Primark believe eCommerce wouldn’t be profitable? Here’s why I think that’s bullshit

Apr 23

So in case you’ve missed it, Primark hit the headlines this week unsurprisingly as a result of how COVID-19 has impacted their business to the tune of £650m per month in lost sales.

Of course, Primark doesn’t sell online and relies entirely on their high street presence to trade, which naturally it can’t do amidst the lockdown.

Now to be clear, although COVID-19 exacerbates and highlights the decision to avoid investing in new sales channels – this isn’t a post bashing Primark’s resilience (or lack of) through the pandemic.

This post summarises my thoughts around the brand’s lack of appetite for eCommerce and how the clothing retailer failed to see an online sales channel as a profitable venture.

So, who’s Primark?

Primark is nothing short of a major household name when it comes to low-cost fashionable clothing internationally. (You may also know them as Penney’s if you live in or visited Ireland.)

Here’s where it starts to get interesting…

In the UK, at least, Primark is a popular and huge high street brand. Now, where Primark comes unstuck is they rely entirely on the high street to sell to customers. No eCommerce, no mail order etc.

An unusual decision to make considering millennials made 54% of their purchases online in 2018 (a core demographic for Primark) and by 2021 Statista predicts that 93% of UK internet users will shop online.

As the saying goes, ‘never put all your eggs in one basket’

It’s precisely what the omnichannel model is designed to mitigate – putting all sales into a single stream is dangerous and can leave a business vulnerable to changes and factors outside of their control.

Imagine how Argos would fare if they decided to rely entirely on their printed catalogue to reach customers? An extreme example, yes – but it’s still a valid one.

Business risk aside, it’s clear that today’s customer prefers to shop in more than just one way with a brand or retailer.

Again, let’s take Argos as example – or to use a better example; let’s look at a supermarket, Tesco.

You can click and collect (leveraging two sales channels in a single transaction) visit an express store for lunch or a smaller shop as well as superstores and then, of course. ordering grocery online. (We’ll come back to supermarkets later on)

The point I’m trying to make here is that’s it’s bad practice to throw everything behind a single way of doing business – this is precisely what Primark’s doing right now.

Ok, so they tried eCommerce before and it failed

Primark dipped their toe into the eCommerce world back in 2013 and went to market in this space via Asos. Even this appears flawed to me from the outset.

ASOS and Primark target two totally different audiences. It’s like trying to sell Ford vehicles in a Mercedes dealer network. Put simply, it just seems like a poor fit.

ASOS and Primark are at different price points and have different target audiences entirely. In my opinion, It was doomed to fail before it had even started.

It was also poorly marketed. Primark didn’t sing from the hills that you could buy their range from ASOS and ASOS themselves failed to do the same.

From the looks of things, neither of the two brands put much effort into the campaign.

What baffles me is how Primark said eCommerce wouldn’t be profitable for them

I get it, margin is tiny in the world of cheap fashion. Primark relies on the ‘stack ’em high and sell ’em cheap’ model to scale their profitability, and it would seem that the clothing giant concluded that adopting their successful high street formula online would fail or at least fail to return a profit.

Now this is where I just can’t make sense of that. Sure, I don’t work for Primark, so I don’t know all of the details and challenges involved – but selling low-cost, low margin goods online doesn’t have to be loss leading.

As Nick Wilsdon (Search Product Owner at Vodafone) said:

There’s something that Noel Mack (CBO at Gymshark) said that’s resonated with me…

To make a long story short, Noel got me thinking about how an executive board can force the HIPPO (Highest Paid Person’s Opinion) effect on critical business-wide decisions; in that something the board doesn’t appreciate or understand is feared and therefore disregarded. You can check out that webinar here on eComm Live’s channel.

It’s more apparent in startups that enter maturity, but I’ve definitely worked for in-house brands where this distaste to digital innovation was frowned upon.

When you think about Primark, outside of the product it sells, it’s ‘go-to-market’ strategy remains relatively unchanged.

It’s possible (although I’ve no evidence to prove it) that Primark’s board has very little digital or marketing expertise outside of its bricks and mortar skillset. A simple case of fear of the unknown, perhaps?

In any case, this is purely a theory if you like – but it’s been responsible for the closure of a many once-powerful brands in the past. A sheer case of unwillingness to change or becoming overly complacent.

What could Primark introduce to make their eCommerce channel profitable?

Here are some thoughts as to how Primark could make an eCommerce venture not just profitable, but potentially insanely valuable.

Introduce minimum spends

Many online retailers obsess over average order value and direct pick and pack costs for a good reason. If the average order value is too low, it will cost more to process and pack each order, and the opposite is also true.

To reduce costs and project margins in an eCommerce model, Primark could introduce a minimum spend of say £20 if ordering online. In doing so, it would prevent the erosion of margin from customers placing orders for single and/or low-value items.

Avoid pressures to offer free delivery too soon or better yet, build it into pricing.

It’s of no surprise that offering free delivery can be a way to improve conversion and get more customers to part with their hard-earned. I get it. However, when you’re dealing with slim margins like Primark are, this could mean the difference between making a profit on a sale and making a loss.

When I used to sell low-cost AV accessories on eBay, I found that I’d always sell 2-3x more of the same item that offered free delivery vs the one that charged a delivery fee.

What’s interesting is that the total sale price was the same for both items. So for example, £4.99 + £1.50 delivery OR £6.49 with free delivery. The latter always sold more.

What I’m getting at here is Primark could choose to offer one of the two strategies:

  • Offer a cheaper item and charge for delivery at the checkout.
  • My recommendation would be to build in delivery into the item cost and offer free delivery at the checkout.

Ok, so the example I gave above was for a single item. What about dealing with multiple items in a single sale?

Well, by increasing your items by a small x% to absorb delivery costs or using a pricing table (items over £5 increase item cost by £1), you can not only cover delivery costs but potentially increase margins and profit across some sales too. A £5 t-shirt sold for £6 is still a cheap t-shirt!

This becomes particularly powerful when it’s combined with a minimum online spend.

Fashion and apparel have some of the highest return rates in eCommerce – how would you combat this?

Fashion is notorious for serial returners, and it costs online retailers a lot of time, money and resources to combat and process them.

In fact, Natalie Arney (Digital Consultant) tweeted a cool resource that details the state of eCommerce returns in 2019 and 2020.

To help mitigate huge volumes of returns and prevent further margin erosion, offer free in-store returns and for the customer to pay for returns via post.

This way, you’re do not have to pay delivery twice, and you’re compromising with customers by offering them free in-store returns. After all, in the world of cheap fashion, compromises have to be made.

Convenience almost always costs more – Primark should absolutely embrace this

There’s a reason why ordering Domino’s for delivery is more expensive than collecting.

It’s the same reason why ordering an item via Amazon Prime isn’t the most cost-efficient. It’s also why groceries cost more in say a Tesco Express over a Tesco Extra; convenience.

Getting stuff delivered to your door is of course much more convenient than heading to the high street, fighting queues and moaning about parking charges.

If many brands are charging more for convenience, why can’t Primark?

Let’s say a pack of 3 kid’s T-shirts costs £8, Primark could offer the same item online for £9.

As before, it’s still cheap and only the most frugal shoppers will even realise. Secondly, many customers are unlikely to have an issue with paying the extra to get the size they need delivered vs heading to a store and potentially leaving empty handed.

In fact, when you think about it – buying online is likely still cheaper (even at a higher price point) when you factor in the cost of travel to a high street store, let alone time.

Leverage a VIP model, something similar to ASOS?

Although I’m unsure as to how successful Premier Delivery has been for ASOS, the fact that it remains online after a good few years is a good sign in my book.

Ultimately, ASOS’ premier delivery gives a customer unlimited next day delivery for £9.95 a year. On the surface, it seems unprofitable, but I would assume profit is in the scale and winning over customers that sign up only to fail to take full advantage of the deal.

When it comes to Primark, it doesn’t have to be delivery either. Primark should know (or if they don’t they should go and find out) what their customers would love from such a VIP model. Could it be:

  • Discount on all new-in fashion
  • Exclusive access to the latest ranges before everybody else
  • Beat the queues with VIP click and collect (god knows everyone hates a Primark queue)
  • Or maybe all of the above?

Offering a bunch of benefits for say £15 a year and scaling it to 10,000 customers in a year?

That’s not a bad way of adding autonomy to revenue. Something that Primark does not and cannot do right now and that’s not even considering the potential power in the data that such a VIP model could introduce.

Just so I’m crystal – I’m not advocating that Primark should no longer invest in the high street..

But what I am saying is they should absolutely diversify their business starting with eCommerce. Also to be clear..

Their eCommerce channel should be about reaching new audiences too, not just channel switch

I’ve worked with and for so many brands that have introduced something new and in order to meet targets communicated to customers in a way that practically told them to abandon the ‘old’ and switch to the ‘new’.

Of course, that’s not what omnichannel is about. Primark needs to offer all channels to all customers and clearly explain the benefits of each so customers can make their own minds up.

But as we know, channel switch is not growth. Primark should focus on encouraging eCommerce sales to audiences that cannot or don’t wish to shop at their high street stores.

How about targeting customers that aren’t close to a Primark store? This way, they can attract potential new audiences that their high street stores have failed to reach.

Big data is the new gold – Primark has lots of potential here

I’m going to go out on a limb here and say that Primark doesn’t have much data when it comes to its customers. Where are they located? Age? Specific tastes? Leveraging eCommerce would allow Primark to collect this and much more (GDPR friendly data of course).

Then leverage 1:1 powerful personalisation via onsite experience, social retargeting, email and more.

Outside of immediate personalisation and sales opportunity, this data can be used to inform purchase habits, better inform the buying teams into what and how much of something to buy and lots more and of course affiliate opportunities too.

Mark Rofe (Digital PR at Rise at Seven) shared a clever affiliate example that Missguided are using right now to top up their earnings of course, by leveraging their data:

Finally, if Primark could achieve all of the above with eCommerce, increase market share and break-even, would it still be considered a loss?

Not every project has to make money for it to be a win, right? Would eCommerce have to make money for it to be considered a success for Primark?

If all they came out with after delivering eCommerce was increased market share, enriched customer data, the ability to reach new audiences and for the project to just about break-even, I’d absolutely call this a win.

Primark should too..

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About The Author

Luke Carthy is an international speaker, eCommerce SEO & CRO Consultant. Luke specialises eCommerce growth, analytics, strategy and increasing conversion rate and can typically found writing about proven and effective eCommerce SEO advice and case studies. Learn more about Luke Carthy.