Primark and Asos moving to the ideal retail model. Or not?

Asos, Boohoo, Missguided, and Shop Direct are just a few of the online-only fashion retailers that are continuing to deliver outsized like-for-like sales increases.

Leader of the pack Asos delivered a leap in sales of 30% for the four months to June compared with the same period last year and Boohoo’s recent numbers have been equally sparkling.

These businesses have all had their ups and downs, when the naysayers came out and called time on their stellar growth phases, but as they are all now back on form there should be a realisation that the online channel has not reached its peak by any means as far as the clothing category is concerned.

In contrast, those retailers with insufficient commitment and exposure to non-store channels will likely suffer. This is no doubt why the shares of Asos and Boohoo have motored along of late while the likes of Next, and Marks & Spencer have retreated. Associated British Foods (owner of Primark) has not fared quite so badly as others but is there worse to come?

It has been perennially surprising that Primark has maintained its strategy of not selling online. Fair enough, it has continued to crank out impressive like-for-like sales from its stores and continued to focus on opening more physical stores (including outlets overseas), which has to date served it well. But its most recent figures showed a slightly worrying fall of 0.7% in the first half of the year.

Adding to the surprise is the fact it also has digital natives as its core customer – who are the driving force of online sales and most likely to engage with retailers digitally. To stick rigidly to a physical store-only strategy is surely a mistake and the likes of Primark need to adopt an approach that acknowledges the shifting sands of retail. Things have become a lot more complicated and retailers have to at least start to play around with their models.

Equally though we can also argue that only operating online is not a guarantee of future success. We all know that the online channel has a massive effect on store sales and vice versa, physical stores also drive online sales.

The multi-channel approach has therefore been recognised as the model of the future. On that basis neither Primark or Asos are in the absolute sweet spot. How they both navigate their way to this model will therefore be very interesting to watch.

But at this stage in the evolution of both businesses I’d rather be riding the Asos express because above all else right now it has the mindset for innovation and is very capable at adapting its thinking to meet changing customer demands and market dynamics.

Glynn Davis, editor, Retail Insider

K3 Retail deliver multi-channel solutions that enable retailers to create joined up shopping experiences for their customers whether they choose to buy on-line, direct, in-store or via mobile. It has over 20 years’ experience delivering award winning solutions, to more than 175 internationally recognised retail brands.