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The New Fashion Brands — Primark.

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The New Fashion Brands — Primark.

*frock = a dress
**frock-bottom prices = жаргонизм для обозначения, ну, о-очень дёшевой цены на платье, одежду

Set out for a shopping trip with $100 and you can snap up a pair of Levi’s jeans or half a Hermès necktie. Or you could pop into Primark and fill a wardrobe. The discount purveyor of fast fashion, which is expanding in America from its base in Europe, will flog you a t-­shirt for $3.50 and trousers for a tenner. Such prices seem too good to be true to campaigners, who assume they can only be the result of corner cutting in a sector rife with dodgy labour prac­tices. Rivals such as Zara of Spain and H&M of Sweden, which used to be considered cheap before Primark came along, already run tight ships and squeeze suppliers hard.

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Primark store.

What is Primark doing so differently that it can sell wares for less and still make money? A lot, it turns out. Though Primark looks as if it is in the same trade as its budget rivals, beneath the seams its business model could not be more different.

On strategic decisions the firm has zigged when much of the apparel industry has zagged.

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As other firms try new approaches, such as rejigging their business for the internet age, Primark has doggedly stuck to a stack-­it-­high-­sell-­it-cheap approach to retailing that would feel familiar to the manag­er of its first store, opened in Ireland in 1969. The strategy has limi­tations, particularly when it comes to new growth. But for now — and notwithstanding the odd pandemic — it is proving its worth.

The giants of fast fashion have grown by embracing speed. Starting in the 2000s Inditex, which owns Zara, made a name for itself by raising the metabolism of the apparel sector. Previously shoppers had to wait entire seasons for high-­street brands to repli­cate the catwalk’s new looks. It took at least that long to get fresh frocks made and shipped from distant Asian factories with long lead times.

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Zara stole a march on the industry by manufacturing some of its collection in Europe, allowing it to get designs in shops in just a few weeks.

Like a hot pair of heels, the business model was soon appeared across the industry. When impatient consumers moved online, Zara, H&M and others hurriedly followed them there—never mind the unreliable economics of home delivery.

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Primark, which is part of Associated British Foods, a conglom­erate worth £16bn ($22bn) that also sells bread and Twining’s tea, has stayed in the slower lane. Its bet is, broadly, that shoppers will accept being a little less cutting­-edge in return for big savings.

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Inside a typical Primark store.

De­signs are simple to keep stitching costs down. Where fancier rivals boast that every shop has a unique assortment of regularly updat­ed goods, Primark orders millions of the same frocks months be­fore they arrive on the shelves. That is a lifetime in the age of Insta­gram influencers. But it lets Primark charge frock-­bottom prices.

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This strategy allows it to concentrate manufacturing in lower­ cost countries, notably Bangladesh, where monthly wages in the garment sector start at around $100. These are often the same fac­tories used by other global retailers, which ought to blunt criti­cism that Primark is an outlier when it comes to labour practices.

The firm does sensible things like limit subcontracting and con­ducts lots of audits to ensure working conditions are adequate. And its slower approach means orders can be placed in fashion’s off-­peak periods, when factories are grateful for the work. Manu­facturers know they can keep staff busy stitching Primark dresses during lean weeks, while slotting in more lucrative short-­turnaround runs for less patient brands. Clothes are shipped to end markets by the slow boat.

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Primark.

The cost savings are passed on to consumers, with some left over for shareholders. Before the pandemic jumbled up everyone’s books Primark reported a gross margin —sales minus the cost of stuff sold — of 41%. That is well short of Inditex’s 57% or H&M’s 53%. But Primark’s parsimonious nature extends to operating ex­penses. It has relentlessly squeezed the costs of marketing and selling goods. Factor this in and it ends up with an “EBIT” margin of around 12%—in line with the industry standard.

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Primark launched cloths utilization program in 2021.

Some of this is down to common -or-­garden penny­-pinching. While H&M spends 4% of total sales on marketing, Primark runs almost no ads. In an industry that often discounts, which crimps margins, Primark assumes its prices are already low enough. Out­side Britain its outlets are enormous—on average, nearly six times the size of those run by Inditex—and often in out ­of ­town malls where rents are cheap.

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A protest (against the child labour in Asia) outside Primark's flagship store in central London.

The jumble­-emporium vibe they exude works: Primark sells about 10 times as many items as H&M per square meter of shop, according to Aneesha Sherman of Bern­stein, a broker. On a recent visit, a young shopper in front of Schumpeter in the queue to the fitting rooms took in 14 items.

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Where Primark has strayed furthest from the fashion pack is in its refusal to sell anything online, which it sees as unfeasible at its price points. That has kept margins plump as the company avoid­ed a wodge of spending on developing apps and fulfilment capa­bilities. The lack of an online presence meant that Primark lost up to 100% of sales as the pandemic shut shops around the world. Ex­tended closures, especially in Britain, home to about half of its 380 outlets, cost it £3bn in sales and perhaps £1bn in profit.

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Primark’s cost­-slashing strategy is so multifaceted as to be virtual­ly impossible for rivals to replicate, argues Ms Sherman. Still, its idiosyncrasies hit limits of their own. The pace of expansion of shops, which is limited to Europe and America, feels glacial to in­vestors — but go any faster and the model’s delicate economics may stop working. Critics wonder about the environmental sus­tainability of $1 knickers. And new online rivals look menacing, particularly Shein, a fast ­growing Chinese super ­discounter.

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The New Fashion Brands — Primark.

Yet the queues outside Primark shops as they reopened after shutdowns suggest that some punters cannot wait to splurge in person. Sales are now higher than before the pandemic, helped by the covid­-linked disappearance of some once-­fearsome rivals, such as Topshop in Britain. In the world of fast fashion, slow, stea­dy and cheap can be a winning strategy.

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