Introduction

Primark (known as Penneys in the Republic of Ireland) is an Irish clothing and accessories company, which is owned by
Associated British Foods (ABF).1 The first Penneys store was opened in June 1969 on Mary Street, Dublin, with this
original store still in operation to this day.2
Since its inception in 1969, Primark has grown considerably over the years, engaging in international expansion. It now
has more than 350 stores in 11 different countries worldwide.3 It opened its first UK store in 1974 but was forced to change
its name to Primark because the US company JC Penney had trademarked the name in the UK. The company’s major
expansion into the UK really happened in the mid-2000s, leading it to become a staple on Britain’s high streets. In 2005, it
bought the Littlewoods retail stores for £409 million, retaining 40 out of the 199 stores and selling the rest.4 In May 2006,
the first Primark store outside Ireland and the UK opened in Madrid, Spain.5 Since then, it has marched steadily across the
Copyright © 2019. McGraw-Hill UK Higher Ed. All rights reserved.

continent, opening stores in the Netherlands, followed by Portugal, Germany, Belgium and Austria. It expanded into France
in 2013 and its first Italian store opened in 2014.6, 7 This expansion saw Primark’s sales rise by 150 per cent between 2009
and 2014, making it a new force in the global rag trade.8
However, the company had its sights on further expansion and in 2015 made a bold move, opening its first US store in
Boston, followed shortly by the establishment of eight other stores in the United States.8 Taking on the US market worth
US$200 billion was a big challenge for Primark, demanding an initial capital investment of US$340 million.9 In 2017,
further plans for expansion were revealed when it opened 29 additional stores, mainly outside the UK, in an attempt to gain
an even deeper presence in Europe and the USA. This expansion plan came after the business tripled its floorspace to about
13 million square feet (1.2 million square metres) over the previous decade.10

A recipe for success

Fahy, John, and David Jobber. EBOOK: Foundations of Marketing, 6e, McGraw-Hill UK Higher Ed, 2019. ProQuest Ebook Central,
http://ebookcentral.proquest.com/lib/bournemouth-ebooks/detail.action?docID=6212385.
Created from bournemouth-ebooks on 2021-10-01 16:51:19.
 Primark has increasingly made its mark on global retailing and many have tried to identify its ‘recipe for success’. Some
have argued that Primark is to fashion what Ryanair is to aviation, an Irish success story spreading affordable Page 248
9
fashion across the globe. Primark’s success is built on selling trendy clothes at astonishingly low prices.
Appealing to the 16–24-year-old market, especially women, Primark has shown that, no matter what your budget, it has a
great range of fashion and home accessories at affordable prices.11 Maureen Hinton of Conlumino, a retail consultant,
argues that Primark has a winning combination: cool clothes, attractive stores and – most importantly – rock-bottom prices.
It targets budget-conscious shoppers with catwalk styles and has the ability to react to trends quickly, identify and promote
seasonal and novelty items, and offer value for money. According to Sanford C. Berstein, in Britain in 2015 the average
selling price of women’s clothes in H&M was £10.69, compared with £3.87 in Primark.8 Along with retailers such as Zara
and H&M, Primark has helped to contribute to the contemporary fast fashion trend. This sees consumers buy lots of items at
very low prices, discard them after a few wears and then come back for another batch of outfits.8
Primark adheres to cost-based pricing and is a price leader. Its business model focuses on high turnover and low profit
margins.12 The company withstands tiny margins, making its money on volume. It believes demand for clothes is elastic
and that, the cheaper they are, the more shoppers buy of them. This seems to ring true according to recent research, which
has shown that H&M sells on average £3,400-worth of clothes per square metre in Britain, whereas Primark sells £5,300-
worth. People are buying cheap clothes in Primark and in large quantities. John Bason, ABF’s finance director, says Primark
achieves its low prices thanks to sleek logistics, a meagre marketing budget and its scale, which helps win bargains from
suppliers.8 It tries to be as efficient as possible when transporting products from factories to stores, keeping logistics costs
down – for example, it asks its suppliers to pack T-shirts so that they are ready to go straight on to store shelves. It spends
very little on advertising and chooses to use social media to promote its brand, rather than expensive celebrity fashion
advertising campaigns. It designs clothes that offer the latest trends, but doesn’t use expensive hangers, tags or labels. It also
sells a lot of items across all of its stores worldwide, which allows it to make savings from buying in bulk for all of its stores.
These decisions mean that it makes savings from buying at every stage of its supply chain.11

The cost of low prices

With its business model focused on offering the lowest prices on the high street, Primark is constantly questioned over its
commitment to a range of ethical and environmental issues.13 It has been struggling to overcome the consumer’s pre-fixed
notion that fast fashion is not sustainable and certainly not ethically made.14 In the past, there have been concerns about the
conditions in which cheap clothing is made. In 2013, more than 1,100 people were crushed when a factory complex
collapsed in Bangladesh. The victims included workers stitching clothes for Primark.8 In 2014, a £10 dress bought in a
Primark branch in Swansea contained a cry-for-help label sewn with the message ‘forced to work for exhausting hours’,
while a cheap top from the same store read ‘degrading sweatshop conditions’. Another woman, who purchased a pair of
trousers from Primark in Belfast in 2011, claimed to have found a handwritten note from China pleading for help from the
international community for alleged human rights violations.15 In addition, Primark’s culture of disposable fashion doesn’t
always sit well with environmentalists. Concerns have been raised about the impact its products have on the environment
‘from the cradle to the grave’.8
Copyright © 2019. McGraw-Hill UK Higher Ed. All rights reserved.

Primark claims that, although its prices are low, the standards it expects from members of its supply chain are high. It
does not own its own factories but is very selective about who it works with, claiming that the welfare of the people making
its products matters to it.14 Primark works directly with suppliers and their factories to ensure that internationally
recognized standards are being met. It also works with NGOs and other organizations to improve ethical and environmental
standards in the industry. It is a member of the Sustainable Apparel Coalition, committed to Greenpeace’s Detox Campaign
in 2014 and is a founding member of the ACT initiative on wages. It has also been a member of the Ethical Trading
Initiative since 2006 and has achieved top-level ‘leadership’ status since 2011.11
Primark has been accused in the past of lacking transparency about its ethical standards. However, it recently developed a
new online tool, ‘The Global Sourcing Map’, which allows consumers to access information about the 1,071 factories and
suppliers that make up the company’s supply chain. This is a positive move for Primark as it builds on its previous efforts to
promote social and environmental sustainability in its supply chain.16

Fahy, John, and David Jobber. EBOOK: Foundations of Marketing, 6e, McGraw-Hill UK Higher Ed, 2019. ProQuest Ebook Central,
http://ebookcentral.proquest.com/lib/bournemouth-ebooks/detail.action?docID=6212385.
Created from bournemouth-ebooks on 2021-10-01 16:51:19.
 Challenges ahead
In recent years, Primark has faced a number of different challenges that have the potential to impact on its business. First,
unlike most clothing retailers, Primark relies entirely on old-fashioned bricks-and-mortar stores and has shunned Page 249
an e-commerce offering.10 Its lack of an online store may be viewed as a challenge going forward. Consumers
are increasingly shifting their spending online and there is a fear that Primark may struggle to compete with online retailers
offering low prices.12 If consumers switch in large numbers to buying clothes online, through social networks and
messaging services, Primark may get left behind.8 Second, as Primark expands globally and makes inroads into the US
market, it is aware that not all foreign retailers have found this move easy. Tesco has struggled with its transatlantic venture
and underestimated the costs of breaking into such a large and highly competitive market. A market that appears so similar
can have unexpected differences and challenges.8
In 2017, sales at the fast-fashion chain were more than 19 per cent ahead of 2016 figures. Primark has achieved the
highest market share gains of all players in the sector, outperforming online giants ASOS and sportswear specialist JD
Sports. Primark is also on track to overtake Next as the UK’s second-biggest clothing retailer. The clothing chain is said to
have benefited when some of its competitors have suffered, because it kept its prices steady. Many rivals had increased
prices in response to rising costs, caused by the fall in the value of the pound since the Brexit vote. However, Primark has
been adept at capitalizing on shoppers trading down.17
Primark’s website and social media activity play a key role in tempting shoppers into stores. A huge part of the Primark
website is ‘Primania’, a hub of user-generated content. It’s an online platform that invites customers from all over the world
to share photos and images of their Primark outfits to Instagram with the hashtag #Primania, which are subsequently shown
in its LED store displays across Europe and the USA.18 In its first year, ‘Primania’ notched up 300,000 visitors a week.
Primark has also been clever in harnessing the power of social media. The company has 11 million followers across a
number of social media platforms, nearly half of whom are on Instagram. Primark’s social media following is rising rapidly
as young people increasingly use their mobile phones to browse fashions before heading into stores. Despite the challenges
that Primark faces – global differences, lack of an e-commerce site, ethical and environmental concerns – the evidence
shows that the retailer continues to thrive as it has been able to generate significant sales growth. The future for the low-
price retailer looks bright.19

Questions
1. What factors have allowed Primark to sustain its price leadership position? How has it used price to convey a
differential advantage and appeal to a certain market segment?
2. Highlight the main ethical concerns associated with Primark’s pricing approach. What evidence is there that Primark
has taken these ethical concerns seriously and has shown commitment to a range of ethical and environmental issues?
3. What are the strategic options open to Primark? Should it move in to online retailing and develop an e-commerce
website? Why, or why not?
Copyright © 2019. McGraw-Hill UK Higher Ed. All rights reserved.

4. Why do you think Primark made the decision to move into the US market? What are the opportunities and challenges
associated with this decision?

This case was prepared by Marie O’Dwyer, Waterford Institute of Technology, Ireland, from various published sources as a
basis for class discussion rather than to show effective or ineffective management.

References
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Fahy, John, and David Jobber. EBOOK: Foundations of Marketing, 6e, McGraw-Hill UK Higher Ed, 2019. ProQuest Ebook Central,
http://ebookcentral.proquest.com/lib/bournemouth-ebooks/detail.action?docID=6212385.
Created from bournemouth-ebooks on 2021-10-01 16:51:19.
 March. Available at www.thejournal.ie/penneys-business-1957209-Mar2015/?utm_source=businessetc (accessed 21
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news/concerns-primarks-cheap-prices-could-753997 (accessed 21 December 2018).

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Fahy, John, and David Jobber. EBOOK: Foundations of Marketing, 6e, McGraw-Hill UK Higher Ed, 2019. ProQuest Ebook Central,
http://ebookcentral.proquest.com/lib/bournemouth-ebooks/detail.action?docID=6212385.
Created from bournemouth-ebooks on 2021-10-01 16:51:19.