Clothing retailer’s finance director says this Christmas ‘demonstrates that the high street is not going to disappear soon’
So much for a digital Christmas. A mix of low prices, snazzy stores and up-to-the-minute fashion delivered a 25% rise in sales for Primarkin the three months to 5 January without a single item sold online.
While rivals rush to invest in smartphone apps and battalions of delivery vans, John Bason, Primark’s finance director, said the company had no plans for an internet store. “Our focus is clearly on the high street consumer experience. This Christmas was a demonstration to me that the high street is not going to disappear any time soon,” he said.
Low-price food stores such as Aldi and Lidl and discount chains including Poundland, 99p Stores and B&M Bargains are also seeing a sales boom without any help from the internet. They are all opening stores and attracting cash-strapped shoppers by holding down prices.
Poundland is estimated to have seen a 20% rise in sales over Christmas, Aldi saw sales growth of more than 30% and Lidl’s market share hit a new high.
“These stores are giving hope to the high street. They are a chink of light in a very dim retail world,” said Neil Saunders, managing director of retail consultancy Conlumino. Although some see discount stores as part of the decline of the high street, Saunders said most now look good and keep an area vibrant by attracting shoppers looking for a bargain. “Landlords can’t afford to be snobbish about a tenant that is successful,” Saunders said.
Poundland, for example, could double its number of stores to 1,000 over time and B&M is opening a store a week.
As rival fashion chains close stores, Primark plans to open 200,000sq ft of new space this year on top of 1.1m sq ft in 2012, which included a second flagship on London’s Oxford Street. New developments will include extensions to its Newcastle and Manchester stores and a new store in Frankfurt, Germany. It is also hoping to open a trial store in France this year.
Bason said Primark was spending money on making its high street stores look more exciting and modern, keeping prices low and ensuring it had the right range of clothing. That helped the chain achieve underlying sales growth over the three-month period of 9% once the impact of new store openings was stripped out, according to analysts. The headline 25% number included new store openings. Primark saw underlying sales rise in all its markets including Spain, Portugal and Germany, but the UK was its strongest performer.
“Anyone can see Primark has got a strong proposition out there as people are looking for value for money. I’m sure they will look at online in the future,” said Freddie George, retail analyst at Seymour Pierce. He said it was trickier for low-price retailers such as Primark to make online sales add up because the cost of delivering goods to shoppers’ homes was expensive relative to the price of their products.
Saunders agreed that keeping operations simple was a key reason why the likes of Primark, Aldi and Poundland were able to offer low prices. “That’s the trade off for the customer. You might have to go to the high street but you get low prices and part of the experience is have a look and seeing what they have got in store.” He said most of the discounters had plenty of opportunity for growth because their store chains were relatively small at present but achieving profitable online sales would be a challenge.
Andrew Higginson, chairman of Poundland, said the chain would look at selling goods online in future but that was not at the top of its priority list. He said the store’s website was still important as a large number of shoppers used it to check out information on products. “Its about getting coverage on social media for now,” he said. “For the industry in general, over the long term, its about multi-channel, people moving seamlessly between shopping online and in physical stores. It all comes back to the customer and how they want to shop and live their lives. You have got to be relevant.”