Department stores are dead? Nobody told Primark

The department store isn’t dead. Turns out, it was just in the changing room. In the week that Debenhams, once a household name in the UK, passed into the hands of its lenders, Primark opened its biggest outlet yet in the country's second city of Birmingham. The new store is an upgrade on the old awkwardly shaped unit Primark had occupied in the city since 2002. At 15,000 square metre and five floors, it’s also roughly four times the size. That seems counterintuitive, given that more and more sales are moving online, while Britain’s impending divorce from the European Union weighs on shoppers’ sentiment. Consequently, many non-food sellers are closing stores. But look more closely at British retailing, and it’s far from a uniform picture of Brexit-induced gloom. The value sector is one of the few bright spots. Bakery Greggs and the UK arms of the German no-frills grocers Aldi and Lidl are flourishing. Primark, a division of Associated British Foods, is benefiting from this trend, and that’s part of the reason why it is weathering the current pressures better than most. But it's not enough just to have cheap prices. Retailers also need to innovate, and just as crucially, back their vision with investment. Buying the site of the former Pavilions shopping centre, and fitting it out, has cost ABF about £100 million (Dh480m). The company has scope to spend because Primark is still expanding sales and profit. But it also has some defences for the future. If Britain’s political drama becomes acute, or there is a slowdown in the global economy, consumers might reduce spending. If so, the cheap chic chain will nevertheless be well placed to continue to capture market share. It also seems to have a handle on costs. It doesn’t currently sell via the internet, so it doesn’t have to bear the expense of cash-sapping online operations. It rightly recognizes that home delivery isn’t a natural fit with Primark’s low prices. Still, there could be room for change here, as the ability to reserve some items online and collect them in store might be a possibility. So if any chain was in a good position to take the risk of reviving a format that many in the industry had declared was finished, it would be Primark. What’s even more interesting is that it isn’t alone. Just around the corner from its new location, H&M now occupies the site of Birmingham’s old BHS. Hennes & Mauritz AB’s family of brands also take up some of the old Dickins & Jones department store in Regent Street in London. Elsewhere, B&M European Value Retail SA’s outlets have been extended into garden centres, making them a one stop shop for food, home furnishings, pet supplies, DIY and gardening. But there are risks with this new breed of discount department stores. As retail rapidly evolves, these giant spaces could turn out to simply be too big. There was little evidence of this in Birmingham, as thousands of people piled through the door of the new Primark. But initial trading is always buoyant and the real test will be in the coming months. For value retailers attempting the format, it’s crucial that they don’t lose their discount DNA. Primark is acutely aware of that. In the beauty salon, makeovers use the retailer’s own products, while treatments have low prices. A shampoo and blow dry is £20, whereas elsewhere about £30 is a more typical rate. Another problem with the old breed of multi-product stores was that they didn’t adapt to customers’ changing tastes. Primark seems to have recognised this. It prefers to think of Birmingham as a concept store that can constantly change and offer a boutique feel, even though it occupies a large space. That’s evident not just in “trend rooms” that showcase the latest looks, but in areas dedicated to its Harry Potter and Disney licensed clothing and accessories that would not look out of place in a much more upmarket retailer. There are also a range of food and beverage outlets, including the Disney and Primarket Cafes and a hipster barber, as customers demand ever more services. Changing rooms include “show and share” areas, where groups of friends can try on outfits, put on their own music, change the lighting and, of course, take plenty of selfies. Meanwhile, a recycling centre for handling unwanted clothing occupies a prominent position, underlining the growing importance of sustainability. It also serves as a reminder that environmental concerns can pose a danger to the discount model, particularly in fashion. But if cheaper chains can navigate these potential pitfalls, it could turn out that there is life in the department store yet. Bloomberg

Department stores are dead? Nobody told Primark

Primark has opened its biggest outlet yet in Birmingham