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Report on how can primark enter india
Typology: Summaries
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Submitted by:
Abhishek Kumar Patra (19PGPIM001) Akash Garg (19PGPIM006) Mehak Gupta (19PGPIM027) Shasank Kumar Singh (19PGPIM035) Shubhmoy Halder (19PGPIM038) Varun Paliwal (19PGPIM0 47 )
3.1 Primark Stores Limited - Strengths
Strength - Strong Supply Chain Network
A strong supply chain network helps Primark to better serve a wide customer base and increase its sales. Primark acquires products from international suppliers based in Europe & Asia. Its merchandising & buying teams buy the latest fashion & up-to-the-minute designs at very economical price. It procures products in large quantities to achieve economies of scale & reduces overheads. It strictly adheres to its set rules and criteria while selecting its suppliers. Primark sells merchandise online at www.primark.com in all nine countries. Its code of conduct is regularly reviewed by the management board. The company ensures high quality standards and tests its products at all stages of production.
Strength - Broad Product Offerings
Wide range of product offerings helps Primark to serve diverse needs and preferences of customers enhancing its top line performance. Primark offers a range of products under apparels for men, women & children categories. Its product portfolio has shirts, t-shirts, trousers, coats, pants, denims, sportswear, golf wear, ski-wear, suits, skirts, cardigans, dresses, jackets, leggings, tops and lingerie, among others. Apart from that, Primark offers a wide variety of accessories such as hat, scarf, bags, ties, bracelets, wallets, sunglasses and footwear. It also gives home products such as fragrances candles, towels, bath mats, cushions and throws, duvets, bed sets, percale sheets and pillows. Wide product offerings help it to achieve balanced revenue platform.
Strength - Strong Financial Performance
Primark has shown a strong financial performance in the FY2018, which enables the company to pursue its growth plans, aggressively. The company reported 9% overall increase in net sales in FY2018. This increase in revenue was principally attributed to increase in retail market by 9%, rise in like-for-like sales & retail selling space by 1%. Primark’s operating profit increased by 1.7% in FY2018. Also, it has reported operating margin of 12.6%, which was higher than Marks and Spencer Group plc reporting value of 6.8% in the same period. Such strong performance helps Primark in protecting its position in the market place and strengthen its future growth and expansion plans.
3.2 Primark Stores Limited - Weaknesses
Weaknesses - Limited Business Operation
Primark’s organic growth rate has been slow when compared to its major competitors. The company operates only in 293 stores across the US and nine countries in Europe and employs 61,000 people, on the other hand Marks and Spencer group plc, operates 852 stores in the UK and 480 international stores, with revenue of GBP10.3 billion employing 83,069 people Primark needs to take significant measures to improve its performance to stay competitive in the segment.
Weaknesses - Product Recalls
Primark’s brand image might be significantly affected by product recalls. In FY2014, the company recalled Pearl berry lights Kimball in Ireland since it did not match the usual high safety for standards.
Before that the company recalled Clear Fairy Lights Kimball due to issue with the performance of the plug, which could lead to an electric shock in the UK and Ireland. Product recalls may increase its operational costs, which may affect its bottom line performance.
3.3 Primark Stores Limited - Opportunities
Opportunities - Focus on Warehouse
Primark aims to improve its efficiency by opening new warehouses & expanding existing warehouses. The company has doubled its warehouse capacity since 2013. The size of another warehouse in Monchengladbach, Germany has been expanded by 60%. The company also opened a new warehouse in Bethlehem, Pennsylvania. It also opened a new warehouse in Bor, Czech Republic. The company plans to relocate its warehouse in Magna Park, UK to Islip, Northamptonshire. It also plans to open a new distribution centre in Roosendaal, the Netherlands. Such initiatives would help the company to make the goods and products readily available at the stores.
Opportunities - International Expansion
Primark intends to expand its retail network through the opening of stores in international markets. The company’s operations span across Spain, Ireland, Portugal, Germany, France, the Netherlands, Austria and Belgium. It has taken various initiatives to strength its presence in the international market. The rising store numbers may increase the visibility of the company that may encourage more customers to visit its stores.
3.4 Primark Stores Limited - Threats
Threats - Shortage of Skilled Labour
The low availability of skilled professionals may pose challenges to the company. The EU’s labor force is estimated to shrink by 0.2% a year between 2000 and 2030. According to International Center for Peace and Development, it is projected that 110 million people might fall under above 65 years age group by 2030 in Europe, an increase from 71 million in 2000. The old age dependency ratio is estimated to increase from 23% in 2000 to 35% in 2025 and 45% - 50% in 2050. The company primarily operates in Europe. Labor shortage may impact its stability and operational efficiency.
Threats - Expansions by Competitors
The company faces intense competition from both domestic & international companies in the retail market. Its key competitors include Hennes & Mauritz AB, River Island Clothing Co. Limited, Wool Overs and Zara among others. While some competitors undertook expansion programs to match the growth rate, the market also registered consolidation involving mergers and acquisitions. Its major competitors include ASDA Stores Limited, Ben Sherman Group Limited, Joseph Turner Ltd, Hennes & Mauritz AB and Marks and Spencer Group plc. Marks and Spencer group plc (M&S) opened 54 net new stores in UK and 25 net new International stores. Another competitor Hennes & Mauritz AB (H&M) opened 379 new stores including 325 H&M, nine & other stores, 29 COS stores, 13 MONKI stores, two Cheap Monday stores and one MTWTFSS WEEKDAY store. The store opening allows H&M to expand its presence in global market. High competition in the market may force the company to increase its
Users Forecast
User Penetration Rate In Fashion Segment
Average Revenue Per User
Sales Channels
Users By Age
Users By Gender
customer to come to a physical store and make a purchase, instant gratification and instant refunds on returns to name a few.
There are many factors that contribute to the decision making and buying process of an individual, the emotions or expressions that the shoppers attach to each of the store personality types and the various elements that contribute to moulding of a personality of any fashion retail store and thereby provide cues to create the personality that the retailer wishes to reflect and position the store.
Traditionally store branding has been influenced by functional aspects of store image and has less focus on the humanlike personality of stores that can affect its performance. These experiences are influenced by the attributes that subconsciously affect a shopper’s purchase decision. This might involve factors like the colours that adorn the store walls, the music played in the store, the perfumed store aromas, the use of mannequins, colour blocking for the merchandise, the wall décor, interior displays and other store atmospherics.
There are many factors that shape the buying process of consumers, the brand personality can be inferred from sources like advertising style, brand users, product category associations, brand name, symbol and logo, price policies and distribution channels, a store’s personality will be influenced by aspects such as store name, store environment, service quality, store personnel, merchandise quality, brand names.
There are many decisions that a retail store uses to differentiate itself from the competitions, by establishing a unique store brand personality. It has a positive impact on store loyalty. Store personality can influence customer store relationship. It is important to pursue the study of store personality because consumers are likely to choose brands/products whose personalities match their own.
Sophistication : the cues that emerged for the fashion store sophistication traits are chic, elegant, high class, selective, stylish, and upscale. Branded Clothing, high price and a very pleasing interior make a store desirable to buy from. Elegance in a store is characterised by a spacious, well organised environment. A selective store like that of exclusive brands carries only restricted brands’ merchandise and a snobbish store may be typically located in a posh locality and are mainly focussed on the quality of the brands. Upscale stores are the ones that boast of a high price range. Primark has a wide variety of clothing range from inexpensive to exclusive and premium quality products. The common Indian shops in stores like big bazaar to get deals and Primark’s competitive pricing would cut profits from other retailers.
Enthusiasm : The cues for the dimension enthusiasm are the vividly colourful store design, attractive window displays, youthful and regularly updated merchandise, friendly and welcoming staff and lively background music, bright lighting, and non-conventional clothing assortment. The brand Primark has wide recognition in many European countries and such a store in India would appeal to a lot of enthusiastic Indians.
Solidity : The cues for solidity of a store can be well reflected through hardiness i.e. the stores ability to adhere to a particular, preferably “newest” style of fashion, imposing- the size and spaciousness of the store and the extensiveness of merchandise. Inventive store designs, commercials and reputation
of the store. Primark as a brand has a leverage over other Indian competitors as it has access to a wide and fashion cultured European market and the latest fashion trends can keep the customer relationship and brand recall.
Genuineness : The cues for genuineness are conscientiousness, honesty, reliability, sincerity, truthfulness and trustworthiness. Such stores provide value for money, have reliable and honest sales staff, sell authentic merchandise, would not unfairly lure a customer in making a purchase and provide decent customer service.
Unpleasantness : The cues for unpleasantness largely depends on what respondents mostly dislike while shopping. The store is “annoying”, “conservative”, “irritating”, “loud”, “outmoded” and “superficial”. Extremely pushy sales people, traditional and conservative merchandise and store decor, messy interiors and intrusive store music, stores very loud in terms of the lighting, crowding, assortment, old sales people and second-hand clothing signifying outmoded stores, and in general mediocrity end up being major reasons for disdain towards the store.
Primark is able to create this experience so convincingly because everything they do is aligned around exactly physical store only value proposition. It is well-aligned externally with the market because this value proposition matches the needs and desires of a particular customer segment and because it differentiates them from their competitors. And it is well-aligned internally because all of Primark's operations - purchasing, stock management, store design, etc. - are aligned to just create this kid-in- the-candy-store experience.
When we look at Primark in this way, it makes sense that they refrain from also operating an online shop. If it were just for selling low-priced fashion, online might have been a possibility - even though distribution and returns would make it a significant challenge to make such business profitable. But on top of that, creating that same kid-in-the-candy-store experience online is much more difficult. We can't just grab something there, try it and buy or leave it. And how much fun is there in looking at a screen together with your friend and ordering your items there?
Unlike other retail companies Primark invests very little in marketing and instead relies on their customers to “do the talking”. At the top of the organisational hierarchy, they promote and pride themselves on being able to promote that “decisions are made locally”. Despite not spending a significant amount on marketing, they have developed a unique understanding and insight into the consumers they target in every country of operation except the USA where Primark is at an early stage of launching. Understanding the environment, market shifts and analysing strategy, competitive advantage and the economy will allow Primark to maintain their large market share and position as the largest retailer in the UK.
8. The Primark Strategy: Segmentation and Targeting
Primark, they are attracting different segments through their offer of products: Homeware, clothing for children, ladies, men, fitness line called Athleisure and Beauty. This division in the range of products on offer allows the marketers at Primark to respond and organise their strategy into components allowing them to develop characteristics and evaluate their markets to predict the success, rise and decline as per the product life cycle.
10. PESTEL Analysis For Primark
PESTEL EFFECT STRATEGIES Political/Legal The rights of workers and conditions of employment could be an area of concern as it has impacted negatively in the past
Work with relevant bodies in applying legal policies. Primark can also continue working with relevant partners and agencies to ensure working conditions are safe and not over-bearing for employees. Economical Operating across several jurisdictions results in trading across different currencies, therefore exposing Primark to significant financial losses if foreign exchange rates fall.
Primark’s decision to remain as a traditional ‘bricks and mortar’ retailer may impact on the level of potential sales and profits.
Primark in the UK may currently be suffering due to the current weakness in the pound because of the decision to leave Europe, however, there may be an opportunity as weaker currencies result in lower interest rates
Primark’s target consumer habits will be changing. The current target market, otherwise known as the ‘millennials’ are different to the up and coming 16- 24 - year-old because of differences in technology use and the idea that they can purchase anything at the touch of a button through e-commerce means
Social After suffering negative press Primark has made their ‘social responsibility’ a bigger part of their website answering key questions that consumers may have.
Changes in the population, a decrease in younger people and an increase in elderly due to higher life expectancies may open a new market for Primark. Showrooming is now the trend- the idea of going into stores, finding items and then purchasing them later online. However, this may work in favour of Primark because consumers may not find items as cheap as Primark. Technological Incorporating technological features in store and possibly online.
The consumer’s behaviour has significantly evolved. The behaviour of the younger generation and their habits of shopping online is relevant here because of the target consumer for Primark.
Environmental Consumers are increasingly becoming more aware and interested in the impact on the environment especially with the widely publicised effects of global warming.
Primark has been proactive and promote their partnerships with environmentally active organisations. Primark is not alone in being environmentally conscious.
11. Primark’s Porters 5 Forces analysis
Threat of New Entrants:
Brand loyalty and the price factor and convenience may not impact the threat of new entrants to the market. - It would be extremely difficult and a long process to build the same reputation, brand, logistical coordination as Primark as well as their power to turn around designs to store shelves in just a matter of weeks.
Supplier Power:
Shares manufacturing venues with other companies, Suppliers can be substituted but there would be loss of time, resources and efficiency, Supplier relationship is continuously developing.
Competitive Rivalry:
There is a significant competitive rivalry as all the organisations tend to find the same common customers. Other competitors do not solely focus on price as a factor and offer wider ranged items – New Look/ H&M/ Supermarket brand assets.
Buyer Power:
Financial Times said that in UK one out of every seven clothes are sold by Primark which makes it pretty evident that Primark aims to sell it’s product to customers who can afford it.
Primark offers a ‘guilt free’ shopping experience as it attracts people through their low prices/ up-to- date fashionable lines and attracting customers through beauty and sports ranges.
Threat of substitute products:
Whilst customers do not have the option of an e-commerce platform, they still have access to stores and Primark locate their stores with precision by understanding their geography. There are however multiple nearby located SME’s which might capture customers if there is low accessibility of these stores.
