Primark has a problem and that is that its model wobbles

Primark is synonymous with cheap. Or affordable, which sounds better. The brand of Irish origin is one of the favorites of the general public for having an absolutely wide portfolio of products (from clothing to home decoration, stationery, makeup…) at very low prices.

What’s going on? That we are in an inflationary crisis that has skyrocketed the costs of everything, and that translates into the model of this retail giant is in danger right now.

Because even though the results he published in the spring were very good (earned 80% more than in the third quarter of last year)now he has had to launch un profit warning (in financial jargon, a bad notice to investors of its benefits) for the annual accounts that it is going to present in November.

Namely, that you will earn less than you expected initially due to “significant market volatility affecting costs, due to the strengthening of the US dollar at the end of this quarter, and much higher energy costs.” Wow, inflation is eating into your margins.

And that Primark has recognized that has also had to raise prices, news that your customers will not like very much and that can drive many away from your stores. Or make them buy less.

But it has another handicap: Primark does not sell online. It is the only fast fashion brand that resists this. And that has already brought him consequences and, in the long run, will bring him more.

What you haven’t learned from the pandemic

It is curious that the Irish chain have not been able to learn from their experience during the pandemic. Because when everything had to close to confine us at home, Primark did not even have an online escape route to try to mitigate the blow.

While its competitors (mainly Inditex) saved the season a bit with Internet sales, Primark saw its stores practically zero due to this denial policy with the online segment.

And if at a given moment it seems that it considered opening its digital sales, now with the recovery of commerce, it has left it behind again. He has no intention of selling online, and folks, these days hardly anyone can afford not to sell online (unless you’re a luxury brand like Chanel).

For this reason, and in a panorama of price crises, Primark has it very complicated for its model to continue to succeed. It is true that people now tend to the cheapest and Primark is still cheaper than Zara and company, but it is no longer as cheap as it used to be, and on top of that it has more costs because the energy consumed by its mega stores is impressive. If this higher expense does not affect prices, the margins shrink.

And if you don’t have an escape route such as online, which also allows you to lower costs, your model is in serious danger. Because the new generations are eminently digital, and if they don’t approach them in this way, they are going to lose part of the cake. Not everyone likes to spend the afternoon harassed through the aisles of Primark.


Source: El Blog Salmón by www.elblogsalmon.com.

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