The last couple of weeks have seen some interesting developments in the retail sector. A few highlights include:
Woolworths, the brand that went into administration at the end of November has come back to life online. The launch was quite successful with 20,000 visitors within the first few hours but the local convenience, which was one of Woolies USPs, is now lost with hundreds of competing e-tailers. In terms of the products on offer, the traditional household items have been shelved but their famous pick ‘n’ mix has survived. The pick ‘n’ mix (or click ‘n’ mix as some are calling it) is fun to play with but let’s see how popular it’ll be online.
Also in the past couple of weeks, Primark’s sales figures were released and they’ve got a lot to shout about - a 20% increase in profits in the middle of a recession is no mean feat. Providing cheap and cheerful fashion, especially to a nation that values fashion highly clearly pays dividends (recent research shows that young Britons are less likely than their American or Australian counterparts to cut spending on fashion even in a recession). So much so that Primark is now expanding to at least 3 European countries. The question in my mind is ‘when will they start selling online?’ because the potential profits are huge.
And finally, across the pond, the ever popular e-tailer Amazon may not stay as competitive with its pricing - some states (and possibly the American Congress) might force it to levy sales tax on products (currently online-only companies are practically exempt from doing this). If this change goes ahead, it’ll eat into Amazon’s margins but result in a fairer playing field for e-tailers who have a bricks & mortar presence in the States. I wonder whether that’ll mean price rises straightaway or if Amazon will absorb some of the increases to start with to keep its competitive edge.
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Trenton Moss commented on 15 July 2009 at 8:56 am
Do you think Primark will ever sell online? I reckon it still might be some time until it’s worth them doing so as:
(a) Much of their target audience (people on lower incomes) aren’t online.
(b) The prices of individual products are generally so low that the cost to them of picking them out in the warehouse and posting them is potentially too great. To make it worthwhile they’d likely have to slap on a hefty delivery charge which would potentially discourage people from buying in the first place.
Given this, I wonder if getting set up for ecommerce online is ever going to be worth it for them, particularly as they’re still making such big profits (as you say).
Mru commented on 15 July 2009 at 6:59 pm
That’s an interesting view point; however I disagree.
I’m unable to find any research that supports the assumption that only lower income groups shop at Primark. Their official target market is “the fashion conscious under 35” in line with the throw away fashion culture that we’re living in. Throw away fashion to me says disposable income, which low income individuals tend not to have too much of. And judging by queues at their flagship store in central London (an affluent area by any standards) implies many of their shoppers fall outside the low income bracket.
Also I’d say their target market is widening in the recession as people who traditionally may not have shopped at Primark are doing so as their purse strings get tighter (which may well have contributed to Primark’s recent increase in profits) in a similar vein to how people are downgrading supermarkets (evidenced by the impressive profits at Sainsbury’s and Tesco’s at the expense of the likes of Waitrose).
You imply that online isn’t commercially viable for cheap and cheerful stores. TKMaxx, which operates in a similar if not the same space as Primark, offers online shopping which one assumes they wouldn’t do were it not a good business decision. Boohoo (online vendor of cheap women’s fashion) which has been referred to as the online equivalent of Primark in the high street charges £4.99 for delivery, which doesn’t seem to put people off as boohoo goes from strength to strength. So I’d say not only is such a proposition viable but there’s clearly a market for it.
Finally let’s not forget that the alternative of offline stores alone, which require retail space in prime high street locations, isn’t exactly cheap in comparison to setting up warehouses for picking and delivering.
Of course this is all mere speculation on our part, as Primark’s parent company AB Foods is notoriously secretive when it comes to its strategy behind Primark’s success. So whether they ever make their presence felt online remains to be seen.
Mru commented on 21 July 2009 at 12:43 pm
An update to this post:
Next (a UK retailer of fashion & homeware) and Morrisons (UK’s 4th largest supermarket chain) have both today increased their profit forecasts in light of better trading recently. Things seem to be looking up on the UK high street.
Meanwhile, in France, President Sarkozy is one step closer to getting a bill passed that’ll allow more stores to open on Sundays (traditionally a day of rest in much of continental Europe). The hope being this will not only stimulate greater spending but also stem the flow of French money into Belgium on Sundays.
And across the pond, Starbucks is trying out a new concept in its home town, Seattle - unbranded, localised stores that sell alcohol as well as coffee in a bohemian setting with music & poetry. Needs must…
One thing to be said for this recession - it’s facilitating an open minded approach to innovation.