Primark parent company ABF’s financial director John Bason told Retail Week this week that going online was still “not a priority” and Primark would be as relevant as ever to shoppers through its reopened bricks-and-mortar stores.

  • ABF finance director John Bason insists Primarks’s relevance “is that we’ve got the best prices around”
  • Miya Knights says Primark needs ecommerce to handle future trading shocks similar to Covid-19
  • Customers and investors will be asking why they cannot access Primark online, says Clive Black

Although online retail has grown, especially among young fashion shoppers, Bason pointed out that Primark ranked in a YouGov poll of millennial consumers’ top 10 brands and its market share growth over a long period showed the strength of its offer. He does not expect that to change as a result of not selling online. “Our relevance is that we’ve got the best prices around,” he maintains.

During the UK lockdown, the retailer promised to “come back with a bang” and when it reopens its doors on June 15 that pledge that will be fulfilled when it reopens all of its branches and a new store in Manchester’s Trafford Centre.

Even so, and while Primark has been active on social channels to engage consumers, is it a mistake for the retailer not to take the plunge and join its competitors online?

Bouncing back

Digital services specialist Eagle Eye’s head of industry insight Miya Knights believes Primark’s resistance to online may ultimately result in a missed opportunity, especially since the retailer could have used the time in lockdown to find a business model that worked for its low-price products. 

“Whether it’s right or wrong can only be answered if it can really weather its inability to trade by bouncing back as lockdown eases and returning to strong growth,” she says.

Primark social distancing

Analysts warn it is uncertain how long the novelty of reopened stores will last

“Although it might take an initial hit on markdowns, I would say the likelihood of a return to growth is strong, which could lead one to think Primark need never have to trade online.

“Long-term, though, I still question whether Primark could be 30% bigger than it is. The opportunity is there if it can crack the last-mile profitability conundrum of its high-volume, low-price model to trade online by using its store estate for micro-fulfilment and establishing strategic ecommerce technology and delivery partnerships.

“I would argue that it needs to if it’s to mitigate the risk of, and build in enough resilience to handle, another trading shock such as the impact of Covid-19 in future.”

IMRG strategy and insight director Andy Mulcahy agrees that while Primark may weather this storm, if the UK were to be hit with a second wave of the pandemic its stance may need to change.

He observes: “Primark will have done lots of financial modelling that will have shown that going online isn’t beneficial for them at this time.

“If you think about their model, though, it’s about getting loads of people into stores and then getting them to pick up extras – you go in there to get a T-shirt and come out with 10 items. This works for them and replicating that online may be perceived as difficult, especially if you add in returns and delivery charges.

“Now, it is possible that some of the variables in their tests are moving, but the fact that they are still not changing their decision must be based on the assumption that when stores reopen, the people will come flooding back and will be willing to queue for an hour or so.

“However, footfall has to be limited in stores, affecting spend per customer, and it’s uncertain how long the novelty [of reopened stores] will last.

“If the UK were to have a second wave, Primark may not be able to withstand the changes to these variables and may change their minds.”

Changing the DNA

With large queues forming outside Ikea stores on the first day of its reopening this week and similar scenes a few weeks ago at B&Q and Homebase, it seems certain that Primark will be greeted with the fanfare it desires on June 15.

However, the retail store is unlikely to return to how it was before any time soon, and while it may not have made sense economically in previous years, the new normal may require Primark to rethink its stance on online.

“I’d have thought the last three months would have definitely caused the Primark senior management to think about the online versus offline relationship,” says Shore Capital analyst Clive Black.

“Whether this is a one-off lockdown or whether it turns out to be more of an ebbing and flowing series of regional lockdowns would have a very big impact on their thinking.

Primark Netherlands

Primark’s bricks-and-mortar-only strategy is part of its DNA

“They are not stupid guys and they’ve thought about the online channel constantly in the last few years but, as a proposition under their own steam, they’ve never been able to make it work economically to the extent that the average price of a Primark good, the average basket size, just hasn’t led them to think it’s economically feasible. Overlay on top of that the returns ratio and it could very easily become a loss-making enterprise. They’ve been disciplined and rational in that sense.

“However, I do sense a growing case for them to be thinking about partnering with some other marketplace. They did pilot something on Asos a number of years ago, just to test the lay of the land. The online retail market has significantly moved on since then. I think the time has come when both customers and investors will be asking why they can’t access Primark online at all, particularly when there are other platforms out there.

“My central estimation is that in due course, I wouldn’t be surprised if there was some announcement from Primark that they are exploring partnerships with other people. It’d be too much to expect them to go the full hog and introduce Primark.com, but their absence online has come into stark relief as a deficiency and weakness in the business model, certainly in the last quarter.”

Primark’s bricks-and-mortar-only strategy is part of its DNA but as lockdown has plunged it into uncharted territory, surely it should be searching for new solutions to overcome barriers to an online proposition?

Knights maintains that “there has never been a better time for Primark to crack its last-mile profitability conundrum than while its stores have been closed”.

Online may not have been deemed necessary until now and if Bason is right it will weather this storm, but Primark may need to start thinking afresh if the impacts of the pandemic continue and its stores go dark once again.