Most readers of this blog will be aware of the business model of Primark, selling on trend clothes at very low prices. The company now sells more clothes than any other retailer in the UK – serving 1.4 million shoppers every day. It has expanded into Europe across Austria, Belguim, France, Germany, the Netherlands and Spain.
Now Primark are opening their first store in the USA on 10th September in Boston, with another eight opening over the next year.
This is of particular interest to us at MTP as Primark belongs to the Associated British Foods Group (ABF), one of our long-standing clients.
Two other leading UK retail companies, Marks & Spencer and Tesco, both expanded into the USA when they were clients of MTP and both suffered losses in that country.
- M&S bought the well-known US store chain Brookes brothers but demonstrated the need to understand the very different business model they had.
- Tesco started a Greenfield company ‘Fresh & Easy’ in California. Despite carrying out a huge amount of market research and consumer testing, and also being regarded as one of the most astute retailers in the world, they recently threw in the towel and withdrew. The problems nearer to home that they were experiencing meant they could no longer afford to carry the losses being sustained.
It will be interesting to see if Primark can buck the trend of retailers trying to make a success in the most competitive market in the world.
The Economist points out that a number of US retailers have recently lost their way including Abercrombie & Fitch, Gap and J Crew.
One problem Primark may face is the lack of an online business. The Economist feels that their prices are too low to justify the shipping costs of ecommerce.
We will be intrigued to see if Primark suffer the same experiences as Marks & Spencer and Tesco or establish themselves as that rarity, a successful retailer from across the Atlantic in the USA.