Breaking Down Primark's eCommerce Strategy

Primark is a British high street staple, famous for fast fashion at super affordable prices. From apparel to childrenswear to homeware to even makeup, there is something for everyone in Primark. It’s safe to say Primark is a hugely important British retail powerhouse: they have a 92% brand awareness ranking in the UK behind only Argos and Marks & Spencer by 1%, and they have 439 stores across Europe, with 184 in Great Britain alone.

However, what has always been notable about Primark is their resistance to eCommerce. During the boom of ASOS and eCommerce in general, Primark were bricks and mortar only. Even during the pandemic and store closures, when everyone else was scrambling to go online, Primark did not cave.

So it was big news in 2022, when they launched their eCom store. Was this finally the launch that would send British eCommerce into a tailspin? With Primark's strong grasp on the British consumer psyche and their incredibly affordable prices, would they completely disrupt the online marketplace and potentially even cause an environmental hazard?

Not quite.

It was announced that they would only launch click-and-collect in 25 stores, and this was only for childrenswear and accompanying children's departments. Not a nationwide rollout, not a womenswear rollout (their biggest portion of the business) and, most crucially, no home delivery.

This was not eCommerce that we're accustomed to. We're used to next day delivery! We're used to online having the biggest catalogue of products! We're used to getting it delivered to our front step! Instead, it appeared that Primark's eCommerce model did not prioritise customer convenience, which is what eCommerce is meant to do.

You would think that, with all other eCom stores scrambling to improve their online shopping experience, Primark should be losing out with their in-store pickup model. Not quite. Primark gradually rolled out to more stores, and womenswear was included in the mix, and in April 2023, it was announced that menswear, home and lifestyle would be included in their eCommerce offering, and click-and-collect would be available in all 184 stores by the end of 2025. So clearly it was a project worth pursuing, and a success as well; otherwise, the expansion would not have taken place.

So the question is, when all other retailers were scrambling to get online, why did Primark resist?

Firstly, we need to look at Primark's business model.

The Primark Business Model

Low value, high volume

We do not mean low value in a disparaging way; rather, it is an honest assessment of Primark prices: you can get a dress from £16, and T-shirts can start as low as £5. Therefore, to turn a substantial profit, they need to sell high volume. That's why their stores are packed with clothes, not just in terms of styles but in terms of sheer quantity. Stacks and stacks of the same design, all in different sizes. This is because they need the high volume, and every time a member of staff has to run to the back to find the right size, that's precious time lost.

The prioritisation of physical

If you've ever stepped into a Primark, you know it's like its own little world. They are often huge stores with multiple floors, with large areas for each department and gender. This is by design: their average store size is around 40,000 sq ft, with Birmingham being their biggest one at a whopping 120,000 sq ft over 5 floors. Again, because their prices are so low, they need the space to display as much stock as possible, to eradicate the need for staff to run to the stockroom to find particular sizes or styles. In addition, by their own admission, they do very little advertising, so by having huge stores and expanding their store estate, it effectively serves as its own marketing, as it raises brand awareness and recognition.

Now, if we look at the problems that eCommerce face, it starts to make sense.

eCommerce's Profitability Problem

Returns

It is no secret that customer returns are one of the biggest problems that continues to plague the eCommerce world. There are plenty of different statistics out there, but anywhere between 17%-30% of clothes bought online gets returned, with some subcategories within apparel registering an even higher returns rate (dresses can register up to 90% during party season!). This is one of the most pressing issues in fashion eCommerce in particular, and nobody has cracked this problem easily: Pretty Little Thing faced backlash when they scrapped free returns, as did Zara and Boohoo. According to Bloom Group, returns cost businesses around 66% of the original item's price, because of the required labour, transportation, inspection etc.

Delivery

One of the expectations with eCommerce is home delivery, and nowadays we are spoilt and want free delivery as well, and we want it ASAP, evidently spoilt by services like Amazon Prime. But of course, delivery costs money. Retailers have to find a courier to deliver the orders, who in turn charge the retailers money for the service. So even if you've made an online sale of £100, you have to factor in the amount you pay the delivery driver or courier to calculate your final profit. If you multiply that courier cost by the large scale of brands such as Zara and ASOS, you can see how home delivery can be costly, especially if your customers are expecting to have it for free. If you then factor in the potential for returns, a retailer is then paying to ship the order out and for the shipment back to them, so a double shipment fee. Again, this is why retailers have put in delivery and return policies, most of which are frustrating from a customer's perspective but perfectly justified from a retailer's point of view.

eCommerce is great, but the consumer expectation for delivery and returns poses one of the biggest headaches for retailers and their ability to turn a profit. And given Primark's low prices, they cannot afford to lose any profits to these problems. So instead, they took out the profitability problem and went for the controversial but brave decision to offer in-store click-and-collect only. And this is how it fits their business model.

How click-and-collect suits Primark's business model

Take out the profitability headache

By not even offering home delivery, they have taken out the biggest profitability problem of eCommerce. They don't have to factor in delivery and returns costs, and instead just have to work on their instore infrastructure to use existing store stock to fulfil these online orders. This requires additional forward planning from their Buying and Merchandising teams, but that can be built into existing supply chain models, rather than creating an entirely new logistical critical path.

Force the customer to think twice

We've all been guilty of this (sorry ASOS). You see something you are on the fence about, but you can get free delivery anyway, so, meh, you buy the shoes, because you don't have to leave the house to pick those shoes up; someone is going to deliver them to your front door, so you can make a decision then. That convenience makes the customer complacent in their decision to purchase, because it's just so easy. However, if you have to go to the store to pick up your order, you then think twice of whether you really want that item that you would make the effort to get dressed and go to your nearest store. This helps to reduce the potential of returns from the get-go, because of that additional effort the customer has to make. Annoying for the customer? Yes. But good for Primark? Definitely.

The opportunity for impulse in-store purchases

As mentioned, Primark deliberately make their stores massive, which means there are plenty of products on display. By forcing customers to go in-store to pick up their purchases, it means they have to walk through the store, walk through all the displays of new styles and household knick-knacks, which increases the chance of the customer buying something impulsively. It's like telling a child to walk through a toy store to get to their birthday party: the eye wanders and you will likely see something else that you want. So by the time you exit the Primark, not only have you picked up the order you originally bought, you may walk out with an additional purchase or two. This is one way to do upselling, and it's a very savvy way to combine the online experience with the in-store one.

So with all this context in mind, are Primark lagging behind, or are they being incredibly strategic?

Mpowering's View

By being level-headed and considered, Primark have adopted a digital strategy that suits their business model and works to their advantage. It has allowed Primark to test and learn at their own pace, roll out new phases only when they're ready, and avoid sudden shocks to their logistics and supply chain.

We think their digital strategy so far has been savvy and bold. They have stood firm and not lost sight of what makes them unique. They've done what's right for their business, and not been distracted by what everyone else is doing, and for that, we applaud them.

At Mpowering Solutions, we are huge advocates of the fact that every business is unique. What your counterparts are doing may not be the best decision for your business at this point in time. If you need advice on your business's short- and long-term strategies, we offer our Strategy Consultation package to give you guidance on what your business needs to achieve sustainable and healthy growth.