Primark announced plans for more international growth by opening stores In America. They plan to open a superstore in Boston next year along with 8 smaller stores and a warehousing site on the north east of the States. The company owned by Associated British Foods (ABR) beat analysts expectations with revenues (sales) up 14% to £2.278bn and posted operating profits of £298m. This is primarily down to the retention and expansion of the customer base, playing on the fact that the retail market (excluding high end brands) has experienced a shift from quality to value. This shift has led to the emergence of Poundland, Aldi, Lidl, but also has enabled Primark to have a solid market share and be one of the stronger performers under the ABR umbrella. This has also given Primark to expand in the E-commerce space, as they tied up a deal with ASOS to sell clothes on their platform.
Now the next big step for the company is tackling America. This is no easy feat just ask the following British stores.
1 – Tesco’s US chain Fresh & Easy has filed for bankruptcy. The retailer has agreed to sell the majority of its US stores to Ron Burkle, lending his investment vehicle £80m to take on about 150 stores. The redundancy packages for about 400 permanent staff, the store closures and the loan being given to Mr Burke will cost Tesco £150m, taking the total cost of its failed US adventure to around 2 Billion pounds. (Source: Telegraph)
2 – Marks & Spencers got rid of US grocer King’s in 2006 to focus on its struggling operations back in Britain. Two-thirds of its investment was lost when it sold the New York based clothing chain Brooks Brothers in 2001.
3 – Laura Ashley Sold its entire US chain for $1 in 1999 after a string of profit warnings caused by over-ambitious expansion. (A profit warning is a public announcement made by companies to let people know that profits won’t be as high as expected)
What do Primark need to do to not follow down the footsteps of the above? In my opinion they first need to improve on how they are perceived by the general public. Corporate Social Responsibility plays a big part nowadays and is in some industries the only reason why customers choose company A over B. I have seen various comments across the net from different individuals talking about the unethical conditions the factory workers have to contend with which led to the Rana Plaza disaster in Bangladesh this time last year. staff were ‘told to return to work’ despite a large crack in the factory wall and this negligence led to 1,129 people losing their lives and another 3,000 injured. Something must be done to show that the lessons have been learnt and the mistakes won’t be made again to improve the perception people have on the company, especially the people that have boycotted purchasing items from any of their stores.
Their price advantage gives them a huge competitive edge and Primark need to play on that if they want to successfully break into the US. Sound out the competition and provide better value for money. Zara, H&M and Topshop who hail from Europe have all been able to successfully break into the US fashion market so Primark will be hoping to follow in their footsteps.
Finally they need to ramp up their social media presence. With a constantly evolving market the onus is on the company to keep up to date with all technological advancements and capitalise on them to obtain a competitive advantage. Trends are shared on sites such as Instagram and Tumblr, so it needs to ensure their potential American market, which is definitely more diverse, are constantly reminded of the brand through the applications on every young persons smartphone.
let me know your thoughts? Do you think America is a step too far for Primark or do you think they will be successful?