Primark could lose its number one spot in UK fashion retail due to lack of e-commerce
Primark risks losing its top spot in UK fashion retail to one of its rivals Next or Marks & Spencer, as its lack of a transactional website leaves its unable to sell any stock at all during the COVID-19 retail shut-down.
The value fashion retailer's refusal to go online had to this point been one of its strengths as its high street stores had proved far more resilient that those of its rivals. However with almost all of its global stores now closed, it is unable to trade and has been obliged to cancel all forward orders from its factories.
According to GlobalData, Primark will lose £650m a month from lost store sales for as long as the shut-down lasts. The crisis may force it to reconsider its approach to online as it loses customers to its rivals during the shut-down and potentially loses its number one spot as the UK's favourite fashion retailer.
“In the UK, it risks falling from the top spot in the clothing market this year, as its two closest rivals M&S and Next have the benefit of online operations – with the latter most likely to secure sales over the next few months thanks to its strong branded offer and efficient fulfilment," said GlobalData senior retail analyst Chloe Collins.
“Though Primark has previously denied that launching a transactional website is in its short-term plans, this unprecedented event will provide it with clear impetus to rethink its bricks-and-mortar only strategy.
“After months of social distancing and self-isolation, consumers are expected to prioritise spend on leisure and experiences more than ever, meaning overall non-food retail spend will struggle to rebound in H2.
“While mid-market players are likely to lose out, GlobalData expects Primark’s value proposition to retain its top-of-mind appeal. When stores reopen, heavy discounts will be needed to clear existing seasonal summer stock that will have a limited selling period, however the company’s decision to cancel all future production orders will at least mitigate these risks and prevent it from becoming overstocked,” Collins added.
Primark is far from alone is cancelling future orders. Marks & Spencer has put the brakes on £100m worth of orders, while N Brown and New Look are among several others to pull back on production.
Fashion is expected to be the hardest his retail sector during the COVID-19 crisis in the UK. GlobalData estimates that around £11.1bn in sales will be lost which is the equivalent of the annual clothing sales of Next, M&S and Primark combined. Instead of a small growth of 0.6% this year, the sector is expected to plummet by more than 20%.