High Street retailer Primark seems to be thriving, despite its refusal to invest in an online platform. But can it last?
At a time when high street retailers such as John Lewis and Marks and Spencer may be consistently delivering new innovative experiences to serve the omnichannel shopper, budget clothing retailer Primark is refusing to stray from the traditional bricks and mortar model.
Rather than invest in an ecommerce platform for its discount-savvy customers, the retailer is instead displaying an insatiable appetite for newer and bigger stores. In the last year alone it’s opened 15 new shops, including a second brand on Oxford Street, with a focus on expanding into France going forward.
And its unique strategy certainly seems to be paying off. The bargain clothing store last week reported a 24% increase in sales as it reached £2bn in the six months to the beginning of March, contributing to a 10% rise in group sales to £6.3bn for its parent company Associated British Foods (ABF).
As reported in the Guardian, ABF's chief executive, George Weston, explained: “Our stores have actually been too small and future stores will generally be bigger than they were before” and added that the retailer would definitely not launch a website, calling on customers instead to “keep toddling down to Oxford Street.”
“It is enough for us to have great fashion, in good locations at the right price. That simply works for us. We don't have a problem that needs fixing,” he added.
But why exactly is the retailer pursuing this strategy? Catriona Campbell, director of customer experience consultancy Seren, believes Primark may consider its price point difference as being unsuitable for ecommerce.
“However, in our user experience research in ecommerce over the last few years, consumers have proven time and again that they are willing to pay to have items posted. Customers, given the option of a clearly priced fulfilment option, are happy to pay for this service,” she says.
So is Primark right to take this approach or is it setting itself up to join the list of British retailers that have failed to cater for the modern consumer and gone to the wall as a result?
Tom Laband, MD of Sevenval UK, believes that if Primark misses this opportunity to deliver an ‘everywhere’ commerce strategy, other retailers will take its place. He says: “We’re living in a time when offline retailers increasingly have to close shops, overall trading volume shifts massively to purely digital delivery and brands are being forced to give their customers more purchasing channels to choose from. “
Manish Madhvani, co-founder of GP Bullhound, also points to the recent closure of high street stores, such as HMV and Jessops, as examples of retailers failing to adopt an early multichannel approach, leaving more nimble competitors to take the market share.
She says: “Consumers are becoming increasingly demanding of retailers and regard multichannel commerce as the norm. Traditional high retailers are expected to provide store, web and mobile commerce through a connected and seamless experience.
“High street giants need to invest substantial amounts in delivering this joined up experience and the spoils are substantial for those who get it right – John Lewis announced online sales of £1bn yesterday along with a £40m investment in their ecommerce platform.”
However, Heikki Haldre, CEO and founder of Fits.me, believes that some business models win more or stand to lose more from their online strategy.
But while Primark has an "enviable business model and results", Haldre believes that the store will still be unable to ignore online for long.
"In my opinion, Primark must move online. Its prices are so low that it is among the very few retailers that do not have to worry about costly returns. For a customer, returning an item is simply more of a hassle than to bear the cost of keeping it. Online, when optimised out of the warehouse, will have tenfold higher per-square-foot sales figure compared to any of Primark’s stores. It has cultivated itself a loyal following among all segments of customers – 14% of Primark’s customers are those of the “A-class” – the same who would shop at Harrods.
"As with all online stores, this helps Primark extend its store opening hours to 24/7, tap into an existing base of customers who would unhesitatingly buy online, and reach the customers who live a long distance from its existing stores. Look at it this way – if Primark has plans to open another 15 stores this year one should be online – it’s equal to a multitude of stores.”
A winning formula?
But not everyone believes that the retailer’s decision to have no online businesses will be its downfall.
Paul Maher, MD of Positive Marketing, says: “Apart from the fact it may not want to draw attention to itself after the Bangladeshi debacle, this makes sense. It can be hideously expensive to modifying IT, especially CRM systems to deal with online and mobile customer experiences. Integrating delivery logistics and returns strip away profits and what used to be affordable fast fashion starts to look a lot everything else. Well done Primark for sticking to its knitting.”
And Raman Seghal from Ramarketing, suggests that as a result of its action, Primark is indirectly saving the high street: “Very few brands on the high street have the power to adopt such a strategy. However, Primark as a the 'destination brand', is one that can.
“It's a missed opportunity for the business to clean-up online as well as offline but this decision will hugely benefit other retailers on UK high streets. As long as Primark adopts this strategy, people will have a reason to go out onto the High Street.”
A convincing argument? Primark's results certainly seem to support this. But Haldre is adamant.
“Primark’s announcement that it will remain offline is a strategy that cannot endure for long," he insists. "It is clear that the future of shopping belongs to online. Those retailers that hope that online does not affect their business models will lose out, while those which embrace the internet will be the winners. This applies to internet newcomers like Benetton, or those who have decided to wait – like Primark."
What do you think? Is Primark right to refuse customers an ecommerce platform or will its failure to embrace the multichannel customer result in another failed retailer?