Celebrating his 10th anniversary as CEO at Primark, Paul Marchant tells Drapers the secrets to the value retailer’s success.
“You have to be agile and on your toes all the time. That means looking at our formula, prices, experience and service. We are always changing and evolving. We are never complacent, and we are slightly paranoid – that way you can’t really go wrong.”
These are sound words of advice in today’s complex trading climate from one of the high street’s most respected leaders, Primark CEO Paul Marchant – and he has clearly been putting them into practice.
When Drapers visits Marchant at Primark’s bright, modern and open-plan headquarters in Dublin city centre, he is days away from his 10th anniversary at the helm of one of the UK and Ireland’s leading high street retailers.
The business Arthur Ryan had created with his team set us up to be really robust and resilient
Marchant joined Primark – which is known as Penneys in Ireland – as chief operating officer in January 2009, before stepping into the CEO position in September, succeeding the late, great Arthur Ryan, who sadly died in July this year. Ryan founded Penneys 50 years ago, in 1969.
“It was a nine-month elongated induction,” laughs Marchant, who is dressed casually head to toe in Primark product. “I had the privilege of taking over from the main man, which I was very proud of.
“When I joined, what excited me so much about this opportunity was how strong the foundations were in the Primark business model. The business Mr Ryan had created with his team set us up to be really robust and resilient.”
In the intervening decade Marchant has built on those solid foundations turning what was a UK and Ireland-focused retailer with a relatively basic store design and product offer, into an international powerhouse with 373 stores across 12 countries, operating 15 million sq ft of selling space, and employing more than 75,000 people. Primark’s adjusted operating profit grew 25% year on year to £426m for the 24 weeks to 2 March 2019 on sales which rose 4% to £3.6bn.
The high-spec head office above the retailer’s first store on Dublin’s Mary Street is preparing to welcome more employees when Drapers visits.
Primark moved its Reading-based product operations to Dublin in September, affecting 220 roles, as Drapers revealed earlier this year. Half of those staff members made the move across the Irish sea and were kicking off with a “freshers’ week” on 10 September. The other half took an enhanced redundancy package. A further 54 people across the Reading and Dublin offices were promoted as a result of the changes, and Primark is recruiting for roles across buying and merchandising, design, product technologists and sourcing.
The business I joined 10 years ago was a lot older, a lot more male and it was completely formal
“The move has gone really well, and we have to give huge credit to all our colleagues in Reading and Dublin for managing that integration. It’s a real indication of the culture of this business, we are very open and welcoming, low on hierarchy and politics, and we have an engaging way of working,” says Marchant.
“The business I joined 10 years ago was a lot older, a lot more male and it was completely formal. I was called Mr Marchant for the first couple of years and everyone was in a suit, shirt and tie.
“We are going through a culture revolution. If you want to understand what that 22-year-old employee wants you won’t get that by sitting up in a mahogany-lined office – you need to be on the floor talking to them every day.
“The people agenda is so important for us. It is about getting the right talent, and developing and nurturing them. There is a family feel to the business.”
We are going through a culture revolution
That family feel is certainly palpable throughout the colourful office, and true to his word the ever personable and charismatic Marchant chats easily to staff members at all levels as we meander through one of the two on-site cafes.
Aside from the culture of the business, one of the biggest changes Marchant has implemented in the last 10 years is the dramatic evolution of Primark’s stores.
“When I arrived, one of the biggest areas for development was the look and feel of stores. We were fairly basic in our store design. They were well built and functional, but we weren’t big on visual merchandising or photography and the windows didn’t get much love.
“We spent a lot of time, effort and energy moving that store look and feel on. We started with mannequins, to show customers how to pull looks together, and that worked, as did putting more accessories into the clothing areas.
“Now we have customer seating and wi-fi in all our refurbished stores. We have introduced services like food and beverages, nail and brow bars. We have created a much more experiential proposition.”
Experience has become something of a buzzword in retail, but Marchant believes in-store theatre is crucial to the success of the business which, unlike its competitors, does not trade online.
“Our strapline is ‘Amazing fashion, amazing prices’, but I think it needs something else now. We need to give the shopper more reasons to shop with us. If I wake up on Saturday morning and it is chucking it down with rain, why am I going to get out of bed when I can watch Netflix and order Deliveroo and not even leave the house? We have to give a reason to come in. The more facets and dimensions you add to your model, the more chance you have of them saying ‘I’m going to go to Primark today’.”
Primark introduced a Primarket cafe concept and a Disney cafe at its largest global store – and the world’s biggest shop, as designated by the Guinness Book of Records, 160,000 sq ft across five floors – in Birmingham this summer. It also has a customisation lab, a beauty bar and a barber.
“Primark has done a terrific job on merchandising its stores and making them attractive and exciting places to shop in, as exemplified by the new Birmingham flagship,” says independent retail analyst Nick Bubb. “That has enabled it to take a lot of market share off BHS, Marks & Spencer and the middle of the fashion market in the UK over the last 10 to 15 years.
“There is still tons of room to grow overseas, but the UK is now relatively mature and the most important challenge it faces is how to withstand growing online competition without having its own online offer.
“The economics may be difficult, but I suspect that is why they lost John Lyttle [former Primark COO] to Boohoo [where he is now group CEO].”
Despite the growing competition, Marchant is adamant the retailer will not launch a transactional website with home delivery but admits that click and collect might be an option down the line.
“Our model is about high volume, low intake margin, low selling price. Those dynamics make home shopping very difficult for us. We have talked about doing a click-and-collect model and we’re looking into it, but we have made it very clear that we wouldn’t take it beyond stores unless we find a route that really enhances the current model from both a customer experience and financial perspective.”
Product prime mover
Marchant, a product man through and through, cut his teeth as a buyer at Topman and River Island before moving to Debenhams, where he was the trading director of clothing. In 2005 he joined New Look as buying director and was promoted to chief operating officer in 2008, before making moving to Primark the following year.
The Kent native has lost none of his passion for product and is eager to show Drapers interesting upcoming, still under-wraps collaborations as we pass rails of product during our tour.
The speed at which product is turned around is another significant change Marchant notes in the market.
“Consumers want what they see today tomorrow. Gone are the days of buying for two or four seasons. We are buying all day, every day.”
Primark has had to reconfigure how it runs its buying operations over the years to adapt.
“The way we sign off product has changed, we have much more frequent product reviews. We have to give our buying teams far more freedom and autonomy to get on with it. We can’t have a situation where we see a great print dress and we’re waiting two weeks for sign-off from the director. The buyer needs to be able to make that decision right there and then.”
Sourcing has also changed. The bulk of Primark’s manufacturing still takes place in Bangladesh, China and India, but the way it works with those suppliers has shifted – having fabrics and samples approved ahead of time –and it has also introduced some near-shore manufacturing: jersey and wovens are turned around quickly in Turkey, Moldova and Morocco.
Some suppliers have been working with us for 30 years, and we treat them fairly and with respect
“One of the reasons we’ve been able to make better products and shorten the lead times is the long-standing nature of our relationships with our suppliers. Some of them have been working with us for 30 years, and we treat suppliers fairly and with respect. We have high expectations, but they see their businesses grow when we grow. Those partnerships are so critical.”
In 2013 Primark became synonymous with the Bangladesh Rana Plaza disaster as one of its third-party suppliers was based in the building. Primark was one of the most proactive in the wake of the disaster and was the first UK retailer to sign up to the Bangladesh Accord on Fire and Building Safety. Primark also started a compensation scheme for victims and their families.
The retailer has been a member of the Ethical Trading Initiative (ETI) since 2006 and has been ranked as “a leader” since 2011, meaning it is in the top 5% of member brands. Primark’s ethical team comprises 110 people working on the ground with the sourcing teams, buyers and its suppliers, and the business conducts 3,000 factory audits each year.
Peter McAllister, executive director, ETI, said: “Primark recognises that there are problems in the supply chain and it needs to remain vigilant. It has a leader status as it works with suppliers to mitigate risks, it has a team of skilled people knowledgeable about human rights in the supply chain working for it, when it finds problems in a factory it tries to tackle the problems rather than abandoning it.
“The Primark team knows the supply chain is not perfect but they take it seriously and open themselves up to scrutiny by us. They are one of the more active retailers on the high street. I am much more concerned about high fashion brands who are not engaged with us.”
One thing any business that becomes international has to do is recognise every single store is unique, not just every country
In August Primark announced that it will train 160,000 cotton farmers in India, Pakistan and China in environmentally friendly production methods, in partnership with Cotton Connect and the Self Employed Women’s Association trade union. The scheme, to be completed by 2022, is part of Primark’s sustainable cotton programme which targets the use of 100% sustainable cotton in all its product categories.
Sustainable cotton is currently being used in some of its denim, women’s pyjamas, towels and bedding. It will also be rolled out to menswear and T-shirts over the coming seasons. Primark launched its first range of jeans made with 100% sustainable cotton in March.
“The misconceptions [around low-priced products being unethical] are very frustrating,” Marchant muses.
“They have to be dispelled and we have to communicate our story. We haven’t been as vocal as we should have been [about what we’re doing]. Because we are in a position of being best in class on price, we have to be absolutely sure about the supply chain behind delivering that £2.50 T-shirt.
“We have to be able to put our heads on our pillows at night and know we have done everything to ensure we have an ethical and sustainable supply chain.”
As well as sustainability, another key focus for the Dalkey resident is international expansion. Up until 2006 Primark was a UK and Ireland-only business. Over the last 13 years it has expanded to cover 12 markets comprising Spain, Portugal, Germany, Belgium, Netherlands, Austria, France, Italy, Slovenia, the US and the UK and Ireland. Poland and the Czech Republic are next on the expansion trail in 2020.
Marchant says the most important factor to successful international expansion is recognising the nuances within a country at a local level.
“One thing any business that becomes international has to do is recognise every single store is unique, not just every country. We have stores in the north of Spain that are completely different to those in the south. We give our store managers a high level of autonomy for their own inventory, so you can make sure that your product offer is much more aligned with the customers’ needs in that market.”
For the foreseeable future the roll-out will be focused on Europe and the US.
“We don’t want to run before we can walk,” Marchant winks. “The Primark brand has strong traits that give it the potential to operate in many more markets in future. The world is large, and the opportunities are there for us, but we have a big job to do to grow in Europe and to establish ourselves properly in the US, so you won’t be hearing anything in the short-to-medium term about a third continent coming on board.”
Although successful, the expansion has not been without its challenges. In 2017 Primark had to reduce the sizes of its stores in Connecticut and New Jersey from 53,000 sq ft to 35,000 sq ft to cut costs . The level of sales generated in the now smaller stores remained the same and so profitability increased dramatically.
“We are happy to go into a market, make mistakes and learn lessons but learn them quickly. We adapt and evolve quickly. We are always cautious with our expansion. We want to move at a pace that is digestible, we want every store open to look amazing. We don’t need to move faster than our model allows us to.”
Analyst Richard Hyman regards this as one of the retailer’s greatest strengths: “The real strength of Primark is it has grown and developed in small steps – it is obsessed with tightly managing its expansion. It is careful and doesn’t open too many stores too quickly – that is its secret to success. Others have rushed too fast in the pursuit of growth, Primark is patient and learns as it grows.”
None of us like to see empty units on the high street – it isn’t good for the customer experience
The other key challenge facing the business closer to home is weak trade, lower footfall and falling consumer confidence in the UK and Ireland. Sales at Primark were up 4% year on year for the 52 weeks to 14 September, however like-for-like sales dropped 2% for the period. In the UK sales increased 3% but like-for-likes were down 1%, albeit the business still delivered “a significant gain in market share”.
To combat the difficult trading environment Primark is negotiating with landlords to lower rents in the wake of so many of its fellow retailers embarking on store closure programmes and company voluntary arrangements.
“None of us like to see empty units on the high street, it isn’t good for the customer experience,” asserts Marchant.
“We continue to open new stores in the UK and we continue to firmly believe in the high street and the role we play in local markets. We would love to see a healthy buoyant high street full with our competitors, we want to trade alongside the best but we can only stress about our performance and make sure we are doing everything we can to satisfy our customers’ demands.”
When asked if he is concerned about currency fluctuations squeezing margins, Brexit, the increase in company voluntary arrangements and store closures, and consumer spend moving away from clothing, Marchant responds: “Yes, yes, yes and yes,” adding: “But nothing keeps me awake at night as there’s nothing we can’t deal with, with a concerted effort and a real focus.
“There are always challenges. The way you deal with that is to try to be better every day. We are good at not ever wallowing in our glory and recognising that we have to be better today than we were yesterday. That perspective of being paranoid and conscious of volatile conditions and a highly expectant consumer keeps you on your toes.”
So, with 10 years down, what does the next decade hold for Marchant and Primark?
“I have no idea!” he laughs.
“We have to evolve our proposition to meet changing customer demands and customers are changing so quickly now I’m not sure what the store will look like in 10 years’ time. When I joined did I think I’d be opening cafes and nail bars, or a 160,000 sq ft store in Birmingham? No. One thing is for sure though, in 10 years’ time we will be totally different to the business we are today but that’s OK as long as you don’t let different sneak up on you.”