Market Challenges in China
The market is very challenging in China, as there are tons of companies who are competing for business on the market. This may be one reason that Urban Outfitters is waiting to see if their presence in China is going to be warranted. After all, if Chinese consumers are not interested in what is being offered, chances are the company will not see results.
The Chinese market has numerous companies that are looking to make it big within the commerce world of China. Not only are their local companies to compete with, but there are always foreign companies looking to expand into the Chinese market. For example, Ikea, Starbucks and Apple have made China into a successful market, but they take into consideration what the Chinese consumers are wanting, and then they provide this to the consumers.
Urban Outfitters does not truly understand the Chinese consumer behavior, a huge challenge in the market for the company. Consumers in China are looking for quality products, but consumers in China are also known for changing their minds frequently as to what is the hot product to have.
According to research, most domestic brands that are in china have a life cycle of 1.5 years
This is not an extremely long time, and Urban Outfitters may be feeling as though they would like to increase their chances of success on the market for longer than a year or two.
Another aspect that makes the market in China hard for a company to break through are the costs associated with producing the product in China or shipping the product to China. Most companies are able to get some type of special price for shipping products that they may need. However, this is not always the case. These are costs that a company has to take into consideration before they decide to head into the Chinese market.
Learn more about the agreement between the US and China with the E-Packet Deal.
Options in the United States
Urban Outfitters still has a few options in terms of expanding in the United States. For this reason, the company looks as though they will be staying put for the time being. Taking into consideration that Urban Outfitters is not one of the most cash intensive companies that are on the market, investing into China could mean the end of the company.
Urban Outfitters is worth about $300 million in cash and securities
On the other hand, taking what they have and working this into more stores throughout the United States could be the more successful choice for the company.
In 2014, Urban Outfitters only had 234 stores open
Most companies do not expand into foreign countries until they have a strong presence in their home market. At this point, Urban Outfitters simply does not have this presence. It is the smarter move to avoid investing into the Chinese market when the company is unsure of how to address the demands of the Chinese consumer, nor have the presence to dominate in both markets.