Primark – A Lesson In How Not To Be Ready

Primark is owned by Associated British Foods plc (ABF) and operates in 10 European countries as well as in the United States. Results, based on a recent briefing by its Finance director (in advance of going into a quiet period prior to closing the books), are indicating a loss of sales momentum. Some of it can be attributed to closings of European stores due to the resurgence of COVID-19.

It is regrettable that to-date the company does not support digital sales, especially since those channels became more important during the pandemic and have great appeal to the young people who initially generated Primark’s high volume of sales. Without those shopping options, that volume is now lost. It is a lesson everyone should take to heart; it is necessary to allow customers to shop the way they want to shop. Make internet sales easily available, set up merchandise in stores to both accommodate foot traffic and make sure that the stores can fulfill e-commerce orders, and keep customer service a priority.

Primark has lost a whole year in sales momentum; the kids have grown and the stores have lost relationships. Primark, like other retailers, must find a way to keep in touch with its customers and must sense what shoppers want tomorrow not yesterday. A good example of how it should be done is to watch how Best Buy BBY changed its operations in order to be customer friendly; it updated store formats to give customer service aligned with current shopping routines.

The good news is that Mr. John Bason, ABF’s Finance Director, said “As we look ahead, digital has a critical role to play as part of Primark’s marketing mix. We are progressing the initial design and development for the new digital platform and recruitment of new talent to create a new digital capability within the business is underway. A new website will be launched in the next calendar year.”

Better late than never.

According to a new report by B of F and McKinsey & Co., e-commerce penetration in Europe rose from 16% of total sales in January 2021 to 29% in August 2021, the equivalent of six year’s growth, and experts are predicting this shift will continue. One must note that several countries have had multiple store closures due to the coronavirus during this time that redirected customer shopping online and other digital options. That created new shopping habits that will stick.

Primark indicated that third quarter same store sales were up +3% compared to the third quarter two years ago, however the fourth quarter is expected to be down -17%. Management said that the have seen a pick-up of sales as the quarter progressed. Despite the shortfall of sales, profit outlook for the full year was raised by management due to (1) a significant reduction in labor and store operating costs and (2) robust performance from food and sugar operations. The company is projecting operating margins will continue to benefit from lower store labor and operating costs.

Primark will open a store in the fashion district of Philadelphia on September 16. It is the fourth store to open in the U.S. this year. Overall, the company opened 15 stores in their current fiscal year. It is now operating 399 stores in 16.9 million square feet.

POST SCIRPT: It is regrettable that a major company ignored the changes in customer shopping behavior that have occurred over the past few years – changes that the pandemic accelerated. The internet is here to stay, and stores must adjust to the way customers now want to shop. It will require many adjustments; stores must adopt new strategies for their physical stores and how they are managed since store shopping will decrease. That will lead to fewer sales associates helping customers on the selling floor. Maybe they can be trained to have multiple functions that will help sales. And, just maybe, it will spur companies to create new ways to utilize their store spaces and offer new services to keep customers coming back.