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‘Get over it’: Primark resists move online despite pandemic shock

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As Covid-19 raged across Europe in 2020, Primark management could only see online rivals trying to supply locked-down customers with t-shirts, hoodies and pajamas. .

Discount Clothing Stores Faced With No Online Sales Channels fully closed We spend £100 million in cash every week.

The retail giant, which was projected to generate £1 billion in operating profit in the year to September 2020, ended up making less than a third of that.

But even the victims of the pandemic were less than convincing Primark Finally accepting online shopping

George Weston, chief executive of chain owner Associated British Foods, told the Financial Times that it’s a “good hypothesis” that Covid has changed the industry forever and sent shoppers online forever. said Primark’s market share has increased compared to before. The pandemic suggested that wasn’t right.

Weston was adamant, Primark said, “Now and then, boulevard retailer” And said that the evolution to a home delivery e-commerce business will never happen.

“At our price range and basket size [online] We don’t just take part of the margin, we take it all,” he said.

“Get over it,” is his blunt message to those who advise otherwise.

Still, surviving the sudden closure of 191 stores in the UK and hundreds in Europe was a challenge the business didn’t want to repeat.

“We grabbed a revolving credit facility, put it in my bank account, looked up the terms of private placement bonds, and told food companies to generate as much cash as possible,” Weston recalls.

As weeks of lockdown stretched into months, UK clothing retailers such as Marks and Spencer expanded their online offerings. Primark considered using marketplaces such as Zalando and Asos to sell, but quickly ruled them out.

“The only reason to do so would have been to clear out inventory to raise cash,” Weston said. “We knew we wouldn’t have to do that once stores started reopening.”

In some European markets, the company’s sales are still below pre-pandemic levels, often due to overall apparel market shrinkage and market share actually increasing in many countries. says Primark.

However, some believe that Primark’s online position is unsustainable in the long term.

A person who worked for a fashion chain noted that the UK and several other major markets are relatively mature and that key customers increasingly expect to be able to shop online.

“They can’t be the only retailers in the world [that] does not provide [ecommerce]said the man. Even low-price retailer Walmart in the United States was initially reluctant to trade online, but ultimately decided that it “needed to get into online trading and learn to make it work.”

Primark’s only concession to online sales so far has been Click & Collect Trial About 6% of total assets in 25 children’s clothing stores in parts of England.

The mini-trial was so popular that the company’s website crashed at launch, but it could be extended.

RBC analyst Richard Chamberlain said click-and-collect services that walk into stores have been tried by retailers such as Sports Direct and H&M, but the added sales have been less than transformative. He said it was more beneficial.

“It’s hard to see,” he said. [ecommerce] Other than diluting the margins”.

Selling online also poses risks to store assets. “Even though 20% of his sales have moved online, the cost base in stores hasn’t changed,” said a former Primark insider. “They don’t want that to happen.”

In contrast, Primark expects click and collect to encourage “top-up” shopping in stores, with customers receiving an additional £1 bangle or 90p hairbrush with their order.

International expansion of GM221206_22X Primark

The chain isn’t the only one avoiding online shopping. His Aldi and Lidl from the supermarket group are staying away from e-commerce. So-called ‘discounters’ such as B&M and Home Bargains in the UK and Action in Europe are also struggling financially.

Primark, like other discounters in all sectors, has seen opening new stores, often in new countries, as a way to generate more revenue.

“We tried [online shopping]said Matt Ankers, chief financial officer of Poland-based discount clothing retailer Pepco. “But customers want to shop in our stores, and our stores continue to be a key driver of our growth.” is open.

Similarly, Primark, founded in Dublin in 1969, plans to add Romania and Slovakia to the 14 countries it already operates in.

One of Primark's stores in Madrid
One of Primark’s stores in Madrid attracts a large crowd of shoppers © Marcos del Mazo/LightRocket/Getty Images

The fashion chain’s approach to international expansion is usually to start small and learn. In the United States, the first flag was planted in Boston, which has a strong Irish-American presence.

But when it soon became clear that the clothes were popular with Hispanic customers, they opened a store in Florida. Primark initially focused on suburban New York boroughs rather than its flagship store on Fifth Avenue in Manhattan.

This gradualist approach and refusal to follow peers online is underpinned by its ownership structure. AB Foods is majority-owned by the Weston family of conservative long-term shareholders.

“It’s really remarkable that some of the world’s most successful retailers come from small communities,” said Weston, looking up the names of Zara’s owners. Inditexhas grown from a remote outpost on Spain’s Galician coast to become the world’s largest fashion retailer.

“It gives you a kind of humility. You have to care about what other people want, not just sell what you have.”

A former Primark insider said management was “just left behind” by AB Foods’ senior team.

But Weston says:

For now, the expensive business of delivering clothing parcels to customers at home and processing returned items is set to remain in that “too hot” category.

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