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Primark 'could re-educate US consumers on pricing'

Chief executive Paul Marchant suggests that Primark’s “everyday low prices” approach to fashion retailing may help to re-educate US consumers away from their apparent obsession with discount offers.

He also revealed to Drapers the extent of the price-comparison research the Dublin-based firm pursues to ensure it has the best prices in any town. Speaking minutes after its first store in the US opened in Boston yesterday, Marchant explained that Primark reviews on a daily basis the prices of all its rivals.

“Probably only supermarkets research food prices like we research fashion prices,” he said. “I don’t know of anyone who does it to the degree we do.

“For our American launch, we looked at all the obvious local value retailers and beyond – Walmart, Kmart, Kohl’s, Target, JC Penney, Forever 21, Old Navy, H&M… Yes, there is a discount culture here, but if you look at how H&M and Zara operate in the US, it is pretty much a full-price model.

“That is what we will do. When they see just how cheap we are all the time, maybe we will do a bit of re-education of US consumers.

“Of course, there are always holiday events for us to consider, and we will make some offers there. And even we make mistakes with product, but once they become obvious, we get rid of them quickly with aggressive markdowns. But that is only a tiny percentage for us.”

The US is Primark’s 10th country for trading, its second continent and its third currency. Its policy has been to have standard prices across its empire, doing straightforward currency conversions at a standard rate.

Marchant said: “We were not going to come to America and charge twice what we do in the UK or Europe. That would be crazy.

“As elsewhere, we only show rounded prices and the only instances were we have made an adjustment on prices is because of our research. For example, Forever 21’s cheapest jean is $7.90, so we have made ours $7, slightly less than its equivalent UK price.”

The living wage is a hot topic at home, and Marchant points out that running costs in the US are generally more expensive than in the UK: “The UK is our most efficient market. Labour costs are higher in Ireland, Europe and in the US.

“Construction costs are more expensive in America too. It’s not cheap doing business here.”

He declined to reveal how much the nine-month refurbishment of the 77,000 sq ft, four-storey former Filenes Basement building cost the company.

(Amid all the bally-hoo and cheering around the opening on Thursday, a small group of labour activists paraded outside the elegant 1912 store protesting at Primark’s refusal to recognise the United Food and Commercial Workers Union. The dozen or so protesters were somewhat outnumbered, however, by around 2,000 customers waiting to get into the store, which employs 590 permanent staff and is taking on a further 420 seasonal workers for the Thanksgiving-Christmas period.)

Asked about the greatest challenges Primark faces in the US, Marchant replied: “It has to be understanding the US consumers’ reactions to our trends, our different fashion looks, colours, sizing, pricing…

“Then we have to move quickly. Our store manager in Boston is local and our area manager for the northeast patch is local, and we are actively encouraging all our people here to feed back to us their views and what the customers say.

“We have got things right and wrong in every market we have entered, but we are very nimble and react quickly.”  

The website is promoted heavily across the new store, including across the back of store staff’s new turquoise and black T-shirts.

Marchant remains unconcerned about criticism that Primark should have a transactional website, not just a marketing one: “The finances of running a transactional website with the sort of prices we charge just don’t add up, so we do not get stressed about it.

“We are heavily involved in digital communications and our customers are so vocal on social media, but we choose to spend our money in investing in a fantastic shopping experience as we have here in Boston.”

Following this debut, Primark will open another seven stores across the northeastern US, starting on November 25 at the King of Prussia mall in Pennsylvania. Opening in 2016 (with perhaps a couple in the spring) will be Burlington Mall (Burlington, Massachusetts), Danbury Fair (Danbury, Connecticut), Freehold Raceway Mall (Freehold, New Jersey), South Shore Plaza (Braintree, Massachusetts), Staten Island Mall (Staten Island, New York) and Willow Grove Mall (Willow Grove, Pennsylvania). All will be served by a Primark distribution centre in Bethlehem, Pennsylvania.

At yesterday’s launch, George Weston, chief executive of Primark parent company Associated British Foods, told Drapers of the rationale for opening in this region: “In the northeast there is a lot in common culturally with Europe and there is a lot in common in the way many people like to dress. Clearly we have to learn a lot more specifics, but I am confident we will do that.”

Asked what might come after the already-announced openings – which in most cases will take over surplus retail space from Sears stores – Marchant was relaxed and non-committal: “We have always said we could go to a maximum of 10 stores in the northeast, so we have scope to add another couple. But we are not the sort of company to do a sprint. We will see how we do and then decide what to do next.”

And with that, he returned to talking to Primark’s latest customers in their 292nd store.

  • On Sunday, September 13 Marchant celebrates six years as chief executive of Primark. He succeeded Arthur Ryan, who founded the business as Penneys in Dublin in 1969. Ryan is now chairman of Primark.

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