Primark, which operates in its Irish home market as Penneys, continued its drive into the US market on Thursday with its 13th store opening there. The new outlet, in Philadelphia's Fashion District, was launched with the usual fanfare to draw in the crowds: a DJ, free rickshaw rides for customers and, most importantly, in-store giveaways. Primark knows what its core young clientele wants.
On Friday, its stock market-listed parent, Associated British Foods (ABF), will sit down with investors to explain how the retailer's new sustainability strategy, Primark Cares, which it claims will make its "fast fashion" business model less environmentally damaging , can defy accounting gravity.
It knows what its shareholders want, too. But it is making them increasingly lofty promises that it will find hard to keep.
As it sources less environmentally damaging materials, the company acknowledged this week that costs may go up, but still it insists that customer prices will not. Yet ABF is also telling investors that profits will be virtually unaffected. Surely if costs go up and prices do not, profits eventually must fall – it seems a mathematical certainty. Either that, or Primark's model must change.
How can the Dublin-run retailer balance these competing highwire challenges that it has set for itself? The Flying Wallendas would struggle to manage it.
It cuts right to the heart of the conflict that is coming for all fast fashion retailers – the clash between their waste-producing business models and the fight to slow down the effects of climate change which, in time, will come to dominate corporate decision-making across the consumer sector.
That domination is inevitable, a looming fact of business life. There is no longer a question over that.
High street retailers such as Primark and its online rivals, including Asos and Pretty Little Thing, are associated with the era of disposable clothing. Items are flown halfway around the world from developing nations, where they are often made under difficult working conditions, to consumers in wealthier countries who may wear their inexpensive purchases just a few times before casting them aside for something else.
It may be want consumers want – for now. But it is also increasingly understood to be ruinous for the planet.
Primark’s answer to this problem is Primark Cares, which doubles as a fashion label in addition to being a corporate strategy. As part of the initiative, Primark says it will “pursue” a living wage for workers in its mostly Asian supply chain.
Organic cotton
Currently, about 25 per cent of Primark’s clothes are produced using recycled or “more sustainably sourced” materials, such as organic cotton. Primark has committed to increasing this to 100 per cent by 2030. As an immediate first step, it will begin over the next year with its €3 T-shirts.
The company has appointed a senior Dublin-based executive, Lynne Walker, to oversee the initiative. It appears to be banking on external validation of its efforts to drive home its "change" mantra. It has, for example, signed the United Nations Fashion Charter and it has also joined the Ellen MacArthur Foundation's campaign to "make fashion circular".
That is a play on the concept of the circular economy. A linear economy sources raw materials, produces goods, and then dumps them afterwards. A circular economy aims to turn that line into a loop by reusing and recycling, cutting down on external inputs.
Primark says it will produce clothes that are more sustainable and more durable. That is the core message to consumers. Its interactions with investors, meanwhile, are also revelatory.
Primark is the jewel in ABF’s crown but the parent group’s share price has been declining since the spring. There is pent-up demand for Primark’s offering whenever pandemic restrictions ease, but sales have still been below expectation all year.
In its pre-closing update last week, ABF also referred to pressures at Primark caused by “port and container freight disruptions” – the cost of shipping is rising.
Pressure is being brought to bear on its costs and business model from every angle. Yet the group also spies an opportunity. ABF told investors this week that “Primark Cares is an opportunity to drive further sales growth from both existing and new customers”.
The Generation Z customers – born after the late 1990s – who are critical to Primark’s fortunes are also the ones who are, in the words of Fortune magazine, most “traumatised” by climate change. They have never known a world without it. Yet they have also never known a world without €10 dresses and jeans.
Anxieties
If Primark can convince Generation Z that it is not helping to kill the planet, then maybe it can prevent them from deserting it in droves as their anxieties over climate change come to dominate their decision-making. However, while that may protect Primark’s sales, it doesn’t solve the environmental paradox at the heart of the fast fashion model – it simply may have to slow down.
Primark can make its clothes more sustainable. It can make them with organic cotton or other ethically sourced materials. It can, with effort, make them less environmentally damaging. But ultimately, if its strategy is to be anything more than a marketing push, Primark may simply have to make less. Government regulation may even force it to make less.
If its clothes, as the retailer has this week promised, become more durable and hard-wearing in future, logic dictates that its customers will need to replace them less often. How can that translate into anything other than a reduced volume of sales?
The only way that reduced volumes are compatible with the promises it has made to shareholders is if prices rise at the tills. But that would turn Primark’s entire business model upside down and contradict all of the recent promises it has made to its customers. It cannot keep everybody happy.
Primark is not some outlier on this issue. The inevitability of dealing with this conflict is coming down the line for every discount clothing retailer, along with a painful dose of reality. It is coming for consumers, too. But neither side yet seems ready to admit it to themselves, or to each other.
That will change. It is only a matter of when.
