News that Primark has chosen the high street over the internet, deciding not to open an online store, has surprised many in the industry as it goes against the strategy adopted by almost all other clothing retailers. Heikki Haldre, CEO and founder of Fits.me, shares his thoughts on whether Adidas should be more inclined to invest in e-commerce than Primark.
Primark’s recent announcement that it will remain offline is a strategy that cannot endure for long. It is clear that the future of shopping belongs to online. Those retailers that hope that online does not affect their business models will lose out, while those which embrace the internet will be the winners. This applies to internet newcomers like Benetton, or those who have decided to wait – like Primark.
However, facing the facts, some business models win more or stand to lose more from their internet strategy.
The high end brands need to invest heavily into their online offering, making sure its customer service and customer experience is as good as in their brick-and-mortar stores. High purchase return rates – 25% on average, up to 60% on some women’s wear – reflect that their online customers are not receiving this quality of service yet. These brands need to make sure their online store does not diminish their brand value by offering standards that don’t meet their customers’ expectations.
The mass-market brands, such as Adidas, view their online channel as one of the most important source of revenues. Their online store is their biggest in terms of sales and should get similar attention in terms of business investments. Let’s face it – some customers still hesitate when buying online, so these businesses are investing into technologies that help customers buy the garment they want, the first time they buy it.
And then there’s Primark, a company with an enviable business model and results. In my opinion, Primark must move online. Its prices are so low that it is among the very few retailers that do not have to worry about costly returns. For a customer, returning an item is simply more of a hassle than to bear the cost of keeping it. Online, when optimised out of the warehouse, will have tenfold higher per-square-foot sales figure compared to any of Primark’s stores.
It has cultivated itself a loyal following among all segments of customers – 14% of Primark’s customers are those of the “A-class” – the same who would shop at Harrods. As with all online stores, this helps Primark extend its store opening hours to 24/7, tap into an existing base of customers who would unhesitatingly buy online, and reach the customers who live a long distance from its existing stores. Look at it this way – if Primark has plans to open another 15 stores this year one should be online – it’s equal to a multitude of stores.”
By Heikki Haldre
CEO and founder
Fits.me
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Adidas is a worldwide brand pushing awareness through experiences and social, this will sell product and ultimately serves its purpose, to engage customers in the brand itself. People are loyal to the brand and proud to be seen wearing the latest kicks/ t shirt etc.
Primark is a very different proposition; its offering is ‘immediate’ and ‘up to the minute’ looks (copies in many cases of what you see on the catwalks) that are available right now. Pop into Primark on any day and you’ll see any number of customers looking for an outfit; the look will be a representation of another (luxury?) brand, but the experience itself is based on the immediate and accessible nature of those low cost goods; i.e. ‘build it and they will come’…
There are also other issues to discuss; the cost of an experienced team to run your e-commerce site would be high compared to in store staff. Then recruitment costs. Location of warehousing/ offices for this venture. The sheer amount of products that Primark sell. The volume of returns, volume of low cost returns (are always a factor) and the consequent Social Media and SEO that may need investment as a result.
So for the time being, for those who live within an accessible distance of a branch of Primark, the experience will continue to be the excitement of filling a basket to the brim with garments inspired by the catwalk shows of Paris and Milan.