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Pandemic turns e-commerce doubters into believers
Notable UK retail e-commerce avoiders Primark, B&M and Poundland are now online players. But what are their respective digital approaches?
Value fashion retailer Primark estimates it lost sales of £1.1 billion as a result of the store closures it endured during the Covid-19 crisis.
For periods of 2020 and 2021, when the UK government tackled the coronavirus crisis via societal lockdowns, all non-essential retailers had to temporary shutter their shops. It meant the tills stopped ringing completely at Primark, with no way to direct sales online.
Fast forward to later this year, and Primark will have click & collect in 25 of its stores in the north-west of England.
Products for kids – spanning clothing and accessories, to decorative nursery products and toys – will be part of the e-commerce test run, and there will be up to 2,000 items available through the new bricks and clicks service.
Primark chief executive Paul Marchant said the move would enable the retailer to reach new customers and trial the service in an area of the UK where the business has a range of different store sizes and formats.
“The click & collect trial is a milestone for our business and builds on the investments we’ve made over the past two years in new technology and people to make this possible,” he explained when announcing the strategy in June.
It will complement the “great in-store experience that is at the heart of our business”, Marchant added, underlining his long-held belief that the Primark model is a physical one.
The new venture was only a matter of time in coming, though, after John Bason, finance director of Primark owner Associated British Foods, hinted to Reuters in March that click & collect would likely be a starter point for any form of e-commerce at the business.
In April, Primark relaunched its entire website, which included a function allowing consumers to check stock levels by store. Click & collect represents a natural next step in that digital journey.
The new service will also offer online-only products, with around 40% of the click & collect items available exclusive to the channel to provide a further incentive to use it.
Dedicated pick-up points will be installed in the participating stores, and all click & collect orders will be processed and shipped from a new dedicated distribution centre (DC) at Magna Park, Leicestershire, which will be run by logistics partner Clipper.
Primark’s move into this space comes despite members of its senior team regularly talking up the power of the store and displaying an unwillingness to enter what they deemed to be a margin erosive online world, in light of Primark’s low price point.
But David Jinks, head of consumer research at parcel delivery service provider ParcelHero, welcomes the decision to surrender the position of e-commerce avoidance.
“All UK retailers must align their high street and online sales to counteract a likely further fall in consumer confidence in the months ahead,” he said.
Primark’s third-quarter sales for the current financial year remained 9% below pre-Covid levels. This is a reason to change its approach, according to Louise Deglise-Favre, apparel analyst at business intelligence group GlobalData.
“Consumers have long demanded Primark fully embrace digital retail, and its click & collect service is highly likely to be successful,” she said.
Some 77% of 2,000 UK consumers surveyed in a February GlobalData poll stated that they would purchase from the retailer online even if it only offered click & collect as a fulfilment option.
Deglise-Favre added that the click & collect trial, and any subsequent expansion, will “help to future-proof the retailer in an increasingly digital world”.
Strength in numbers
Two other large UK retailers which hitherto avoided the e-commerce world are Poundland and B&M. But, like Primark, they are now embarking on their own digital commerce journeys.
Poundland completed the purchase of online discount retail business, Poundshop.com, in March. The price of the deal was undisclosed, but the value chain said it would provide the infrastructure to power a national roll-out of its own e-commerce pilot, which currently runs from several stores in the midlands and South Yorkshire.
As part of the acquisition, Poundland acquired circa 400,000 UK customers, as well as 65 members of staff based at the online retailer’s DC and head office in Wednesbury, West Midlands.
Poundshop.com’s intellectual property, online platform, picking and fulfilment operations, and customer database were all also included in the takeover.
The integration of the new asset is led by Poundland retail & transformation director, Austin Cooke, although Poundshop.com chairman Steve Smith and CEO Chris Maddox will provide advice to enable a smooth handover. Cooke will ultimately lead the day-to-day operation of Poundland’s online business.
In the months ahead, Poundland plans to introduce its PEP&CO clothing and homewares to an online audience. It has also set its sights on extending beyond the UK, with a Republic of Ireland e-commerce offering under its Dealz fascia.
Barry Williams, Poundland managing director, said Poundshop.com’s arrival “puts power and pace behind our aspirations to make our amazing products and value available to customers across the UK and Ireland, however they choose to shop”.
Zoe Mills, senior retail analyst at GlobalData, argues that Poundland must “build on the momentum” of its 2021-launched online proposition.
“Widening its scope online by expanding to more locations, such as Manchester, Liverpool and London must be a priority, especially as competitor B&M is beginning to dip its toes into the online channel,” she said.
B&M CEO Simon Arora, who is leaving the business in 2023 after 17 years leading the company, revealed plans for a transactional website during a preliminary results announcement in May. It means he will be leaving the business with online on the table, having resisted it for the entirety of his tenure.
The e-commerce site, which launched in June with around 1,000 SKUs of typically high ticket and difficult-for-customers-to-transport bulky goods, is part of an “open-minded” approach to e-commerce, according to Arora.
B&M has adopted a “test and learn” philosophy for the months ahead and will closely monitor the customer response, he said.
“The existing network of five main B&M UK DCs remains adequate to service current sales volumes and as such no large-scale capital investment in additional capacity is anticipated in the near term,” Arora added.
On the potential success of the e-commerce model at B&M, he said: “Given the disruptive B&M price position, the business believes this could prove an attractive proposition for customers.”
The decision for the budget retailers – which operate with “wafer thin margins” – to now explore e-commerce is a post-pandemic reaction, according to Richard Lim, CEO of research house Retail Economics.
Office for National Statistics figures show e-commerce represented 19% of total UK retail sales in February 2020, one month before the pandemic forced lockdowns in Great Britain.
In April, this figure sat at 26.4%, having surpassed 30% in 12 separate months in the previous two years as lockdowns and coronavirus uncertainty prompted spikes in online shopping. There has been a significant acceleration in e-commerce’s influence on UK shopping.
Lim said “the huge shift to online” was a major factor in these businesses abandoning their physical-only retail stance.
“The pandemic has forced value retailers to look at how they can potentially operate an online model,” he said, describing it as “questionable” that Primark would have launched click & collect this year if it was not for Covid-19.
“The pandemic was a catalyst for the value retailers to think about how they are going to manage an online proposition,” he added.
Poundland and B&M, classed as essential retailers in the pandemic due to their food offering did not have to close all shops in lockdown, but Lim wonders whether Primark’s enforced inactivity in the pandemic cost it customers.
Richard Lim, Retail Economics
“There are many consumers who have been exposed to new brands throughout lockdowns and that may have opened them up to other possibilities outside Primark,” he said, adding this could have influenced the click & collect decision.
Lim also questioned the timing for these launches, considering serving an online shopper comes with an array of additional logistical, technological integration and operational costs.
“It is almost inevitable they will all have to have an online proposition at some point, but is now the right time given the cost of living crisis and additional profitability pressures such as rising import prices and other supply chain cost increases?” he said.
The results of ramping up online operations at a time of economic uncertainty are as yet unclear, but there is recognition among the UK value retailers that customers need to be given the option of shopping online in some form.
And with the value chains all going online in the past 12 months, there are echoes of 2010, when fast fashion players Zara, H&M and Gap – and their competitors – all launched UK transactional websites within the space of a month.
Those launches were described by market analysts at the time as “late”, coming as they did in the wake of grocers and electricals retailers – and online marketplaces such as Amazon and eBay – paving the way for e-commerce in the UK.
It seems competitive pressure, changing shopper habits, and a growing willingness to experiment with business formats – much of which is influenced by the pandemic – is fuelling the value chains’ move into digital 12 years on.
“It has taken a long time but Primark, Poundland and B&M have woken up and smelt the discounted coffee,” said ParcelHero’s Jinks. “Now that the big three holdouts are belatedly dipping their toes in the water, we’d be surprised if any of them leave the pool.”
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