Urban Research: 50 stores a year pace, 20% plus sales growth

Urban Research used to be a standard select shop, but has begun to diversify into the premium brand business, providing opportunities for overseas brands, and into mass market SPA retailing. It has seen sales rise from just ¥3 billion in 2001 to an expected ¥35 billion in FY2013 and is projecting an increase of 20% to ¥43 billion this year.

Fashion retailer Urban Research plans to continue its store growth rate of 50 plus stores a year. Last financial year (ending January), it opened 50 stores but will open up 60 this year, bringing the total to 210. It will add more stores to existing brands at the same time as increasing differentiation between the various Urban Research banners, and also accelerate expansion for its new brands. Tax increase not withstanding, it expects sales to grow around 20% again this year after a 25% jump in FY2013 to ¥35 billion – Urban Research says it doesn’t see the tax hike having much impact on its formula of lifestyle business.

This Spring alone it will open 22 stores across 10 brands including important Urban Research Store flagships in Omotesando Hills and Kichijoji. Both stores will have a higher ratio of imported fashion labels than is typical in suburban SCs, and will act as a testbed for conversion of other stores to a more traditional select shop format. Urban Research Doors is also being repositioned, shifting to a lifestyle merchandise profile mixing homeware and accessories, including a new line of store branded groceries called Doors Groceries. Having rolled out the Doors chain in major cities – two more opened in Tokyo in late March – it is now targeting young families in regional cities. Rosso Urban Research is moving further upmarket, again with more imported brands, selling designer labels like 3.1 Phillip Lim, Golden Goose and Chloe, and has a new own brand of shoes and accessories called Rodesko with reasonable prices of ¥10,000 and up for bags and ¥13,000 for shoes.

One of the key sources of growth, and a major focus of investment, will be the new mass market chain, Sense of Place, expected to become the third major chain alongside Urban Research Store and Urban Research Doors. Sense of Place is an entirely new business with distinct planning departments, supply chains and separate branding. Unlike Urban Research’s other chains, which are based on the select shop format, Sense of Place is a mass market chain with prices of ¥1,500 for tops, ¥4,000-¥9,000 for bottoms and dresses, and ¥6,000-¥12,000 for shoes.

Much of the product development is handled outside the company, with help from trading companies, while leading UK designer and founder of the Tomato design group, Simon Taylor, manages design direction – he also created the initial brand concept.

Urban Research plans a network of large format Sense of Place stores in the centres of major cities over the next 18 months before rolling out smaller stores to suburban SCs. By the end of this Spring, Sense of Place will have 15 stores and this Autumn it will open a 900 sqm store in Nagoya and another of 500 sqm in Shinsaibashi. Next Spring a 1,000 sqm flagship store will open in Meiji Dori in Harajuku.

There is one more potential source of growth: a new foreign franchise business. Urban Research recently signed US store Freeman’s Sporting Life and Denmark’s By Malene Bilger in a tie up with Yagi Tsusho. Although progress has been slow compared to expansion of the domestic chains, Urban Research says it has now established a better understanding of cross border operations and communication, and expects to start solid expansion for both chains this year. In addition to stores, e-commerce accounted for ¥7 billion (20% of total sales) last year, and rose 40% on the year. It continues to work on O2O marketing such as widening use of the smartphone app UR-Style that includes staff photo blogs of outfits and recommended items, as well as regular coupon offers which activate when entering a store.

To cope with all this expansion, Urban Research set up a new distribution centre in Osaka in January to handle 70% of merchandise.