Primark has said it wants to have an online presence but the economics of trading online would currently make it impossible for the fashion retailer to trade profitably.
Supply chain director Martin White has issued a rallying cry to the logistics industry to help it tweak the business model and make it work for the retailer. White said: “We would be dumb as a business if we weren’t looking at online.”
White said the “whole model has to be challenged” before the value fashion retailer could trade profitably online.
The profitability of online retail in low margin categories, such as grocery, has been questioned since the advent of etail, with high distribution and return costs making it unviable unless the scale of the operation is large.
Speaking at the Metapack Delivery Conference last week, White said Primark is looking at trading online but has no timescale to follow. “We know the market is out there but [at the moment] it’s a very easy way to lose a lot of money very quickly.
“If we start online now we won’t be able to control it. We’d go from zero to 80 million units in the first year. How do you get that large scale right from the off?”
He asked logistics and delivery companies to devise new methods to bring goods to market. He warned European value retailers and suppliers are also chasing the same solution and that the UK retail industry will need to work hard to ensure it gets there first. “We will crack it but we need the industry to help,” he said.
White added the business’ performance is strong enough for its lack of online presence not to be a problem for now, but in the long term online trading would be necessary. He said: “At the moment we have got strong growth through bricks and mortar and through international and that’s our focus right now.”
White said Primark has come under pressure from consumer groups which often question why Primark isn’t online. He said of online competitor Asos, whose boss Nick Robertson was on the same panel at the conference: “I’m fed up with customer groups saying Asos this and Asos that. We know where we have to be but I’m doing it on margins that are probably half of his.”
Primark last month reported an “outstanding” first quarter sales performance, generating a 25% surge in turnover in the 16 weeks to January 5.