Published Monday 24th June 2019
Retail in the UK is widely believed to be on a downward spiral. According to the latest BRC-KPMG Retail Sales Monitor for May, like-for-like sales were down by three percent compared to last year, the largest decline of that type since December 2008. Arcadia Group, owners of a string of high-street staples including Topshop and Dorothy Perkins, recently avoided administration thanks to a rescue package that will see them close 50 stores.
However, there is one retailer who appears to be still having success. During April, Primark unveiled the largest clothing store in the world in Birmingham to much fanfare. Behind the excitement of the five-floor extravaganza lies a business succeeding where others have failed, showing potential areas for growth in an industry largely in need of new ideas.
The Modern Retail Landscape
As mentioned above, retail has mostly been on the decline in the UK over the last decade. According to one report, 2018 represented the worst year of monthly sales for bricks and mortar stores since 2006. The BRC announced that December 2018, one of the most critical periods in the high-street calendar, was the worst Christmas period since the financial crisis of 2008.
Out of all retail sectors, non-food was seen to be suffering the most. Debenhams suffered a 5.7% fall in like-for-like sales over the Christmas period, followed by store closures announced in April. They are just one of many high-street stalwarts forced to close shops over the last few years, many of them reaching various demographics. From bargain stores such as Poundworld to high-end sellers like Marks and Spencer, all businesses can be at the mercy of changing consumer habits.
The significant change to the modern retail landscape has been the enormous growth of e-commerce over the last decade. According to the Office for National Statistics (ONS), internet sales accounted for only 2.5% of total retail sales in December 2006. However, almost unmatched growth has seen UK consumers establish themselves as some of the fastest-adopting online shoppers in the world. By December 2018, online sales had grown to account for 19.8% of all retail sales.
A large proportion of that revenue has been taken by e-commerce giants such as Amazon, as consumers look for price competitive and convenience. Bricks and mortar businesses find it hard to compete with Amazon on many points, which has led to a string of business failures, particularly from established high-street names.
The Secrets to Primark’s Success
The current retail landscape makes Primark’s recent success even more impressive. The retailer announced a 4% rise in sales for the six months to March, just months before its rival Arcadia Group was forced to announce store closures. This growth was achieved, remarkably, by a company without an online presence.
It’s not just the retail climate that they are competing with, either. The fashion industry is coming under increasing pressure for its environmental impact and fast-fashion, of which Primark is a key driver, is becoming increasingly targeted by governments and eco-consumers.
However, despite the environmental consensus against the fashion industry’s practices, Primark has capitalised on this money-making sector. Online retailer Boohoo, sharing a similar market but in the e-commerce space, showed sales growth for the last four months of 2018 of 44%. In the high-street world, no clothing business can compete on price and convenience with Primark.
According to Tim Kelly, Primark’s director of new business development, the secret to their competitiveness lies in its cost efficiency. “We save on small stuff – our packaging is quite simple – and we do believe that all the way through our supply chain we do make a difference.”
However, not even Primark will have the power to survive against the reducing footfall on UK high-streets. Every retailer is forced to adapt to the new market, and Primark’s giant new store in Birmingham is the clearest example of a business future-proofing itself. The evolution of bricks-and-mortar retail demands that businesses no longer simply sell goods but offer an experience to their customers. This incentive to leave their homes and visit a physical store is vital to the future of retail.
Primark’s new five-story outlet does not just sell clothes. Included in the establishment is a Disney-themed café for young audiences, along with a nail salon, barbers and free Wi-Fi for their broader customer base. Taking up a disused shopping centre, the Primark store is designed to provide a ‘day out’, creating events that will attract an audience to which they can sell their goods. Many believe this to be the future look for traditional retail and Primark have taken a big step to ensure their growth continues.
As mentioned above, much of Primark’s success would not be possible without intelligent cost saving along the supply chain. Here at Expense Reduction Analysts, we are experts at helping businesses reduce retail operating costs. Our industry experts have worked with some of the UK’s biggest companies and can save money in a range of cost areas, from utilities to distribution. It is vital that retailers begin to prepare for the industry’s much-changed future, but sizeable investments will be required. If you are looking to free up some capital in your business, why not speak to our dedicated team and see what savings we could create for you?