(789) Why Primark Is Thriving While Retailers Like Forever 21 Are Closing | WSJ The Economics Of
Overview of Primark's Business Model
Primark, a European fast fashion retailer, focuses exclusively on brick-and-mortar stores.
Despite the rise of e-commerce, Primark generated 9.5 billion in sales revenue last year without online sales.
E-commerce vs. Physical Retail
Primark's CEO emphasizes a clear decision to avoid e-commerce due to high costs and logistical challenges.
Online shopping leads to returns, which significantly cut into profit margins (e.g., returning $100 worth of products costs $26.50).
Primark believes e-commerce isn't financially viable for its business model.
Adaptation During the Pandemic
During the pandemic, Primark closed all UK stores and did not implement an online shopping option, which hindered revenue.
For many retailers, e-commerce served as a crucial lifeline during store closures.
Primark introduced a trial of Click and Collect, allowing customers to buy online and pick up in-store, minimizing logistics costs.
Customer Experience and Sales Strategy
Customers collecting online orders in-store are likely to make additional purchases due to ‘shopping momentum.’
Primark offers a wide range of products beyond clothing, appealing to customers like a department store.
Retail spaces are large to accommodate high sales volume but require significant foot traffic to be sustainable.
U.S. Expansion Challenges
Initial U.S. expansion was slow; Primark learned to adjust store sizes and locations for better foot traffic.
A smaller store size (35,000 square feet) was determined optimal for attracting customers in densely populated retail areas.
The company's cautious growth strategy allows for adjustments based on local market conditions.
Current Retail Trends
Post-COVID, in-store shopping is regaining popularity as e-commerce growth slows.
Primark's strategy resonates with consumers seeking the experience of physical shopping, aligning with market shifts.