spas and hotels. Those are our customers’ reference points. You have  to get out of your comfort zone and look at your business through your customers’ eyes. Creativity requires that you let go of uncertainties and embrace calculated risks.”

Senk cited Anthropologie’s new Leifsdottir collection as a risk that has paid off. The ambitious collection is rife with interesting details. The company developed more than 100 prints for the line and every garment has unique buttons and different labels. Leifsdottir is sold at Bergdorf Goodman, Bloomingdale’s, Neiman Marcus and Nordstrom, and select items are available in Anthropologie stores.

To encourage creativity, Senk teaches his staff “to fear last year’s best-selling product. Nothing is more boring than last year’s bestseller. You have  to create security around failure.”

One of Senk’s recent initiatives has been building a team to launch Anthropologie in Europe. It will be similar to its profile in the U.S., where the sweet spot is thirtysomething shoppers who lean more toward young contemporary than misses’. Anthropologie is a known quantity in Europe, Senk said.

“The world is a much smaller place today than 10 years ago, when Urban first opened,” he said.  “We started shipping internationally at the end of last year and we’re doing well. We have a lot of European traffic in our American stores. The English as a culture are a very curious people. They read a lot and want to know what’s new.”

Senk hopes to eventually cross-pollinate Anthropologie’s U.S. and European teams. “The word ‘anthropology’ means the study of people and cultures, so being international really plays into what Anthropologie is about,” he said.

Richly layered and nuanced brands are the goal at Urban.

“Don’t get me wrong, we use a lot of analytics in our company, but we are not ruled by them,” he said. “I’d even go so far as to say we believe complexity enriches our business and efficiency detracts from it. Customers appreciate complexity. Who wants to have the same monotone experience that nine gazillion other people have. We all want to be treated as individuals, and in order to accomplish that, you have to have complexity in an organization.”

Senk said he’s been tempted at times to save money by producing a garment more inexpensively or making a cheaper shopping bag, but when he considers the effect on customers, Senk always decides to keep things as they are.

“We talk about exceeding the customer’s expectations,” he said. “That’s who we work for. When you’re really clear that the customer comes first, every decision is easy. In the 15 years that I’ve served this organization, I’ve never been asked to meet a goal for a quarter. We don’t spend a lot of time talking about financial results. It’s easy to fall into a trap of efficiency of leverage. At Urban, this isn’t where we look to save money. If you focus on the customer, your profits will come in spades. Our sales per square foot across all three brands — Urban, Anthropologie and Free People — exclusive of Terrain — was $800 [in 2008]. We get productivity, and margins, by the way, when we take care of the customer.”