A Successful Retailer Without an Online Presence?
In today’s retail world where e-retailing and omnichannel seem to be the main drivers for revenue, how can a company such as Primark financially benefit from simply brick & mortar?
As Sears shuts down stores to stay afloat, UK-based Primark is taking advantage of some of these shuttered locations to expand into the US. An interesting retailer, Primark is similar to H&M and Zara’s, producing and selling low-priced, fashionable apparel. However, perhaps the big difference among the three is that Primark does not have an online presence, nor does it foresee having one anytime soon.
Yes. A retailer without an online presence and one that is still able to muster a 22% year-over-year increase in revenue.
In today’s retail world where e-retailing and omnichannel seem to be the main drivers for revenue, how can a company such as Primark financially benefit from simply brick & mortar? Well, for one thing, the company believes its strict control of its supply chain and limited marketing expense has attributed to its success.
Much like H&M and Zara, Primark responds quickly to changes in fashion tastes. With over 270 stores in primarily Western Europe, the company seems to be a tough negotiator with its 700 plus manufacturers based mostly in Asia.
The company’s quick response to fashion changes is quite impressive. About 10% of its fashion lines are changed out each week and it’s estimated that average stock turnover is about 6 times per season versus an average of 2 times for most US retailers. “Basic” garments are produced usually in Asia with a lead time of about 90 days while “fast fashion” has an average lead time of 8 weeks and are manufactured in Turkey or East Europe which allows Primark to respond quickly to demand for popular items.
Primark has 5 European warehouses – among which with locations in Germany, UK and Spain. DHL Supply Chain Solutions manages at least these three. Who will likely manage a US warehouse could very well be DHL Supply Chain Solutions or its subsidiary, Exel.
With plans to enter the US Northeast first with 10 planned US stores by 2016, Primark will continue with its current supply chain methods which will include sourcing clothing from traditional supplier markets of China, India, Bangladesh, Cambodia, Vietnam and Turkey. However, the company noted that it will make financial sense to establish suppliers from countries closer to the US such as Guatemala, Costa Rica and Mexico. This shift in thought will ultimately result in a rethink of its supply chain, a key to its current success. Perhaps a tricky situation but if done correctly, it can achieve success.
The other key to its success is limited marketing expense. It does little advertising and marketing and instead relies on word of mouth and ironically digital and social media.
So, a retailer without an online presence – a refreshing change and one that seems to follow its own drum beat – but, can it transport its European success and implement it successfully in the US home to such low-price providers as Amazon and Wal-Mart?