Urban Outfitters Bares All

We venture inside the secretive $3.4 billion empire as it reaches a crucial crossroad.

Get a compelling long read and must-have lifestyle tips in your inbox every Sunday morning — great with coffee!

America’s original naval shipyard is in Philadelphia, at the southern tip of the city, where the Schuylkill River meets the Delaware — 900 acres that were once a literal island, a teardrop of land floating at the bottom of the city like a dot on an exclamation point. Even after construction crews filled the back channel to glue the dot to the mainland, the Navy Yard remained an island in spirit and function, a city unto itself. Warships were built there. At the yard’s peak during the Second World War, nearly 60,000 craftspeople and laborers jammed together each day to make cruisers, destroyers, battleships and aircraft carriers for the U.S. Navy, toiling in a waterfront cluster of hot, noisy, cavernous brick buildings, some of which were painted dull gray and shielded to prevent leaking light from revealing their location to enemy bombers. Sixteen percent of the employees were women, including hundreds of “girl welders” who climbed the towering scaffolds of the skeletal ships and manipulated steel with hacksaws and torches. Wrote one supervisor in 1943, “The dirt blackens their faces and eats into their pores; the fumes choke their throats and smart their eyes, but the girls can take it and they do.”

The old buildings still stand today, and there are still thousands of workers inside. But the pits where crews once bent steam pipes have been converted to koi ponds. A stone Buddha keeps watch over the fish. Dogs snooze on pillows beneath the desks of women — more women than men now.

The Navy Yard has been transformed by one of Philadelphia’s largest and most iconic companies, Urban Outfitters, Inc., the retailer that started here in 1970 with a single store and is now a $3.4 billion global empire, a family of lifestyle brands that ring the world. There’s the eponymous Urban Outfitters, which markets clothes and vinyl and rebellion to men and women ages 18 to 28. (To avoid confusion between the overall company, Urban Outfitters, Inc., and Urban Outfitters the brand, I’ll use “URBN” to mean the company — URBN being its stock-ticker symbol and also the four giant black letters blazoned on the side of its recently completed distribution center for online orders that sprawls across 1.1 million square feet in the town of Gap, in Pennsylvania Dutch country.) The brand known as Anthropologie offers a mix of fashion and housewares to adventurous women ages 28 to 45. Free People sells bohemian clothes for younger women; Terrain sells garden planters and outdoor furniture and a $2,498 steel fire pit it describes as a “rustic cauldron.”

URBN generated more than $3.4 billion in sales last year across more than 500 stores, plus online and wholesale. The company’s products are some of our widest-reaching cultural exports, and by any measure, URBN is one of Philly’s great business success stories. Most of the decisions on product mix, store footprint, visual identity and business strategy have been made in this city, by artists and marketers and executives who are either from the region or were lured from other places, including fashion capitals like New York and L.A. Before there was a tech scene here, before designers and coders packed co-working spaces and musicians built studios in Fishtown, URBN brought creative talent to Philly.

Yet there’s also a distance between the company and its hometown. It’s not Comcast, which puts its name on everything and is ingrained in our civic life and also in the public imagination of what it means to be a Philly company. URBN doesn’t advertise like that. In fact, it has never liked to talk about itself in the broad sense. Five or six years ago, this story couldn’t have existed. But the company has stumbled recently into a seemingly endless series of PR disasters — blasted on social media and in the press for selling a string of offensive products, for being “a company that is bad for women and members of the gay community” (according to Mic, a news site for millennials), and for allegedly violating the trademarks of a sovereign Native American nation.

Within URBN, the damage has led to “some soul-searching moments about how the world changes,” says Oona McCullough, director of investor relations. “The flow of information is so fast that if you as a company don’t own your story, somebody will tell it for you.” So when I reached out and asked to interview URBN’s leaders, who rarely speak outside of quarterly conference calls, and to see the creative nerve centers at the Navy Yard that are closed to the public, I was asking at the first moment in the company’s history that it needed to say yes.

•

THE FIRST THING you notice is the dogs. Richard Hayne, founder, CEO and chairman of the board, is a dog lover. Of URBN’s 24,000 global employees, 2,100 are at the Navy Yard, and about 350 of them bring their dogs to work. “That’s one of those miniature Australian shepherds,” David Ziel, URBN’s chief development officer, observed one morning in June as a small fine-haired dog sprinted across a patch of grass to catch a tennis ball thrown by a young employee in a red shirt and shorts. The grass looked new and lush. “I had my seventh sod replacement this year because there’s so many dogs,” Ziel said.

A former Nike development manager in his 40s, Ziel wore a lime-green shirt, khaki shorts and sandals. He manages this campus and oversees build-outs for new stores. He stood on a path between two red brick buildings, about 200 yards from the banks of the Delaware, along with McCullough, a former financial analyst in a denim dress. They were about to lead me on a tour inside URBN’s campus. It was a cloudless sunny day. On a grid of intersecting walkways, young women in rompers and filmy tops and t-shirt dresses crisscrossed men in polos and jeans. It felt like college.

The company is here, and the campus looks the way it does, because of Richard Hayne. People at URBN call him Dick. At this point, his origin story has been fairly well told despite his almost total lack of interest in telling it. There was once a man with an anthropology degree from Lehigh University, long hair, and an obsession with the JFK assassination. He liked liberal causes and was married to a peace activist, Judy Wicks. In 1970, with a $5,000 investment, the couple opened a shop near the Penn campus — the Free People’s Store, full of offbeat clothes, vinyl-record listening stations and plants. When they divorced soon after, Dick kept the store, later renaming it Urban Outfitters and expanding into new cities, hoping to attract a kind of customer he would call “the upscale homeless” — a young person with “a slight degree of angst.” He remarried, and his wife, Margaret Hayne, is now URBN’s chief creative officer across all brands and also president of Free People. They have two children and live in Chestnut Hill. Dick Hayne’s estimated net worth is $1.3 billion. And over the years, his political views changed. The lefty who used to travel across the country with the Zapruder film supports Republicans now.

The company made it clear that if this story was primarily about Dick Hayne, it wouldn’t participate. Beyond a brief email from Margaret introducing some of her colleagues, I didn’t have any contact with her, either. Unlike CEOs who become public mascots for their companies, Dick Hayne would prefer not to have a public image at all, a quirk that dovetails with his beliefs about business strategy in a way that shapes the structure and culture of URBN at a molecular level. “The model a lot of companies use is a very pyramidal model which sort of designates that all creativity, all wisdom flows from the top,” he told the Inquirer in 2008. “We think that’s the absolute wrong model.” Hayne wanted each brand to have a distinct voice, so he encouraged them to function like autonomous companies. They have their own leaders, their own PR reps. One URBN person used the phrase “states’ rights” in describing the model to me.

The balkanization of the brands got to be too much even for Hayne, which is partly why URBN began moving to the Navy Yard in 2006, renovating six decrepit warship facilities with the help of historical tax credits and $115 million of its own funds. (The campus now includes nine buildings.) Until then, the company’s offices were spread across multiple buildings in Center City. According to David Ziel, Hayne wanted to bring employees together to create a “singular corporate culture” while also designing a new compound cool enough to convince potential hires to move to Philly.

I followed Ziel and McCullough into a renovated single-story manufacturing building known as Building 543, the largest on campus and partially open to the public. Past the entrance, a high wall to the left glittered with oversize blue and green beads, and beyond it, a huge open corridor bustled with a coffee shop and people eating on tree stumps next to the koi ponds with the Buddha statue. Ziel pointed out the central heating and cooling plant for the campus, a neat lattice of meticulously painted pipes behind tall panes of glass. Instead of hiding the machinery, the company turned it into an aesthetic element. “Dick and I designed this almost from an inspiration of a microbrewery,” Ziel said, “to make it look pretty.”

Even modest objects in Building 543 seem to contain seeds of enormous corporate ambition. On the far end of the building is an URBN-owned cafeteria simply called 543. “Dick wanted to create a brand,” Ziel told me. “And he said, ‘Dave, learn food.’ So Dave learned food.” Apart from the view out the window — a ship so large and near that it looks fake, like a hologram — there’s nothing obviously significant happening here. It’s a cafeteria. But URBN is entering the food business. Last November it bought the Vetri Family group, the restaurants of acclaimed Philly chef Marc Vetri, in what Fortune called “one of the more unusual acquisition stories of 2015.” Wall Street and the financial press were skeptical at first, but URBN saw it as a natural move, a nod to both shifting customer desires and the brutal reality of retail in a world where you can buy almost anything online and Amazon increasingly shapes the market. (Internet and catalog sales now account for more than 30 percent of URBN’s total revenue.) It’s not enough anymore for a store to be a mere repository of stuff; a store has to provide an experience. And customers today spend more than they used to on dining out, so it makes sense to lure them with food. Three months ago URBN opened a Pizzeria Vetri in D.C., and in October the company will add a Pizzeria Vetri with a bar and lounge at the King of Prussia mall.

Seen in this light, the cafeteria at the Navy Yard is a testing ground, a place to experiment with a concept before it goes national. Other parts of the campus have played a similar role. Anthropologie has begun to open megastores that run to 30,000 square feet, and the prototype was developed inside another building here.

Next, we toured Building 18, Anthropologie’s 56,000-square-foot headquarters. It’s an absurdly majestic building of a prior era that feels like it couldn’t be built today because the masons who knew how to build it are dead. You enter beneath an ornate statue of an eagle. Inside, two vast perpendicular hallways meet at a place called “The Cross.” A skylight drenches the workspaces with sun, so employees sit beneath blue, yellow and orange parasols, life-size versions of the little umbrella in a tropical drink.

The other brand buildings at the Navy Yard have their own vibes. Urban Outfitters employees work surrounded by steel columns that have been blasted to partly remove layers of old primer, then lacquered over to preserve a decayed look. Free People’s building resembles a Free People store, decorated with vases shrouded with knitted tapestries of ethnic inspiration. In all the buildings I toured, there were signs of people making things with their hands — sewing machines and bolts of fabric and dyeing chemicals and a thousand bursts of color and pattern pinned to whiteboards and walls. For a certain kind of entrepreneurial person, URBN shines like a beacon in an industry that’s famous for burying entry-level employees with menial tasks. Ana Hartl, senior director of creative for Free People, remembers that when she first joined URBN in 2002, she thought, “Oh my God, I can draw? I can sew? I’m allowed to do this here?” She said, “I get this comment all the time — oh my God, this is what I imagined fashion to be like.”

If employees perform at URBN, they can rise quickly, even if they’re very young. “The people who were there loved it and saw something special in it,” said Lora Pietrangelo, who used to work for Anthropologie as a buyer. Within her first weeks, she was in meetings with the creative director of a billion-dollar brand.

The flip side is that the job can be brutal. Several former employees described an environment of long hours, intense pressures and threadbare support — a ruthless world behind the serene exterior of koi ponds and parasols. “It was very much like baptism by fire,” explained Pietrangelo, who left the company in 2009; she now owns a lifestyle specialty shop in Swarthmore. “You’re thrown in, and you either sink or you swim. The attitude was kind of like, if you don’t like it, there’s 10 people lined up who would love to have this job.”

I spoke to another URBN alum who looks back on her time at the Navy Yard with a mix of appreciation and morbid amazement: “Anyone who makes a product, their whole life is URBN.” It wasn’t unusual for her to work until 11 p.m. She worked weekends and missed her friends’ weddings. She lost a lot of weight. It was nice to have the option to bring her dog to work, but if she didn’t, she’d “be in trouble for animal abuse. Like, I’ve been here for 16 hours today, so what would I do? Get a dog sitter?”

Last October, Gawker published an email that was sent to URBN’s salaried employees asking them to volunteer at the company’s fulfillment center in Gap on the weekend, preparing packages for shipment: “Get your co-workers together for a team building activity!” URBN’s explanation for its unusual request: While working out the kinks of the new center, they got caught short-handed during one of the busiest months of the year and couldn’t hire hourly employees fast enough, so they appealed to the salaried folks to pitch in and learn about the e-commerce business. “There was a great sense of camaraderie,” a spokesperson told me. But the fact that the email was leaked suggests that some employees weren’t feeling it. When I asked the spokesperson about working conditions at the Navy Yard, he said, “There’s no getting around the fact that retail is a tough business and we need to hit the targets that we need to hit.”

•

THE PERSON I MOST enjoyed meeting at URBN was Sue Otto, chief global creative director for Urban Outfitters. Otto is in her late 50s. She has green eyes and straight jet-black hair, and she wears black every day, usually a black sweatshirt, black denim pants and black sneakers, because, she said, it makes life simpler when you don’t have to think about what to wear. A former teacher, she joined the company in 1981, working around 20 hours a week at the second Urban Outfitters location, in Cambridge, Massachusetts, and attending hardcore punk shows at night. On a visit to the Cambridge store that year, Dick Hayne recognized that she had a good eye and encouraged her to shape the store to her own taste: “I like to build things, and he goes, ‘You can build anything you want.’” She bought a bunch of old TVs and painted them black and white in static patterns. Customers loved it.

After that, Hayne recruited Otto to help open new stores in new cities. Since then she’s held a number of influential roles in Urban Outfitters, trying to understand the mind of the young customer, to capture “the new thing.” Today her job is to oversee the teams that define the creative voice of the Urban Outfitters brand: not the products, although she weighs in, but the look and feel and messaging of the store displays, and the framing of digital and social campaigns.

A major goal in the past few years has been “changing the way people think about us,” Otto told me. Leadership at Urban Outfitters has gone through a period of flux; between 2010 and 2015, three different men cycled in and out of the role of UO brand president. A woman, Trish Donnelly, currently holds that position, and recently Otto and a close colleague at UO, Joanna Ewing, who started with the company 14 years ago earning $8 an hour in the fitting room of an Urban Outfitters in New York and is now executive creative director of marketing and imagery across the brand, were essentially brought in to turn the ship around, to start repairing the image of the brand and the company in the wake of all those controversies. “I don’t know how much I’m allowed to say,” Otto said, then shot me an earnest, slightly pained look. She folded her arms and leaned forward. “Ask me about one.”

We were in her Navy Yard office, a small room in the UO building with a bare table in the center and a young female assistant at a Mac. A poster on the wall said “Drugs Roll & Sex Rock.” I tried to think of which controversy to choose. There have been so many — enough to fill listicles. “26 Times Urban Outfitters Failed So Hard It Just Failed” (BuzzFeed). “15 Urban Outfitters Controversies” (The Week). Among the headlines of critical stories on the feminist site Jezebel: “Urban Outfitters’ Not-So-Great ‘Depression’ Shirt Pulled From Stores”; “Urban Outfitters Offers ‘Vintage’ Blood-Splattered Kent State Shirt”; “Memo to Urban Outfitters: Offending Literally Everyone Is Bad Business.”

It’s possible to group the controversies into three distinct categories. One you might call Outrageous Product, involving items that seem to cross a clear line of sensitivity or taste, connected to the Urban Outfitters brand. Examples: the aforementioned sweatshirt that read KENT STATE UNIVERSITY, the site of a famous shooting, and had a reddish stain; a bottle of “Peach Shampoo for Suicidal Hair”; a Monopoly-knockoff board game called “Ghettopoly”; a yellow t-shirt with a six-pointed star sewn onto the left breast pocket that appeared similar to the Star of David used by the Nazis. (The Anti-Defamation League called the shirt “extremely distasteful and offensive.”)

Another category involves the perception that URBN is anti-gay, as an article republished by the Huffington Post said in 2013, including Urban Outfitters on a list of “7 Companies That Don’t Support Gay Rights.” The only source for these accusations is the past political giving of Dick Hayne. By mid-2003, he and his wife had donated $13,150 to then-Pennsylvania senator Rick Santorum, who that year compared homosexuality to incest and bestiality. At the time, Hayne didn’t say if he agreed or disagreed, telling Philadelphia Weekly, “Like many people, I have some affinity for Rick Santorum, and I have problems with some of his positions.”

A third category of potentially damaging allegations might be labeled Theft. Independent designers have posted pictures of URBN products that look nearly identical to their own designs (a handbag that says ESCAPE; a line of necklaces shaped like the U.S. states); they may not have the money or legal firepower to sue, but with social media they can take their case directly to the public. And URBN is now defending a major trademark suit brought in 2012 by the Navajo Nation, a sovereign Native American tribe of about 300,000 in the Southwest. The suit mainly concerns mass-produced items sold by URBN with the words “Navajo” and “Navaho” in the names, including “Navajo Nations Crew Pullover,” “Navajo Print Fabric Wrapped Flask” and “Navajo Hipster Panty.” (The products were later pulled.) The Nation’s attorneys accused URBN of infringing on its trademarks, confusing customers, and threatening the livelihoods of actual Navajo artisans.

When Sue Otto asked me to name a controversy, the first one that came to mind was in the territory of Outrageous Product — the “Jewish star” shirt. Otto responded instantly: “It was not that” — not a Star of David, she said. Urban Outfitters sourced the shirt from a Scandinavian company, and the star was that company’s logo. “It had been on all those garments for a long time. In no way it was intended” as a Star of David.

We moved on to the Kent State sweatshirt. A vintage item, Otto said, a one-off. “The girl who bought it, her family lives there, Kent State.” The shirt happened to have a splotch of maroon from the fluffy underlayer visible through a hole in the pinkish-gray fabric. “People were like, how did you not see it? There were like 100 of ’em” — vintage school-logo clothes. “And nobody was reading every single school. Obviously when someone said, ‘This is what it looks like to me,’ we’re like, well, we’re going to take it off the site.” Otto shook her head gently. “No one would hurt anybody.”

While defensive on some of the details, Otto seemed mortified about Outrageous Product in the broader sense. “There are some people who worked here who were stupid. I mean, I’d love to think that everybody had some conspiratorial thought. People go, did you do that for marketing? And I’m like, it was just an error … a buyer just simply made a mistake, or someone used a word someone shouldn’t have used.”

When we moved on to the gay issue, the reaction was totally different. Here, I only sensed woundedness, bewilderment. This is probably the controversy that has caused the most damage to URBN — for a youth-oriented company in 2016 to be seen as anti-gay is demographically catastrophic — and it’s also the one that has stung employees the most. “Dick isn’t homophobic,” Sue Otto told me. “There’s lots of gay married couples at our company. It just isn’t fair. And I think it really sucks for them. They get a huge lack of respect [from the public].” During an interview with a different executive, when I asked about the anti-gay perception, she paused for a second, set her jaw, and then began to speak with emotion. “I’m gay,” she said. “Within my community, every barbecue that I will ever go to here [in Philly], people ask me why I work here.” She said the company has always been “amazingly welcoming” to gay people. “Ensuring that we represent [LGBT] employees and customers is incredibly important to our brand,” the executive said. (She asked me not to name her because “I don’t want to be the gay spokesperson” for the company.) URBN has provided same-sex partner benefits for more than a decade. The former CEO, Glen Senk, is openly gay, and his partner worked at URBN, too. There’s no evidence of anti-gay attitudes at the company.

The diversity picture gets murkier when you start to broaden out to gender and people of color. All the creative leaders I met — people in charge of large teams — were women; still, for years URBN has fought efforts by a group of shareholders to diversify the board of directors, which contained all men until 2013, when none other than Margaret Hayne was appointed. Since then, another woman has joined the board. URBN doesn’t publish the diversity breakdown of its employees, but nearly everyone I saw on my campus tour was white; skinny white models dominate its catalogs and store displays.

There’s a case to be made that URBN’s whiteness has made it more vulnerable and less nimble. Of all the questions I asked, the ones that made employees most uneasy involved URBN’s use of ethnic imagery and motifs in its clothes, which some critics call “cultural appropriation.” As Otto framed the issue, “How do you maintain authenticity and respect the artist and also respect other people’s points of view?” It’s obviously something they’re thinking about, but no one quite knows how to address it. The only unambiguous answers are written in URBN’s court filings in the Navajo Nation lawsuit, which is still being litigated. The company has denied all wrongdoing, arguing in legal documents that “navajo” is a generic term used across the fashion industry by many companies to describe “a type or category of design” and that URBN’s products are legal and justified under the doctrine of fair use. But the anxiety isn’t primarily about what a judge will think. It’s about what customers think. With some products, URBN is packaging and selling a kind of frictionless experience of the Other. If that starts to be uncool, it’s a problem.

Attached to the Navajo Nation court filings are internal URBN emails obtained in discovery. There’s nothing malicious in the emails, but there’s also not much evidence of concern beyond damage control — you get the sense of white people trying suddenly to grasp a critique they don’t understand, one that they hope will go away. In 2012, a man named Chad referenced asking a woman named Kate “for some direction about what we would call ethnic or native American or African-inspired prints.” Kate replied, “It’s always hard, because even if it isn’t offensive to us, it might be offensive to others. We just try to keep things as light as possible — basically nothing that will catch the watchful eye of a Jezebel editor!” Kate went on:

I would suggest delving deeper into the inspiration, or using more “generic” terms — Sun, Painted Rock, [Random Word] + Canyon, Vista, Valley — or locations, like Four Corners. Evoke a mood, but don’t draw on specific terminology that could be perceived as culturally insensitive … Ok, it was inspired by Native American art, Apache came to mind when looking at it … they lived on the Great Plains … Great Plains Fringe Earring. Evokes the vibe/trend but doesn’t rile anyone up over it … hopefully!

•

ONE OF THE CHALLENGES of working at URBN is that at some point, employees age out of the demographic they serve. “It gets a little tougher for people here when they’re 27 or 30,” said Sue Otto, speaking about her own brand, UO. They don’t naturally know what the new thing is, so they have to work harder to go find it. “I’m very happy being old,” Otto told me. “But I still have that same curiosity and excitement. And it never ends for me.” Lately she’s been trying to figure out the video-messaging app Snapchat, inspired partly by her 14-year-old daughter. “It’s not easy for an adult to do,” Otto said. “I can’t make it work. But that’s fun. I like it when it’s something that I just don’t get.”

Despite these efforts to keep an open mind, there are some shifts in the zeitgeist that baffle her. “Mass pop culture,” she told me. “More is better. It used to be if bands had millions of followers, you’re like, screw ’em, you’re done with ’em. You know? But now it’s like — who the hell doesn’t have millions of followers?” For a brand that lives and dies on its grasp of the counterculture, this raises the question of whether there’s any counterculture left to package and sell. But Otto has tried to roll with it. Some members of her team were recently afraid to present her with ideas for Justin Bieber t-shirts. “Everybody’s like, Sue, are you going to be okay with that? I’m like, yeah. Because it’s not 1995. What can you say? We get crap like, ‘You’re purveyors of hipster culture.’ And we’re like, ‘I don’t know, I guess?’ I mean, what is hipster culture? Were we more authentic when we had two stores and didn’t have any money? And we were selling shitty ladies’ Levi’s then? That wasn’t exactly non-corporate. So it’s hard to say what is real.”

I didn’t hear this as cynicism, but instead as an honest admission of uncertainty, humbleness before the mystery of the young. If anything, the brand is pivoting toward sincerity. UO’s Joanna Ewing described 2011 to 2013 as “the YOLO years”: You Only Live Once. “Kind of a depressing sentiment, if you think about it?” Ewing told me at the Navy Yard, wearing a happy-face pin on her red dress. Otto didn’t explicitly connect this optimistic stance with efforts to repair the brand’s image, but spoke about a decision to become “great advocates for equality. Knowing that we are conveying the values of our customer. That’s a really big deal for us.”

It will take a lot of dexterity for the brands of URBN to navigate the shifting landscape of retail and stay edgy (but not too edgy) in the era of social media. But the company’s leaders are trying to move with their customers. URBN has always functioned as a kind of ruthless creative vortex, recruiting bright young people and giving them power, aggregating ideas and fantasies and pieces of the culture to transform and curate and place into shelves and catalogs and websites. And now Otto’s customers are telling her they believe they can change the world, and she’s listening. “The idea of social consciousness and being involved is huge,” Otto told me. She sees it with her daughter, who reads online about animal rights and other issues and urges her mother to check out petitions on change.org and donate to the cause. Otto said, “I go, ‘I don’t know.’ My daughter goes, ‘Well, get on it.’”

Published as “Urban Myth?” in the September 2016 issue of Philadelphia magazine.