Primark Factors That Can Maintain Profitability In Highly Competitive Industries

According to a March 2016 business statistics, in 2016 1-2, the retail sales of 50 key large retail enterprises decreased by 6.2% over the same period last year. clothing Retail sales fell by 5.5%, while the growth rate dropped by 11.7% compared with the same period last year.

In China, where economic growth is slowing down, more and more prudent consumers will be watching their pocketbooks. The most affected ones are luxury goods and clothing stores. The labor intensive clothing manufacturing industry is also suffering from the increase in labor costs and material costs. brand Businessmen, the increasing cost of clothing, the cost of channels and the rents of retail shops will affect the development of China's local brand apparel, and its price advantage will become increasingly difficult to control. This will not only affect China's physical clothing retailing industry, but also affect the development of local apparel brands. Online retailers The costumes will also be affected.

There is such a fast fashion brand Primark from Ireland, which has been developing in the whole channel. It insists on not taking the electricity supplier, but still keeps the whole business format. The lowest price strategy is steadily growing every year. The first time we entered the United States from Europe last year, when the opening stage was hot, the American people gathered by the retail giants also shouted "wolf."

According to a latest financial data, thanks to the recent weakening of the sterling trend and the improvement of Primark sales performance of its cheap clothing retailers, Associated British Foods PLC (ABF.L), the UK conglomerate, raised its annual profit forecast for the 2016 fiscal year in its two quarter performance update released in February 22nd. Although the profit has not reached the expected warm winter, Associated British Foods PLC expects Primark to grow by 4% in the first half of February 27th. The slowdown of global economic growth is the biggest impact on the clothing industry. How does Primark maintain sustained growth?

Primark is a fast fashion brand in the UK. It is known as "the most progressive Street store", "the most affordable shop", "the best store for 50 pounds", "the best shop in the centre of the city", "the British distributor of the year" and so on. Primark, which was born in 1969 in Dublin, Ireland, has a long history, but it is not a classic high-end brand. On the contrary, its goods are very cheap. Consumers can buy 5 pounds of ballet shoes, 4 pounds of bikini, 3 pounds of sunglasses, 6 pounds of legging, 5 pounds of skirts, 2 pounds of necklaces in Primark stores, and all the new ones at full price. In addition to men's and women's wear and children's wear, there are about 15 pounds of household goods lines. It's simply Aldi of the fashion industry.

　　 A T-shirt priced at 3 pounds in Primark store, UK.

By the end of March 2016, Primark has opened 300 stores in the world with a total sales volume of 1 million 150 thousand square feet, with shops and countries including Ireland, Spain, Britain, Holland, Spain, Germany, Portugal and Belgium. In September 2015, it first landed in the United States and opened its first store in Boston to kill its competitors, the local clothing giant brands of the United States, including: Gap, Old Navy, Forever 21, European "King" Zara, H&M, and Japanese clothing brand giant Uniqlo UNIQLO in the United States.

As the last one to enter the most competitive fashion market and the world's largest and most mature American market, a well-known public brand, Primark Boston has also received the attention of the US industry. The price of Primark in the US market is 20% lower than that of Forever 21, lower by 33% than Old Navy, and 40% lower than H&M, according to analysts at Sanford C. Bernstein, an investment bank. The average price is 36% lower than that of the industry. For example, the price of men's jeans and Primark is nearly 60% less than that of the nearby Gap factory store. This price advantage opens up the first day for the Boston women's group, who is pursuing the best cost performance, waiting for Primark.

　 Primark can maintain profitability in fast fashion and highly competitive industries, mainly on two factors:

1, Primark offers very low price, but its sales and profits can be compensated by the sales capacity per unit area.

The Primark flagship store in Boston has an area of 77000 square feet. The four storeyed floor is located in the most ancient Downtown Crossing block in Boston. It has 84 fitting rooms and 530 model hangers.

According to data from Nomura Nomura, a non fashion magazine, Primark has the strongest sales volume per unit area in fast fashion brands and some department stores own brands, which sell up to 488 pounds per square foot, 1.6 times H&M, four times more than Macy 's Inc. Messi department stores, and five times more than J.C. Penney Co. Penny's. In stark contrast, the average price of Primark products in the UK market is only 3.69 pounds, less than half the average price of H&M products, which is only 8.92 pounds. It is only Marks &Spencer Group PLC, Martha's department store product has an average price of 10.08 pounds 1/3, and Next PLC products average flat price 12.73 1/4. Despite the discrepancy between Sanford C. Bernstein research and Nomura Nomura Securities, Primark is still the most famous clothing brand in the UK market. According to Sanford C. Bernstein in May this year, the average selling price of Primark in the UK market is 3.87, while H&M is as high as 10.69.

Primark is so popular in the United States that apart from its cheap products, there is a fundamental factor that all american apparel retailers are developing in exhaustion all over the channel (O2O). At this point, Primark has the magic logic of brand strategy development. It has not yet set up an e-commerce provider yet.

In 2013, the brand sold 20 pieces of goods on the ASOS, a famous clothing business platform in the UK, so as to test the water on the Internet shopping. But after 12 weeks, the project was halted. It is not because it can not be sold, but because the demand is too strong, resulting in the transportation cost greater than the commodity profit. "The profit margins of our single commodity are very small, which is why even online retailers can't compete with us." George Weston, CEO of Primark parent company ABF (Associated British Foods), said.

　 2, another success of Primark lies in its fashionable fashion design and open and transparent price in recent years.

Stephen Springham, a senior retail analyst at London based retail consulting firm, pointed out: "Primark's clothing is not only cheap but also fashionable." Stephen Springham said. As a matter of fact, it doesn't matter if clothes are worn out, because consumers are now looking for renewal. " He also stressed that the success of Primark was due to its fast turnover of commodities, and its occupying heights with sales competition.

Primark can't stop being more than just civilians. There are many fashionable people who are also loyal to Primark, called "Primarni". Of course, the main reason is certainly not cheap. Moreover, the styles that appear on every stage of fashion week can be found in Primark in less than 6 weeks, and even the price of the original product is not available. Even Robbie Williams, Kate Moss bought things in Primark; Justin Bieber also went to the UK to tour underwear to pick up underwear, and it made the new young children jump into the pit of Primark. In fact, plagiarism is not just Chinese, but many foreign brands are everywhere. The fashion of throwing at once is a trend in the younger generation.

3, the secret of winning the magic of Primark price lies in: do not do any form of marketing activities, directly control the upstream manufacturers, remove the middleman link, similar to a direct purchase of many Chinese clothing businesses.

The huge order quantity enables the brand to get the lowest price from the suppliers of most Southeast Asian manufacturing countries, such as China, India, Kampuchea and Bangladesh, and narrow the distance between fabric suppliers and processing plants, and use skilled workers and mechanical assembly lines to reduce the operation cost to a minimum.

Primark has also been criticized by the industry for its crush on suppliers. As many as 1129 people were killed in the collapse of the Bangladesh garment factory in April 2014, many of whom were clothing producers for Primark. At that time, the retail brand was also pushed to the public opinion.

In 2015, it was also discovered that the workers found the workers' help letter from Chinese factories in the Primark clothes they purchased. Although Primark had done emergency public relations treatment, denied the media accusations and issued a statement that it was a practical joke. Even so, the notorious reputation of sweatshops and Primark were hard to give up.

Fast fashion uses cheap material for clothing, accelerates the fashion style of changing consumer wardrobe, and leads to waste of resources and environmental pollution. This is also a controversial topic in the West in recent years. When the Primark opened in Boston, sweatshops and garbage collection became the two most important topics of Primark public relations. Primark's external public relations staff said: its company is a member of the "ethical trade union" and employs a team of employees to audit the local labor standards in the garment producing area. The public relations officer also added to the media that his company repeatedly uses cardboard, plastic and clothes hangers to reduce waste.

When the first store in Boston opened for Primark, many mainstream American economy and retail media paid much attention to it. In addition to paying attention to the price competitiveness of Primark, the media also mentioned the environmental sustainability and supply chain sweatshops and safety issues of great concern to the industry and the whole world. However, the American media has also mentioned that in the face of such cheap and fashionable clothes, even those American consumers who are full of moral sense will forget the thousands of garment factory workers engulfed by the Bangladesh fire.

Primark's low price strategy continues to skyrocket. In the economic downturn, the consumption of consumers worldwide is becoming more cautious, which also gives domestic retailers a great deal of vigilance. How can we ensure the competitiveness of commodity prices today? At the same time:

1, many foreign fast fashions have reduced the processing plants to other countries with more backward labor laws in Southeast Asia.

2, the design team that is closer to the center of fashion capital can acquire all kinds of fashion design styles at the first time.

3, it is still the main development mode of many fast fashion to start shop in a physical store. The mature brand operation achieves the scale of the brand, and the high turnover inventory enables these fast fashion to get lower commodity prices from the factory. These are the weaknesses of Chinese clothing brands.

In fact, it can be seen that this is not just the battle between e-commerce and physical retailing.

Let's be thankful that Primark has not yet entered China!