Primark Enters America Today. Rivals Beware.

"... The Irish retailer, owned by Associated British Foods (ABF), now sells more clothes than any other retailer in Britain... On September 10th it will open its first shop in America, the world’s biggest clothing market. Boston will be first to get a Primark, to be followed shortly by seven other sites in the north-east.

Triumph is not guaranteed. Primark may be the most successful brand Americans have never heard of, and changing that will take time. Nevertheless, ABF, which also sells sugar, tea and Ovaltine, has reason to be optimistic. For many shoppers, Primark has an irresistible offer: trendy clothes at astonishingly low prices. The result is a new and even faster kind of fast fashion, which encourages consumers to buy heaps of items, discard them after a few wears and then come back for another batch of new outfits...

John Bason, ABF’s finance director, says Primark achieves its low prices thanks to sleek logistics, a meagre marketing budget and its scale, which helps win bargains from suppliers. The company withstands tiny margins, making its money on volume. It has bet successfully that demand for clothes is as elastic as the waistband in a pair of plus-size sweatpants: the cheaper they are, the more shoppers buy of them. It is also benefiting from the “Instagram effect”, in which fashion-conscious young consumers post snaps of themselves wearing another new outfit on social media...

There are a few threats to this model. Primark may find, as Tesco has recently done, that breaking into America is no walkover for foreign retailers... Then again, Primark’s ultra-cheap prices could prove as tempting in the United States as they are elsewhere... Another possible problem is Primark’s online business, or lack of it. Its prices are too low to justify the shipping costs of e-commerce... "

Read the full article at The Economist.

Image Credit: The Boston Globe