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Retail’s Future

Sept. 10, 2012 – Northern Nevada Business Weekly:

Urban Outfitters new Internet fulfillment center in Stead is expected to help the company double its revenue steam from online shopping, and at the heart of the facility is a materials handling system that cost almost as much as the 462,000-square-foot building and surrounding land.

Urban Outfitters unveiled its $55 million Internet fulfillment center last Thursday in front of a host of business leaders, economic development officials, Reno and Sparks city government leaders and dignitaries such as Gov. Brian Sandoval and Sen. Dean Heller. The facility built by United Construction currently employs 70, a number that’s expected to grow to 120 during holiday season.

Urban Outfitters engaged VanDerLande Industries of Holland to construct one of the most high-tech materials handling systems in northern Nevada. VanDerLande began working on the $25 million system in March. It was the company’s first foray into materials handling in the U.S. since 2001. The company routinely constructs baggage-handling systems in the United States, says Stephen Smith, director of project execution.

VanDerLande began testing the system in mid July, says Project Manager Rick Bruce. The materials handling system can dispatch about 4,300 parcels each hour, and it can sort 9,000 individual items each hour. A package can be picked and packaged for shipping in as little as 18 minutes of travel time, and with expedited shipping an order can be on a truck about two hours after a customer places on online order. Urban can ship about 25,000 parcels each shift.

All told, the materials handling system at Urban Outfitters includes:

• three miles of conveyor system

• eleven miles of walkable pick face for item storage

• about 600,000 nuts and bolts

• more than 50 miles of electrical cabling

The compacted time frame also presented a significant challenge for construction crews, Smith says.

“To go from March to being fully realized in September was quite an aggressive program,” he says.

VanDerLande won the job through its work with Urban Outfitters’ facilities in the United Kingdom, says Ken McKinney, executive director of logistics for Urban Outfitters. VanDerLande was a dark horse in the selection process, McKinney says, but the company won over Urban executives with its recommendations for the new facility.

Currently, about 20,000 SKUs are handled at the site, but that number could grow as high as 150,000 individual products, McKinney says. Urban Outfitters entered the Reno-Sparks market in 1998 and used Bender Warehouse Group to distribute orders to 15 locations. The company added its own 214,500-square-foot retail distribution facility on Echo Drive in Stead in 2005 that currently services 137 retail outlets. It expects to expand the footprint of the new building on Moya Boulevard to 895,000 square feet as its Internet presence grows over the next five years, says founder Dick Hayne.

Urban Outfitters has more than 500 facilities worldwide, including retail storefronts and distribution and fulfillment centers.

“The Internet business is now roughly 20 percent,” McKinney says. “We are thinking that 50 percent is not an unreasonable expectation. Eventually we are going to cap our store growth, so the Internet becomes the next vehicle to generate revenue. No matter how you slice it, this facility (in Stead) will be 30 percent of our volume of our Internet business.”

Urban’s Internet fulfillment center in South Carolina currently handles 70 percent of online orders placed with the company. However, Urban expects to add another East Coast facility to provide one-day service to clients along the upper Atlantic seaboard. The fulfillment center in Stead is ideally positioned to provide speed-to-market for orders placed by West Coast customers, McKinney says. The two Internet fulfillment centers allow Urban to reach 80 percent of its customers with two-day ground service, and 12 percent with one-day service. With the one site in South Carolina, Hayne says, those numbers were just 40 percent for two-day service and 2 percent for one day service.

“Those are significant numbers,” he says.

Urban Outfitter’s new building won Silver Certification from the U.S. Green Building Council’s Leadership in Energy and Environmental Design program. Building the project combined the efforts of United Construction and Dermody Properties. United broke ground on the project in May of 2011 and had the shell erected by December.

“The schedule was aggressive, but the schedule was met,” says United President and Chief Executive Officer Craig Willcut.

Roughly 90 percent of the subcontractors on the job were from northern Nevada. At peak employment, 210 construction workers were employed at the site, Willcut says.

Read the full article from the Northern Nevada Business Weekly.

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