Primark made an interesting move last week by announcing that it would be backing out of its online experiment with ASOS. Sarah Kellett, retail industry consultant at Fujitsu explores why – and concludes that the high street is still alive and kicking.
Last week Primark announced that it would be ending its brief relationship with ASOS. At the same time it revealed impressive financial results, showing that sales for the year are expected to be more than a fifth ahead of last year. Furthermore, it confirmed the opening of 12 new stores in the UK and a move into France before the end of the year. This news will have come as a surprise to those who are heralding the end of the high street.
I’d say this is proof enough that ‘bricks’ have not yet been replaced by ‘clicks’ – and that the high street remains a driving force in the world of retail. In fact, this view is supported by 65% of retailers, who took part in Fujitsu’s recent Pan European Retail Survey and who agree that the importance of the stores has increased significantly within Europe in recent years.
When the digital revolution began, many retailers set up their online stores in haste and in this immature market it was hard to envisage what impact this would have on all their overall brand operations. Speed to market was the priority. What we see today is very different, with many retailers recognising that their core customers do not distinguish between the online and offline experience. Topshop is a prime example of a company that does this brilliantly – by having a really strong personality in its stores and online. Whichever platform the customer chooses, the experience is smooth and consistent.
But if the Primark story tells us anything – it’s that an online presence is not necessarily essential if your customer offering is “spot on”.
It is one thing for a retailer to make sales online – but making profitable sales is another thing entirely. To make significant profit via online sales, retailers need an incredibly slick supply chain, with the right technology in place. Online returns rates are as high as 25% at the moment, people over order to try on at home – and order multiple sizes to make sure they get a garment that fits. Without highly sophisticated returns systems in place, their margins are dramatically reduced on the online sales. By steering away from an online model completely, Primark is removing the risk of this loss of profits.
However, the true reason that Primark is so successful is because it truly understands its customers. It sells them products they want to buy, at a price they can afford and importantly, in an environment they want to buy in. It also gives them the right customer experience. The high footfall customers experience in-store is part of its brand story. It’s hard to replicate that emotional connection with a brand in an online environment.
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