Should Primark make the leap to online?
Jan 31, 2013 (Datamonitor via COMTEX) --
Primark is clearly not suffering from a lack of a transactional website, but as a huge player in an intensely competitive retail sector, there are obvious benefits to an online presence, at least socially. Verdict's clothing & footwear analysts, Kate Ormrod and Honor Westnedge, examine whether or not the retailer needs a full multichannel offer.
Kate Ormrod: Primark needs an online presence
"While its lack of transactional website is currently not proving detrimental to Primark, it is hard to imagine the retailer never entering the online channel at some point. Its store-only strategy could prove disadvantageous, particularly in the competitive clothing sector where sales can easily be lost to competitors.
Investment has been focused on building Primark's physical presence across Europe and less has been done to move online. The online channel would allow Primark to widen its global reach, boosting both brand awareness and sales, far beyond its stores' ability. With many shoppers dissuaded from entering Primark stores due to their notably stressful environment, long queues being a common feature, the online channel provides a relatively hassle-free shopping experience - which would encourage shoppers to browse for longer, boosting spend.
Its current and undoubtedly successful business model cannot be easily replicated online, due to the high volumes it would need to sell and the costs involved in delivery and returns. However, it should seize the opportunity to provide an innovative online shopping process, with features including "shop the look" to increase average basket size, instant chat-style advice, and online exclusives. With fewer shoppers visiting the high street and many consumers seeing stores as just showrooms, Primark should look to embrace e-commerce now instead of being pushed into it at a later date."
Honor Westnedge: Primark does not need a transactional website now
"Currently, Primark does not have a suitable business model to support the investment and costs of running an efficient and profitable online channel. Its strategy of selling high volumes of low priced product works well in physical stores, as it can drive the necessary footfall to support the cost of its large outlets. Its average basket size benefits from the often stressful and uninviting environment since customers impulse-buy and pick up items they did not intend to purchase without really thinking about whether they need the item or not.
This phenomenon rarely happens online except for on flash sale sites such as Cocosa and Brand Alley, where customers feel pressured to make a quick purchase. Consumers shopping online consider purchases far more carefully, since they can take their time to assess their need for the item and browse across a number of retailers to ensure that they are getting the best value for money.
Shoppers are therefore unlikely to buy the same number of Primark items online that they would instore, causing the average transaction value to be far lower. Consumers would also be reluctant to pay delivery charges when the basket value is so low, forcing the retailer to offer very competitive charges, which would ultimately make delivery a loss-making operation, particularly given fuel costs.
While the 15% rise in sales for its last financial year is unsustainable unless it continues to open new space internationally, if the retailer were to launch online it risks cannibalizing UK store sales. This would impact volumes, making it difficult to keep its current portfolio profitable. For now, Primark should continue to invest in new markets, broadening its presence and doing what it does best: selling high volumes at low prices in high footfall physical locations."
Verdict View: Customer engagement online is the future for Primark
The case for Primark to embrace the online channel is clear, but in light of its existing business model and impressive growth from physical expansion across Europe, the time is not right to launch an online store.
Primark should instead invest in enhancing its existing website, to better showcase its fashionable product through a blog and lookbooks that provide shoppers with style hints, celebrity looks, and the week's top picks and must-buys, which would ultimately drive footfall into stores. Engaging shoppers via social media sites such as Twitter and Pinterest is vital in building relationships with its customers; it is also an area in which its competitors already have authority.
This would lay the ground for a transactional website to be launched within three to five years, which would further support its international growth strategy.
For more information about this topic please contact Kate Ormrod at firstname.lastname@example.org or Honor Westnedge at email@example.com.
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