Urban Outfitters goes big with new NYC store

Krystina Gustafson | CNBC

At Urban Outfitters' new Manhattan store, you can try on a sweater, sip on a latte and get you hair styled—all without stepping outside its walls.

The specialty retailer, known for its eclectic apparel and novelty items, on Saturday opened a 57,000-square-foot store in New York City, complete with a hair salon, coffee bar and record shop.

Urban Outfitters opens new lifestyle destination in Herald Square, New York.
Source: Urban Outfitters

It's the latest example of the shifting retail environment, in which malls and bricks-and-mortar stores are looking to reinvent themselves to ramp up their foot traffic, which has taken a dive since the advent on online shopping.

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"For a long time people were like, 'Oh, it's all about online, Brick and mortar is dead.' But no, I think you just have to do something more exciting for the customer," said John Hauser, chief officer of brand experience for the Urban Outfitters group.

Hauser said he began eyeing the Herald Square location, a stone's throw from Macy's flagship store, about three or four years ago. He initially wanted to rent out a portion of the space, but when the landlord only wanted to lease the space to a single tenant, Hauser developed the idea to blow out the store to about four times its average store footprint, making it the brand's largest location.

Postponing back-to-school shopping?
Postponing back-to-school shopping?

In addition to its traditional apparel and home offerings, the store ties in Los Angeles-based Amoeba Records shop, which sells more than 800 vinyl titles, and Tortoise & Blonde, an eyewear company with in-store "lensometer" that can scan a customer's glasses and read their prescription.

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It also features a bookshop—complete with seating for browsing titles—an instant photography shop that lets shoppers print their photos from Instagram, and its first full beauty outpost.

Joanne Podell, a vice chairman at commercial real estate firm Cushman & Wakefield, said the most important component to Urban's new store format is the coffee shop. That's because whenever a retailer adds in a food or beverage component, it encourages the customer to sit down and relax as they browse the store—meaning they're in no rush to leave.

Oxford Industries-owned Tommy Bahama said earlier this year that its stores with attached restaurants generate two-and-a-half-times more sales per square foot than those without them.

"You keep the customer longer, and what's better than that?" Podell said.

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Keeping the customer engaged is something the Urban Outfitters brand is aiming to improve. Although the company's Free People and Anthropologie units posted impressive same-store sales gains in the most recent quarter, of 25 percent and 8 percent, respectively, the company's namesake brand has lost traction among its younger shopper. For the same quarter, the Urban Outfitters brand saw comparable-store sales decline 12 percent.

In the company's earnings call, president and CEO Richard Hayne attributed the drop to the brand losing its fashion footing among its core 18- to 28-year-old shoppers.

"I... believe the stores and web look better than they did several months ago, but clearly, there is still much work to be done," he said.

In addition to the Urban Outfitters' new Herald Square location, it opened a store in Brooklyn earlier this year that includes a third-party rooftop bar.

"I think there's something to always making each [store ] fit the neighborhood," Hauser said. "But I think the idea of having a richer experience and a bigger experience is really cool, so if the customer responds to the ones we've done we'll probably keep doing them."

By CNBC's Krystina Gustafson