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Why is Primark denying digital?

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There is no overstating the impact of the pandemic on the retail industry. We've seen stores close down, other retail giants move to digital only for a bit, and some others (such as Cath Kidston) make a permanent shift to digital – which was a smart move, to be quite frank.

But there are some other retail giants out there that just don't seem to get the message. Primark is one of them – still holding grounds against digital, yet in deep trouble like pretty much everyone else.

We have asked EMEA commcerce consulting director at LiveArea Elliott Jacobs for his honest opinion on the matter below.

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Photo by Green Room.

Why is Primark against digital?

The pandemic’s impact on the retail industry has been severe. Some have buckled while others have proven their agility and resilience, handling the supply chain strain as consumers flocked online.

This acceleration toward eCommerce is continuing to gather pace. While research shows almost two-thirds of retailers are focussing on eCommerce as a focus point of future investment, there are still those resisting the drive online.

Most notable among them, is the low-cost high street stalwart, Primark. The brand is controversially rejecting digital despite losing over £1.5 billion in sales while its stores were closed during the lockdown. This begs the question as to why any company, let alone the country's most infamous affordable fashion brand, would reject even the slightest move online?

A brick-and-mortar giant

When retailers reopened their doors last month, Primark saw the longest queues and proved to be the most popular chain on the high street. However, for all this success, the retailer still lost £650 million a month in sales, combined with an additional £800 million hit to cashflow from paying suppliers and other costs over the lockdown period.

Primark lacks a website and has remained reasonably consistent with its strategy. It briefly trialled eCommerce back in 2013 through Asos, but this proved difficult and ineffective. For years, Primark's main differentiating factor has been its low product prices made possible thanks to a streamlined supply chain, limited operating costs and large store spaces.

Covid-19 saw Primark's main competitors embrace online sales as a cornerstone of their business strategies. Meanwhile, Primark is staying loyal to its current strategy which includes little mention of digital transformation – so how will this strategy fare?

The changing nature of the physical store

A lack of reliance on eCommerce means maximising space in physical stores is all the more important for Primark. In fact, last year saw the world's biggest Primark store open its doors to shoppers in Birmingham, covering 161,000 sq ft over five floors – in addition to stocking the chain's affordable fashion products, the store also offered an experience, including a Disney-themed café, a barber's shop and a beauty studio. However, with such drastic changes ushered in for the post-Covid retail landscape, the purpose of Primark's megastore will now be called into question.

The pandemic has permanently changed the way we shop, with recent studies suggesting social distancing will be required in-store until 2022. This means that the long-term impact of Covid will likely see a change in the way physical spaces are used, ultimately transforming the entire fashion retail experience.

Traditionally when walking into a fashion store, there are four key components to the experience: browse, touch, try and queue. Each of these no longer feels appropriate, and needs changing from how we are used to experiencing them. To adapt, retailers will need to think about how technology can play a role in removing some of these friction areas and change how we experience fashion.

A focus on digital

eCommerce has been fundamental in helping retailers capitalise on the drive online. That said, digitalisation of the consumer journey is manifested beyond online sales, and other digital technologies are also promising to have a profound impact on the industry.

While consumers are no longer interested in experiential retail and smart technologies like magic mirrors, there is still scope for retailers to leverage technology in other areas. The queues seen in June suggest there is still appetite for Primark's affordable business model, particularly among cash-constrained consumers forced to tighten their purse strings as a result of the pandemic.

In the absence of online shopping, Primark should focus on improving its back-end logistics capabilities and further investing in ship from store and click-and-collect services. Consumers are now less concerned about the experience, instead opting for a more functional approach – Primark would do well to focus on minimising the amount of time consumers must spend in-store.

All eyes watching

Primark's resistance to any online sales channel is controversial at best. The company\s digital denial is reminiscent of Sony's naivety during the Betamax and VHS format war, when consumer behaviour was ignored in preference of preserving the status quo. In Sony's case, it went from owning 100% of the market to just 25% in six years, watching more agile competitors steal market share.

While Primark is clearly attempting to carve out and cement its niche, doubling down on what it does well, the strategy is do-or-die. Fast-forward five or ten years and we could be looking back at Primark as a case study of a failed retailer – a huge business with a dominant market share that was too stubborn to diversify its routes to customers. Consumer behaviour has changed forever, and businesses across every industry have flocked online – Primark's reliance upon the assumption that high street footfall will return to its pre-pandemic levels is simply unnecessarily risky.


Elliott Jacobs is EMEA Commerce Consulting Director at LiveArea.
 

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