A brief perusal of the business and social media would suggest that the march towards online shopping at the expense of “bricks and mortar” stores is unquestionable. This view is broadly supported by the apparent evidence of retailers rationalising the number of their outlets and the burdensome costs of business rates and lease agreements. The latter two areas are not something that is relevant for pure-play online retailers.

Is this an accurate assessment of the current state of play in the retail sector?

At first glance it is hard to argue against this inexorable development. Indeed projecting ahead into the next decade it would appear that more and more shoppers will gravitate to online shopping.

But hang on a second! Is there any evidence to suggest that this perception may be too simplistic and one which underestimates the complexity of shopping behaviour?

In my view Primark: the fashion retailer challenges this view that “all things lead to online”.

In this blog I attempt to dissect the Primark strategy to shed some light on why they appear to be so successful.

But first a little historical perspective on Primark.

It began life in Dublin when started to trade under the name of Penneys in 1969. In the intervening fifty years it has become one of Europe’s leading fashion retailers in the so-called “fast and affordable fashion” segment. Founded by a gentleman by the name of Arthur Ryan and boosted by its popularity in Ireland, it expanded its operations into the UK and Northern Ireland. It is now part of the British conglomerate, British Associated Foods (ABF).

Over the years it has grown to over 350 stores in around nine countries in Europe. It opened the first store in the USA in 2016 in Boston. Since then it has expanded to nine stores.

It was prevented from using the name “Penneys” outside of Ireland because J.C. Penney had already acquired the rights to use the name. It came up with the name “Primark” to address the international markets.

It has also expanded the range of products from clothing to include including new-born and children’s clothing, women’s wear, men’s wear, home ware, accessories, footwear, beauty products and confectionery.

Its approach to expansion and development can be summed up as being incremental, measured and cautious. It has used organic and inorganic growth strategies to reach its current portfolio of around 350 stores. For instance it acquired stores from former successful retailers such as C&A and Littlewoods in the 1990’s. It has also opened a number of stores such as its largest one in Manchester.

It can be argued that it has a very clear and unambiguous positioning strategy.

Quite simply the value proposition is firmly centred on the concept of allowing shoppers to stay on trend and who have a limited budget to purchase clothing and other accessories such as “beauty care”.

Low prices are central to this positioning strategy. Indeed some would say it offers rock bottom prices that are in many cases more competitive and cheaper than the pure-play online retailers.

Primark targets the under 35 demographic. This includes millennials, who are “tech savvy” and are constantly on the look-out for bargains.

It invests heavily in its buying teams, who work closely with a wide range of suppliers, particularly in developing economies such as Bangladesh. It has built up a reputation (sometimes negative) for driving hard bargains with suppliers in order to obtain large discounts on volume orders and purchases.

It also recognises that in a “fast-fashion” business it is critical to have effective and modern supply chain systems in place. It was one of the pioneers of computerised customs clearance, has invested in state-of-the-art warehousing and distribution networks. For instance it operated a giant warehouse, operated by TNT, which is dedicated to holding and moving Primark inventory on an exclusive basis.

Computerised warehousing and distribution systems are linked to computerised data on daily sales and inventory information. This allows for effective rapid replenishment. It makes extensive use of outsourcing and working with third-party specialists to achieve this aim of rapid re-stocking.

Lesson so far? It is critical to develop a sophisticated supply chain strategy to deliver “fast fashion”.

Primark does not engage too actively in developing brands. It places greater emphasis on stocking wide range of items at low prices.

Before we accuse Primark of being luddites and “sticking their heads in the sand” about online retailing, we should note that they have a strong social media presence. This is evidenced by encouraging shoppers to upload “Primark Looks” on their website and generating discussion and sharing of experiences.

In 2013 it set up an online sales presence on the ASOS website to “test the waters”. It dropped this initiative after twelve weeks, reflecting its unhappiness with the experience.

Senior management argued that further developments in online retail channels create more problems and costs than originally anticipated. For instance Primark estimates that within the online fashion retail sector, as much as 30 – 40 per cent of items purchased are returned. Such returns can be up to as much as six times more expensive than in-store returns.  Some online retailers provide free delivery or do so at a heavily subsidised charge. This also builds in a layer of cost to the operations.

They argue strongly that such costs “eat into” their ability to deliver rock bottom prices, as per their value proposition and positioning strategy.

Instead Primark invests heavily in its in-store experience for its shoppers. It make use of digital features such as big screens to highlight their merchandise to enhance the selling environment.

Interestingly research tells us that Primark shoppers tend to buy in large quantities when they make a visit to the stores. From a psychological point of view, those of you who visit a Primark store will notice the very large baskets that are placed at the entrance.

A comparative research study looking at H&M, the Swedish fast fashion retailer and Primark in 2015 indicated that the former generated around £5,000 sales per square metre across its UK stores. By contrast Primark achieved around £8,000 per square metre.

This reinforces the perception that in many ways Primark is typical of the traditional retailers of the past: “pile them high and sell them cheap”. In some ways it is like shopping in Costco.

Two esteemed academics in the field of marketing observed that “If you nail positioning and targeting, everything else falls into place”. (Kotler and Keller: 2016). You might reflect on the accuracy of this observation with respect to Primark.

Primark has certainly bucked the trend. It is a pure-play bricks and mortar retailer. In my view its strategy is based on a calm, measured and incremental approach to development and international expansion. It is a trend-led, low-cost leadership operator.

Is it sticking its head in the sand? I do not think so. Primark makes clever use of social media platforms to promote its image and engagement with shoppers.

Online retailers such as Boohoo, ASOS and Ocado have to grapple with the challenges of remaining lean and cost-effective in such an environment.

Let’s monitor Primark in the future to see if it eventually has to “bite the bullet” and establish an online sales presence.

Can Primark sustain its low-cost strategy? For instance it has been accused in the past of using “sweatshops” in Southern Asia to generate its cheap garments. Let’s see.