The Secret Behind The USA’s Fastest Growing Retail Chain
Primark, a low-cost European based clothing retailer, has defied the odds to become the USA’s fastest growing retail chain. US sales are up 103% year-over-year and 4% in the 40 weeks to June 22 (and have kept rising since then).
Primark’s growth continues despite competitors like H&M and Zara, both of which have missed earnings expectations earlier this year. Primark also seems to be unaffected by threats facing the fast fashion industry such as the second-hand clothing market. Furthermore, Primark is opening stores in an economy where retailers are struggling - Macy’s, Abercrombie & Fitch, and GAP are amongst retailers shutting down stores. The brand even seems to have survived dormant British high streets.
So will Primark’s US expansion be successful? Or will it’s fate be that of other British retailers, most notably Tesco and Marks & Spencer, who were unable to survive in the US market?
Despite the odds, it seems that Primark will continue to grow in the US. Primark is able to differentiate itself by providing significantly cheaper prices than competitors. And everything the company does is aligned with this goal.
Firstly, Primark doesn’t sell online. That seems like bad business sense in the world of Boohoo and ASOS, but it helps to keep costs down. In 2013, Primark tried selling products on ASOS for 12 weeks, but found that e-commerce wasn’t in line with its business objectives. The company didn’t want to take on shipping and return costs, and passing costs onto the customer would lessen its edge against competitors. The tradeoff is that Primark is only able to reach a small fraction of Americans; despite this apparent disadvantage, the company outperforms competitors where it can physically reach customers. Primark invests in its stores to provide a better experience for these customers. For example, stores tend to be large and offer unparalleled choice. It is the kind of place you could spend hours in. The strategy is simple: target fewer customers but serve them well and keep them coming back for more.
Secondly, Primark relies on bulk buying. The huge baskets found everywhere in the store are a testament to this. Since its products are significantly cheaper and more diversified than the rest of the market, the company hopes that customers will be tempted to buy more. Primark tries to create a shopping experience to facilitate this. If you are a teenager (as many of the customers are), you go with your friends, have fun trying out clothes and end up buying a lot more than you intended to because the clothes are cheap. Not hugely different from the appeal of the second-hand clothing industry.
It seems that Primark’s entire business model revolves around keeping price low. Strategic moves like shunning the internet and encouraging bulk buying are evidence of this. And it seems to be working; Primark’s US arm is on track to break even next year.
The secret behind Primark’s success? Being cheaper than everyone else. And it is willing to go against the flow to do that.
Written by Sonakshi Dua, Edited by Devaansh Mahtani & Alexander Fleiss