English and Literature
Submitted By mshimshi
The fast fashion retail model pioneered by companies such as Zara and H&M has been taken a step farther by Primark, the U.K. and Irish retailer offering clothes at rock-bottom prices. IESEs Julián Villanueva, José Luis Nueno and Julie Ziskind examine the secrets of Primarks success in a new case study.
Consumer habits have changed significantly since the onset of the financial crisis in 2007. Value takes priority over snobby attitudes about labels and brands. This development has been termed the Primark effect, in honor of the company that has earned a nationwide reputation for bargain shopping.
The ability of the chain to sell jeans for £3 or flip-flops for £1 is due to the stores no bells, no whistles business model, built around three cores.
1. Efficient Supply Chain, Rapid Turnover
Like many of their competitors, Primarks strategy is heavily rooted in using private labels.
However, unlike Zaras focus on style, or H&Ms general affordability, Primarks niche is its rock-bottom prices. Costs are kept low by making cheap garments from man-made materials, using cheap production processes.
There is also limited reordering of products, as they operate on a when its gone, its gone basis.
This results in frequent visits from customers, as the average store turnover is six weeks.
2. Limited Operating Costs
As Primarks main selling point is price, the company must forgo expensive advertising almost completely, instead relying on big bags and big savings to convey their message. They also place their cheapest items at the front of the store, attracting passing trade and word of mouth.
Primark stores tend to be in shopping malls outside of downtown, further reducing costs through lower rents.
Finally, staff service is focused primarily on managing checkout lines and managing showroom inventory. Quality of service may…...