- Primark finally caves in and commits to home delivery
- The retailer has historically shied away from full e-commerce
- Likely to have changed its mind due to growing competition from Vinted and Shein, and cheaper delivery services
- No launch date for full transaction web capabilities
- The strategic move provides a new growth opportunity ahead of split from parent group ABF
Dan Coatsworth, head of markets at AJ Bell, comments:
“Primark offering home delivery is the biggest UK retail news of the year.
“Having full online transactional capabilities is something the company has always shied away from. It has always argued that low price-point items are uneconomical to send, particularly if someone is only ordering a pair of socks or a t-shirt costing a pound or two.
“It stubbornly retained this view for longer than anyone expected, before easing back by launching a click and collect service. We’re now primed for the full home delivery experience.
“While physical stores remain relevant, online shopping is well established and Primark clearly had no choice but to adapt to the modern retail world.
“The rise of Vinted and Shein and a proliferation of lower-cost alternative delivery providers to Royal Mail will have been major influences on changing Primark’s view on e-commerce.
“So many people now use Vinted to buy cheap bundles of clothes, and that has created major competition to Primark which has enjoyed years of strong trading as the go-to place for low-cost items. Shein’s rapid growth has also been a headache for UK retailers.
“It’s become a lot cheaper in the past few years to send items by post compared to the old days when Royal Mail dominated the market. Providers like InPost and Relay have significantly lowered the economics of delivery, meaning shoppers can now buy a low-cost item and not have the shipping charges dwarf the price of the goods.
“H&M, ASOS and Boohoo will not be happy at the news that Primark is encroaching on their territory for online fashion orders. It will put even more pressure on them alongside competition from Shein and Vinted.
“Primark has a massive opportunity to accelerate sales growth, and it’s come at an important juncture for the business. It is splitting from parent group Associated British Foods next year into a standalone entity, and the promise of full online capabilities could help to attract a bigger pool of investors to support its growth plans.
“That’s a much more compelling narrative than the current one which is clouded by ongoing trading setbacks. The latest update shows ongoing struggles in mainland Europe and a lacklustre showing in the UK and Ireland.
“The summer heatwave didn’t help as it deterred many people from getting out of the house to go shopping. The hot weather also meant that people weren’t buying autumn clothing early, and one can only imagine how many summer raincoats are left gathering dust in Primark stores.
“There is no firm date for when Primark will start home delivery, yet it has made the first step by acquiring Debenhams/Boohoo’s Sheffield distribution centre. That provides the backbone required to process orders and get items on the vans. Clearly a business of Primark’s size will need significantly greater logistics scale than one depot, suggesting that the group’s investment in full e-commerce capabilities has only just begun.
“There is also the question of whether the home delivery service will eventually be rolled out to Primark’s other geographic territories as it has so far only committed to Great Britain.”
