Tuesday 24 September 2019

'We are reacting every minute of every day' - Primark CEO Paul Marchant reveals the secrets of Penneys' success

Primark chief executive Paul Marchant feels keeping up with customer demands will shield it from threats, writes Samantha McCaughren

Paul Marchant, chief executive of Primark. Photo: Steve Humphreys
Paul Marchant, chief executive of Primark. Photo: Steve Humphreys

Ten years ago when Paul Marchant took over as CEO of Primark, better known as Penneys in Ireland, it was well-known for value but needed to up its fashion game. Marchant can't remember the exact moment when he knew the brand had 'arrived' in the fashion stakes, but he whips out his phone to show a photograph from a recent walk down Dusseldorf's Königsallee, one of the most luxurious shopping streets in Germany.

"We were walking from our store to the hotel, and we walked past the Dior store. And inside the Dior store was a big pile of Primark carrier bags. Someone had put their shopping down to shop inside the Dior store, and you can't buy anything in Dior for under a grand," he says.

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"There's me looking very, very pleased with myself," Marchant adds, showing the snap of himself pointing at several large and very full Primark bags through the window of the designer store.

Marchant is slow to take credit, but under his leadership, Penneys and Primark, owned by Associated British Foods (ABF), have become a social media and retailing phenomenon.

Those with influence in the fashion world - as well as ordinary shoppers - are proud to proclaim that their bargain outfits come from the retailer.

When Marchant joined the company and took over from its late founder, Arthur Ryan, a decade ago, he believed that the core principles of the business did not need to be changed, "other than the consumers' demand for more fashion".

"We've always been anchored with fantastic-value core basic products - T-shirts, denim, bed linen, knickers and bras. The core foundation items have always been there," says Marchant, who has rarely given interviews since taking up the role.

"One of my objectives was to evolve that fashion story but at a sensible pace."

And he has certainly changed the company, which celebrates 50 years in existence this year.

The company's head office above its Mary Street store on the north side of Dublin city may not be in a location favoured by cutting-edge social media giants.

But after entering through a bland security desk, Primark staff are treated to one of the most modern and Instagram-friendly office spaces in the city.

In addition to the high-tech break-out rooms and high-quality canteens, the many staff facilities include two personal training studios, a gym offering 36 classes a week, and a mothers' room, where breastfeeding mothers can go to express milk or simply head for some quiet time.

When Marchant joined, everyone was addressed as 'Mr' or 'Mrs'. Now Marchant, dressed in a Primark bomber jacket and white trainers, chats and jokes with employees all over the building.

"It's really important to me that we create a culture that's dynamic and vibrant, with the communicative culture that we've got here," says Marchant.

He often talks about the company evolving at a slow or sensible pace but, on a day-to-day basis, things move at a breakneck speed.

This is thanks, in part, to Primark's own reputation for the speed at which it turns around the most sought-after fashion looks.

The old model of two fashion seasons a year is well and truly gone. "The whole industry has to recognise that customers see something and want it instantaneously," he says.

"That changes our pricing model and changes the way that we buy; it changes the direction and the frequency of product reviews. We have changed the way that we work with our suppliers to speed up the whole supply chain.

"Sometimes there's a myth that the shorter lead times mean that you may be buying from different countries. It's just as much about the processes you have with your existing suppliers to be more efficient."

He says the company's suppliers have evolved to make production turnaround times much shorter. "There's always going to be the odd exception where you can turn it around very quickly, but in relatively small quantities," he says.

"But, typically, with something which is either on a jersey base, or woven fabric, you're really talking about six weeks to get the volume."

Some items are planned months in advance like coats, but Primark's strength is knowing what shoppers are going to want before they do.

"We are reacting every minute of every day. Our buying teams, our designers, our fashion PRs would be in the competition (rival stores), on social media, every single day, looking at what the new look is," Marchant says.

This hunt for so-called 'fast fashion' also has a negative side. The idea of buying an item for a one-off wear has become the norm among a new generation of shoppers, spawning the concept of 'disposable fashion'.

Marchant is not a fan of the description. "I think the phrase 'disposable fashion' is a really bad one, that you can wear it once and throw it away," he says. "We absolutely do not produce clothes that we want people to throw away; we want to produce clothes which genuinely have a longevity and can be worn over many, many, many, many wears.

"We do recognise, however, that we live in an Instagram generation, where people want to wear something once and maybe not be seen to be photographed in a second time. We really can't affect that."

He also rejects any suggestion that Primark clothes are any more disposable than those of rival retailers.

"We think our role we have to play is to continue to supply and offer our customers great products that are high-quality," he adds.

"Just because we offer great value, doesn't make our products any more disposable than anybody else's. If you look at our supply base, 98pc of our factories we share with our competitors; we don't have this mystical supply chain."

However, Marchant is plugged into an emerging counter trend, which goes against the disposable fashion concept: a desire from some shoppers to get more wear out of clothing.

"We definitely see that move toward people clothes-sharing, recycling their clothes, buying second-hand, buying vintage," he says.

"We have responsibility to change and evolve our model to suit customer demands. Who says we wouldn't have a vintage clothing offer in our stores at some point in the future?"

This leads on to the overall question of sustainability, which Marchant says is high on Primark's agenda. "By the time you go into a Primark store next year, you will see a significant amount of our merchandise with a sustainable label on," he says.

"Whether that piece is cotton... we're looking at more recycled polyester; we're looking at working on recycled plastics for products," he says. "It's not rarefied, it's mass-market now."

He also says that if a company is working effectively with its supplier base, there is no reason why sustainable costs should be higher.

Marchant defends the company's record on working conditions at its suppliers. This came into sharp focus in 2013, when a factory collapsed in Bangladesh, leading to more than 1,100 deaths.

"I think we are leading a lot of change in this area," he says. "Maybe we haven't been as vocal about it as we should have been."

He points to the company's membership of the Ethical Trading Initiative since 2006. "We recognise the responsibility that we have as a brand and as a business, to be a good organisation, to be a good neighbour, and to work on ongoing improvements to workers' conditions," he says.

The company has 110 people working in its ethical trade team around the world, and 3,000 factory audits are carried out each year. "We have an obligation to improve conditions in all our factories," he says.

Marchant had always wanted to work in retail. Raised in Kent, England, he left school at 16: "I couldn't wait to get into the workplace. I was so obsessed with retail, obsessed with fashion."

He started working in a menswear retailer before joining Debenhams, always working on the buying side of the business. He worked with River Island for a period before returning to Debenhams, where he was made a director at age 29.

He then joined value retailer New Look as chief operating officer, where he spent four years, before being poached by Ryan.

There was quite a buzz in the British press when it emerged that Marchant looked set to be the chosen one to take over from the enigmatic Primark founder.

"It was always going to be a big piece of news for anyone to be given the chance to take over from him," recalls Marchant. "So when the conversations first started, the opportunity to be able to take over from such a retail legend, like Arthur Ryan, was something that was beyond exciting."

They didn't know each other before Ryan made the approach in early 2008, but they got along straight away. Marchant joined Primark in 2009, taking over as CEO after nine months there.

He saw where he could change Primark: "I really felt there was room to move the business on, in particular, from a store look and feel, and creating a retail environment which was exciting. And recognising that need for retail theatre."

One of the biggest questions both shoppers and stock market analysts ask about Primark is when it will start selling online.

Marchant acknowledges that the company is probably the only large retailer which doesn't have an online offering. "And today we sit very comfortably with that," he says.

"We've continued to grow our market share at a time when other retailers have moved their proposition to more of an online offering.

"However, we are very mindful, back to my point about needing to react to the customer demands; we do recognise the shift to online is in the public domain for everybody to see.

"But what's important for us is that any proposition at any point in the future that we offer around online needs to be one which enhances our existing model. And that's from both a product proposition and customer proposition. And from a financial perspective."

The company and its parent business ABF have talked publicly about click-and-collect as something they may consider.

"There are lots and lots of things that we look at, and lots of things that we consider, and we would be negligent if we weren't continually challenging our model. Whether that be around click-and-collect, around new products, around price architecture, around store environment, we're changing up our model all the time," he says. "So have we looked at click-and-collect? Yes, we have. Will we continue to look at it? Yes, we will. Do we have any plans to launch right now? No, we haven't."

There are issues for the Primark model when it comes to online, given its low-margin, high- volume approach.

"If there is a proposition, from a click-and-collect perspective, that works for our business model, then we will do it," Marchant says.

"We are a low-average-selling-price, low- margin, high-volume business and those first two - low-price and low-margin - don't go hand in hand with an online proposition because of the costs involved in that. So from a commercial perspective, that makes that challenging."

He adds that the business thrives on footfall - people coming through its doors. Customers often come in to buy one item and walk out with a bag full of products. "We have to make sure that anything we add to the proposition doesn't damage that experience that the consumer has today. But we never say never to anything. We are definitely not closed-minded in any way about the business of this brand," says Marchant.

Online shopping is changing fast, he adds: "If I look at how my kids interact, they're not looking at websites any more. They're looking at social media. So it may well be that digital transaction in the future takes on a completely different format."

He points to Instagram, which could become transactional in the future, as something which could again change how people shop for fashion. Will we see some move to digital in the next couple of years then?

Marchant laughs before saying "probably not", although later goes back to it saying he is nervous about sticking any timelines on things, as the company will react as customer needs change.

Marchant believes there is still room for expansion in Ireland and the UK, the company's most mature market, not just in terms of new locations but also in terms of bigger stores.

It is currently in 12 markets with 373 stores, the latest new territory being Slovenia. It will enter two more markets next year - Poland and the Czech Republic. It has a relatively small presence in France, Spain and Italy, and so is likely to expand further there. Sales in the first half of the year were £3.6bn (€4bn).

The company will continue to expand at a relatively cautious pace, opening 15 stores in the current year. "The danger with trying to hit a number is that you maybe make the wrong decisions," Marchant says. "We want to be ambitious. But we want to make sure that every door we open is the right door, in the right location, on the right footage, and is successful."

Marchant is feeling upbeat about prospects in the US. There are nine stores in the US at present with another soon to open in the American Dream shopping mall in New Jersey. Others will follow.

"The fact that we are moving beyond the 10th store trial we initially announced now will give you some indication that we're starting to see some really positive progress in the US."

He says that every market is different and even different parts of the same country would have different requirements.

The US has also required some tweaks: "We first went to the market, and there were a number of retail commentators who observed that Primark was a first-price, right-price retailer, and how would that work in the market used to ongoing promotional activity?

"We haven't changed our strategy in the US. We are still a first-price, real-first-price retailer. It's never our intention to change that in any market. That's what we stand for.

"Then the job we had to do was to educate the customers: that T-shirt is $3 and that is the price today, is the price tomorrow and will be going forward. And I think they've got that message now."

There would seem to be lots of headwinds facing retailers. Brexit concerns have heightened in recent days and there are fears of a global recession. Germany has already been tougher for the company.

Marchant doesn't appear rattled, however. "We believe we can thrive in an up-turning market, we think we can thrive in a down-turning market. We think our proposition is genuinely compelling," he says.

"There is no point moaning about the market being tough, we have to do something about it. Customer attitudes and behaviours are changing so quickly. You turn your back for a short period of time, and the world has moved on. Without being arrogant, we think we are very good at what we do and that's what we obsess about."

It appears that fast fashion doesn't allow Marchant much time to feel satisfied. Primark is thriving because it is constantly reacting to ever-changing customer needs.

"There is a phrase that I use all the time, which is sort of healthy paranoia," he says. "Make sure that every day you are on top of the game."

 

Curriculum Vitae

Name

Paul Marchant

Age

51

Position

CEO of Primark

Lives

Dalkey, Dublin

Education

Bexley Grammar School, Kent, England

Previous experience

Debenhams, Topman, River Island, New Look

Family

Partner Charlotte. Son Riley (18) and daughter Amelie (14)

Pastimes

My biggest hobby is shopping. I love it. I would spend every minute of every day walking around the shops if I could.

I am a big sports fan. I support Charlton Athletic; they are rubbish but I love them.

Favourite movie

Anything that makes me laugh.

Business lessons

What corporate culture do you promote at Primark?

I believe in working hard and being agile and staying relevant. And it’s really important to me that we create a culture that’s dynamic, vibrant, with a communicative culture that we’ve got here. It’s really important to us as a leadership team and we encourage a culture of people being able to be vocal.

What did you learn from Arthur Ryan, who passed away recently?

Every conversation I had with him was a tutorial and he gave lessons in anecdotes. And I was fascinated by them. We would socialise together, and we’d sit and we would talk the business, and we would talk about the competition and the marketplace, customers. And Arthur was completely obsessed with being the best at what we do. He would say things like, ‘never forget who we are, don’t try to be something we’re not, but understand what we stand for and be the best at that’.

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