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British fast-fashion giant Primark, described as the Costco of clothing, gears up for rapid expansion in the US, courting shoppers with rock-bottom prices

Primark is known for its inexpensive clothing and accessories.Business Insider / Mary Hanbury

  • Discount clothing chain Primark plans to open nearly 50 stores in the United States over the next five years.

  • The chain is known for its rock-bottom prices, made possible by the reduction in commercial costs.

  • This includes not having an online store and keeping advertising to a minimum.

Primark has invaded Europe before and now it’s setting its sights on the United States.

Primark

A Primark store in London.Belinda Jiao / SOPA Images / LightRocket via Getty Images

The European budget clothing chain said on Tuesday it plans to expand its store network to 60 locations in the United States over the next five years. There are currently 13 stores there, which are mostly located along the east coast.

Primark is from Dublin, Ireland, where the store has a completely different name: Penneys. It opened in 1969.

Penny, Dublin

Primark has a different name in Ireland.Niall Carson / PA Images via Getty Images

When the company expanded to the UK in 1973, it was forced to change its name because the US department store JCPenney was already registered there.

The name Primark was born, and from that point on it was used for all of its stores opened outside of Ireland.

Between 2006 and 2013, the company grew rapidly, opening stores across Europe – in Spain, the Netherlands, Portugal, Germany, Belgium, Austria and France. Sales increased 150% between 2009 and 2014.

Primark Germany

Primark has more than 380 stores in Europe and the United States.Wikicommons / 1971markus

Source: Primark and The Economist

In 2015, she opened her first store in the United States, in Boston, Massachusetts.

Primark

Primark is coming to the United States.AP Photo / Steven Senne

At the time, analysts expected the store to pose a threat to rival US clothing stores such as Gap and Abercrombie, slashing them in terms of price and constantly renewing new styles.

A Morgan Stanley study in 2016, after Primark launched in the United States, found that its prices were, on average, 202% lower than average clothing prices in the United States.

The chain continued to grow slowly in the United States over the following years, opening stores along the East Coast.

Primark

Primark does not sell online.Business Insider / Mary Hanbury

When the pandemic hit, Primark found itself in a worse position than many competitors because it doesn’t sell online.

Her business dried up overnight as she was forced to close stores during the first lockdowns in the United States and Europe, costing her £ 800million ($ 1.07bn) of sales between March 1 and June 20, 2020.

Its adjusted operating profit for the year ending September 2020 fell to £ 362million ($ 484million) from £ 969million ($ 1.3 billion) in the same period. last year. In Tuesday’s annual results, adjusted operating profit fell a further 11% from 2020.

Despite this, it continued its store openings in the United States. More recently, she has opened stores in more prominent locations including the American Dream Mall in New Jersey and Chicago’s premier mall, Slate Street.

Inside the American Dream - Visit American Dream 2021

Inside the American Dream Mall in East Rutherford, New Jersey.Thomas Pallini / Insider

“With our current portfolio trading very well, it appears that we have established a solid foundation from which to accelerate our expansion into the US market,” said Paul Marchant, CEO of Primark, in a statement this week.

The store is known for its bargain prices, lower than competitors such as H&M. You can buy a dress for as little as $ 4 or a pair of high heels for $ 10.

Primark

The shoes start at $ 2.Business Insider / Mary Hanbury

It does this by running an elegant logistics system, having limited advertising, and buying products wholesale, which allows it to negotiate better prices from suppliers.

In the past, the company has been criticized for its tactics to cut supply chain costs and the conditions under which its garments are made.

In 2013, Primark was introduced as one of the retailers making clothing at the Rana Plaza factory in Bangladesh, which collapsed and killed more than 1,100 workers. The company paid $ 14 million to the families of the victims and signed an agreement to promote safety at textile factories.

The company relies on sales volume to generate profit because margins are low on its clothing and accessories.

Primark

Shopping at Primark is akin to shopping at Costco, analysts say.Business Insider / Mary Hanbury

The typical Primark buyer tends to buy in large quantities due to the low prices in the store. The baskets at the front of each store are a nod to this buying habit, allowing customers to stack them with new items.

“Consumers buy from Primark differently from many retailers,” Bernstein’s Jamie Merriman told The Economist. “It’s almost like shopping at a Costco, where you think in terms of volume.”

Its decision not to operate an e-commerce store also keeps prices low. Customers can view the products online but cannot purchase them there.

Primark US website

Primark.com

Primark executives still claim that selling online does not make economic sense, despite the events of 2020, due to the high shipping and return costs.

“I think COVID has demonstrated Primark’s strength more than its weakness,” George Weston, CEO of parent company Associated British Foods, told Reuters in November 2020.

“What we have seen with Primark is that when people can shop, they prefer to shop with us rather than doing it online,” he said.

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