Primark sales fall to zero due to lack of ecommerce wing
Clothing giant Primark has stated its sales have gone from £650 million each month to zero, as the coronavirus has forced it to close in Europe and the US. According to the Chief Executive of Associated British Foods, which owns Primark, without government furlough schemes, this would have seen many of Primark’s 68,000 European staff lose their jobs.
The benefits of digitalisation and the creation of omni-channel shopping experiences have been extolled in any number of reports in recent years. The convenience and reduced costs of buying online, as well as the proliferation of available digital shopping channels, mean that the online market has grown steadily across the world, accounting for more than 20% of total non-food consumer goods sales in the UK alone in recent years.
While the demand for ecommerce has seen many bricks-and-mortar retailers throwing themselves into digital sales lately, one brand which has notoriously bucked the trend is Primark. Since its launch in 1969, Dublin-headquartered Primark has made a name for itself as a keystone high-street player, but has done so with a limited online presence. The website Primark does have is meant purely for browsing items; to make a purchase, customers must make a pilgrimage to one of its physical stores – and despite this, 2019 saw the firm become the fastest-growing retailer operating in the US.
According to company executives, Primark’s business model does not lend itself well to e-commerce, with the retailer having tested out ecommerce practices as early as 2013, when it sold its products directly via British online fashion and cosmetic retailer ASOS' website. While that pilot was anticipated to flourish into a long-term partnership, it ended after 12 weeks, never to be revived. The pilot had exposed the fact that as Primark offers some of the lowest prices for clothing available, its profit margins are too meagre to face online retail, where it would have to absorb shipping and returns costs, or pass them onto the consumer.
While for the longest time, this did not seem to harm Primark, recent reports have confirmed the firm’s old-school model has not weathered the Covid-19 storm well. In late April, Primark announced it has gone from making £650 million in sales a month to nothing, as the coronavirus has forced it to close in Europe and the US. While Primark is evidently not the only high street brand to have been impacted by the current crisis, its refusal to entertain ecommerce has clearly exacerbated this situation then.
Many fashion retailers were at least able to rely on remote orders to continue flowing in, lessening the impact of the sudden absence of footfall in their stores. Primark owner Associated British Foods’ boss George Weston subsequently admitted to the BBC that without furlough support from European states, many of Primark's 68,000 staff would have been made redundant. Meanwhile the company has also written down the value of its clothing stock by £284 million.
According to Weston, however, the current crisis does not look likely to see Primark change tack. Associated British Foods is understood to be cash-rich, compared to many retailers, holding £801 million in cash and a £1.09 billion loan agreed – meaning it can afford to wait out the storm, and probably benefit from the collapse of some of its nearest rivals to boot.
Speaking on when stores may finally reopen, Weston added, "We must make our Primark stores safe for our staff and our customers, even if that means ensuring there are fewer people shopping at any one time and so accepting lower sales at least until the remaining risk is minimal. In time we can rebuild the profits. We can't replace the people we lose."
