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Positive profits for Primark despite high-street lull, what's their secret?

4 min read

18 January 2019

Reporter, Real Business

What Primark's cheery retail performance shows is that consumers prefer to buy from streamlined brands that nail their markets over bloated department stores who don't understand their customers any more.

Budget high-street retailer Primark has reported that its Christmas trading period was better than expected. But how is this the case when so many of their high-street counterparts including New Look and Debenhams reported the opposite?

Primark owner Associated British Foods released a statement saying that festive sales exceeded its own expectations, suggesting that this performance took the brand itself by surprise.

“The UK performed well and our share of the total clothing market increased significantly,” – Associated British Foods

They went on to remark that sales were up by 1% ahead of last year for the same period.

– This performance is impressive, considering that they are operating in a market which has experienced a consistent downward decline over the past few years.

This could even be called a “turnaround moment” for the company, who had previously issued warnings of a “challenging” sales environment before Christmas 2018.

In terms of recorded sales, in the 16 weeks to 5 January 2019, they rose 4% where growth was believed to driven by the opening of a series of new stores.

Whilst many high-street retailers, Primark included, blamed online retail discounts and warm weather on the poor festive trading environment, if you look at the high-street brands that performed well, it’s the ones that understood what customers wanted in terms of straightforward goods and services, that did best.

Let’s explore this further:

For example, whilst retailers, like Marks & Spencers, Debenhams, and House of Fraser are closing stores, brands such as Primark and JD Sports continue to grow and are opening new stores abroad, as well as expanding retail space in the UK.

Why is this the case?

Because these brands offer consumers an easy, ‘no-frills’ experience.

Most importantly, they know who their target customer is and they understand what they want.

Think about it, JD Sports offer consumers competitively priced sportswear, including both training gear and streetwear options. Primark offers customers the cheapest clothing deals available on the high-street.

Do bloated, multidisciplinary retail stores work anymore?

When you then look at larger stores such as Marks & Spencers and Debenhams, and their confused mix of clothing, food (M&S) and homeware items, who are their target customers? To be honest, I don’t think they even know anymore.

Homeware buyers will head online for better deals. Clothing? They’ll either go online or if they prefer high-street shopping, Primark offers them the best deals possible.

Retail consumers in 2019 want simplicity. They’re more likely to shop at brands who perform one particular service well rather than a bloated retail brand that does a little bit of everything but doesn’t lead the market in any particular good or service, (such as Debenhams, House of Fraser, the list goes on).

For customers who are still taking to the high-street this year, Primark offers them the best of what they do, namely the cheapest, fastest on-trend clothing available on the high-street. How can the others keep up?