Has Primark got the wrong strategy?
Authur Ryan had done an amazing feat, taking Primark (then Penny’s) from a single Dublin store to 370 stores across 12 countries, with £7.8 billion revenues & nearly £1 billion in profit in 2019.
Their business model of not selling online with fast stock turn around, allowing them to stock the most fashionable items, had clearly worked.
But the global pandemic has changed how people buy goods, even fashionable clothes, begging the question: Will Primark in store shopping numbers ever return to the same levels?
Not pivoting and selling online is really hurting Primark financially.
On 23 March 2020, Primark closed their 189 UK stores, reopening 153 stores in England on 15 June 2020. As a result of this 1st lockdown. Primark reported a sales loss of £430 million.
Then in December 2020, Primark said it will lose an additional £220m in sales as UK stores were forced to close again under new restrictions to control the spread of COVID-19.
For the year ending September 12th, 2020 Primark saw full year adjusted operating profit plunge by 60% to £362 million, while full year revenues fell 24% to £5.9 billion.
Even with this staggering fall in sales, Primark has again dismissed calls to sell its products online.
The retailer responded to recent customer tweets encouraging it to embrace e-commerce, writing: “We prefer to sell our products in our physical stores but thanks for the suggestion.”
Over the last 10 months many organisations (large and small) have had to change and pivot just to survive, including ourselves.
Our traditional customers, who’d previously worked from business centres, manufacturing facilities or distribution units, have had most of their office-based teams working from home.
Quickly we had to pivot and work out a new go to market model for promoting and selling our home & workplace electric car chargers, which meant more investment in our website and paid advertising with Google & Facebook.
There are many other examples of large retailers (like Primark) having to pivot too. Rather than close their doors completely, they’ve been able to deliver products and provide a click & collect service.
But these delivery and click & collect services have only been possible due to a previous investment in a robust online strategy, which works in tandem with traditional bricks and motor stores.
There is an unanswered question for companies like Primark, who refused to change course or pivot. Will their traditional business return to the same levels as it was in February 2020?
Our gut feel is it won’t in the same numbers, and it’s the same for us. We believe some employers will ask their teams to return to the office, but there will also be some who continue to homework.
What percentage this will be, no one can really be sure. Our best guess is that 70% will return to the office and 30% will continue to work from home, with a need for both home and work place EV chargers.
And if you transfer these numbers into Primark’s business model. 30% of their traditional customers will now be converted into buying on-line, which will reduce their 2019 revenues by £2.34 billion.