Can the buck stop with Penneys in assault on the US?
Lauren Formica is less than hopeful that Primark will emerge triumphant over low-cost retail giants across the Atlantic
Published 15/08/2015 | 02:30
After wandering through the stunning Boston Public Garden, you find yourself in Downtown Crossing, the shopping streets close to the financial district of one of the most historic cities in the United States.
There seem to be endless window displays advertising the newest trends with low prices. It is simply begging the young with money to burn to come in and take a look. That's why the decision for Penneys, or Primark as they are known outside of Ireland, to enter into this cut-throat race of discount fashionable clothing in the US is a bold choice. Personally, I would be hesitant to bet on their success in the American marketplace.
To Primark's credit, they have made a variety of strategic decisions as they enter into the American market, such as housing their flagship store in the recently refurbished Burnham Building, which has 70,000 square feet of shopping space.
Seeing as the Irish Famine Memorial is a mere five-minute walk from the store, they are also capitalising on the Irish-American connection that is present in Boston.
Another clever move is managing the store locally, which will ensure they are paying close attention to their new audience.
Finally, the continued use of the name Primark avoids any confusion with the American brand of JC Penney.
And now, the harsh reality: Primark faces two major issues when entering into the American market. The first is the fierce competition that they will endure as they move into the US. Not only will they contend with their regular competitors like H&M, Forever 21, and Zara, but they will face up against solely American challengers. For instance, Charlotte Russe, which is a trendy retail clothing store that targets young women in the 15-25 age bracket and operates across the US, will be a new competitor on Primark's radar.
To lesser extent, Primark will also be competing for market share with the likes of Kohls, Old Navy, TJ Maxx and JC Penney. Yet, the real rub is going to be with the big-box retailers that are immensely popular in the US. In the US, Walmart and Target are staples of day-to-day life. The behemoth known as Walmart clocks in with 5,000 stores nationwide - with locations in every state.
If I were Primark though, I would be on high alert when it comes to Target. With 2,000 stores across the country, it offers inexpensive, fashionable clothing for all consumers and has an extensive home-goods section that is equally as stylish as the one in JC Penney. Although Target is more expensive than Walmart, the price hike comes with a step up in quality and trendiness. To a US consumer, Target and JC Penney would offer extremely similar options.
From anecdotal evidence, and adjusting for the conversion in currency, JC Penney's prices are similar to Target's in women's fashion clothing and home goods, but Penney's has competitive prices with Walmart in closet staples such as shoes and undergarments. Both of these retailers offer similar enough products and prices to Primark brands that they will be one of Primark's fiercest challengers.
The next great issue for Primark is going to be their lack of brand awareness in the US. In Ireland, Penneys benefits immensely from brand recognition and customer loyalty. The Irish consumer sees Penneys as the go-to option for in-style clothing; it is cheaper than H&M and appeals to a broader audience than a Forever 21.
Primark is walking into the US market without either of these advantages. As US consumers, we have our established touchstone brands where we shop for the newest trends on the cheap, and Primark is not yet one of them.
Primark is going to need an incredible marketing campaign that jockeys it into the American consciousness as the place to go for low-cost fashionable clothing. They are going to need a strong differentiating factor from their competitors to make them successful since they are entering into a heavily saturated market.
It appears that they are looking to hit a lower price point than the other discount clothing retailers. If they can manage that, I believe they might have a shot at breaking and maintaining a place in the US market. In the same breath, however, Target and particularly Walmart, are old-hands at pressuring their suppliers into giving them the lowest cost of a good possible.
Also, keep in mind that Primark is going to have to do all of this while combating the laundry list of competitors mentioned above, who have significantly more brand awareness and experience in the US market.
Primark have a serious uphill battle ahead and will be forced to take a chunk out of their competitors' market share to establish themselves. They have ambition on their side, however - they are attempting to open multiple locations in the US before the close of 2015.
In the end, I sincerely hope that Primark proves me dead wrong and takes the US clothing market by storm without facing any serious challenges. In a post-Celtic Tiger era, the continued expansion and growth of an Irish brand is something to be commended and encouraged.
Their presence in the US market will force the other discount retailers to be more competitive which will hopefully benefit the American consumer.
Primark faces tough odds in breaking into the US market, but with an iron-clad strategic plan that addresses brand awareness and fierce competition, they have a shot at success.