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  • - [Narrator] Let's say you wanted

  • to buy this Primark T-shirt.

  • If you're shopping on Primark's website,

  • you'll quickly discover that you can't.

  • (buzzer dings)

  • Over the past 10 years,

  • e-commerce sales have more than doubled.

  • But last year,

  • European fast fashion retailer Primark made 9.5 billion

  • in sales revenue without a single penny

  • from online shopping.

  • - We made a very clear choice

  • and our clear choice is bricks and mortar.

  • - [Narrator] This comes at an uncertain time

  • for struggling clothing retailers.

  • Retailers like Forever 21, JC Penney,

  • and Neiman Marcus have closed stores

  • and filed for bankruptcy.

  • And while a UBS report shows up to 80,000 retail stores

  • will close in the next five years,

  • Primark plans to expand to 60 stores in the same timeframe.

  • - [Speaker] Is driving two hours from Toronto

  • to Buffalo to shop at Primark worth it?

  • Heck yes, I used to fly six hours to do so.

  • - So how is Primark expanding without online shopping?

  • This is the economics of Primark.

  • - Fashion retail is incredibly competitive,

  • more so than ever.

  • There's not many players, especially in fast fashion

  • that are making fat margins.

  • Pretty much the thinking everywhere is

  • that you have to have this online presence.

  • - [Narrator] But online shopping is

  • actually incredibly expensive for retailers.

  • - You have to have a logistical hub

  • from which you would dispatch the goods

  • and then you'd probably have a local distribution center

  • from which you have to do last mile delivery.

  • Each step of that just is an extra layer of cost,

  • it just eats away at the margin at which

  • in fashion is very, very slim anyway, but the real killer

  • for e-commerce is somebody who buys something

  • on the internet is far more likely to return that product

  • than somebody who goes into a store.

  • - [Narrator] Returns are one

  • of the biggest profit losses for online retailers.

  • On average, processing a return for $100 worth

  • of merchandise bought online costs a company 26.50.

  • For years, online retailers just ate these expenses.

  • Only now are more

  • of them deciding to pass the cost back to the consumer.

  • - Primark have just stayed right from the beginning,

  • we don't think we can make money out of e-commerce.

  • We're not even gonna try.

  • We're gonna focus all our resources

  • on the physical store and protect our margins.

  • - [Narrator] And that wasn't an issue

  • for the retailer until.

  • - Now Primark is expected to close all 189

  • of its UK stores tonight

  • and it doesn't have an online offering to fall back on.

  • - E-commerce was a lifeline for a lot of retailers

  • during the pandemic.

  • They couldn't open their stores, but they were still able

  • to make some sales on the internet.

  • - [Narrator] But Primark didn't budge,

  • even as consumers urged

  • for it to offer online shopping and even

  • after its revenue dropped by almost 2 billion pounds.

  • - And I think their confidence in this model

  • of having no digital sales and only using stores I think,

  • was probably shaken by the pandemic.

  • Who knows what would've happened

  • if it had gone on for longer?

  • I think the closures weren't quite long enough

  • to really tip the scales

  • and force them to fundamentally rethink the model.

  • - [Narrator] Instead of traditional online shopping,

  • in 2022, Primark launched a trial service called,

  • Click and Collect in select UK stores.

  • Customers can select certain products online,

  • then pick up their orders in store.

  • So Primark still has some cost to maintain its website

  • but it's cheaper than running a true online shop.

  • - So Primark makes a sale, but they don't have any

  • of the logistical costs that would be involved

  • in packing it up and then shipping it out to your home.

  • - [Narrator] And there's another bonus for Primark.

  • Since the customer has to go inside

  • to collect their purchase, they're likely to browse around

  • and maybe even buy more.

  • - They make the sale online,

  • but then they have a good chance

  • of making some extra sales when that person visits them.

  • - [Narrator] Consumer psychologists

  • call this shopping momentum.

  • Essentially, once you've already decided to make a purchase,

  • it's easier to justify adding more to your cart.

  • - It always feels just overwhelmingly busy

  • with people who are in there looking for bargains.

  • - [Narrator] And it's not just clothing.

  • Primark lures consumers with beauty, home,

  • and travel products similar to a department store.

  • - What we like to say about Primark here in the US is

  • that we're all treasure without the hunt.

  • - [Narrator] So customers may go in

  • for a new t-shirt and leave with a suitcase.

  • - [Speaker] Primark that I can drive to and don't have

  • to fly to is a dream because that means there's no limit

  • to what I can buy and bring home.

  • - [Narrator] To carry this vast selection of items,

  • Primark finds large retail spaces

  • because it relies on selling a lot.

  • It's one of the largest retailers in the UK

  • by volume and one of the largest across all of Europe.

  • Last year, Primark made about 9.5 billion in sales revenue

  • in part by selling a lot of things at low profit margins.

  • And it does this by sourcing a lot

  • of its clothing from Asia.

  • Combined with not offering online shopping,

  • this enables Primark to sell its merchandise

  • at lower prices,

  • even lower than many other fast fashion retailers.

  • - Where they do have serious rivals on price is

  • with the digital only players that like Shein for example,

  • they are often even cheaper than Primark.

  • - [Narrator] But according

  • to The National Retail Federation,

  • 80% of shopping still happens in store,

  • giving Primark an edge

  • over its digital only competitors, even so,

  • its in-store shopping model got off

  • to a rocky start in the US.

  • Primark opened its first US store in Boston back in 2015.

  • Although it was already popular in the UK,

  • its US expansion started slowly.

  • Over four years, it opened nine stores.

  • After years of experimentation,

  • Primark learned it would have to change

  • to succeed in the US.

  • - When we first opened,

  • we took a similar store size that we would've had in Europe.

  • - [Narrator] But when Primark opened its stores

  • across the northeast,

  • it struggled to find the right store density.

  • - What they found in the US is that retail is

  • so much more competitive.

  • There's a lot more retail in downtown areas in the US

  • than there is in the UK, for example.

  • So you just can't support a massive store.

  • It's just not possible to get enough revenue for the size.

  • - To support its large store sizes,

  • it needed a lot of foot traffic.

  • But unlike the UK stores which were located

  • in constantly busy areas, US stores were mostly in malls

  • where during the week, foot traffic dwindled.

  • - We learned that actually, 35,000 square foot

  • of retail selling space is actually the sweet spot for us.

  • - They didn't face the commercial pressure

  • that a publicly owned company might have faced

  • to suddenly open 100 stores

  • and get really big really quickly

  • and then possibly risk disaster

  • because they hadn't thought it through.

  • - The culture of Primark has always been

  • to take our time and to test and learn.

  • And we've done that in every country

  • where we've introduced the brand.

  • This wasn't about growing market share at all costs.

  • - [Narrator] And the overall retail market is shifting.

  • Online shopping hit a peak during Covid, but now,

  • growth is beginning to slow as people return to stores.

  • - And I think that's never been so important

  • as it is since we came outta Covid.