With bargain-basement pricing, fast stock turnover and a trend-savvy assortment, Primark is unquestionably a force to be reckoned with. And last month, they opened in the USA.
But what does it mean for US retailers staring down a new rival?
Well to find out, let’s look at how UK value retailers operate compared to their top performing counterparts in the US like Forever 21, Old Navy and H&M to see what differences exist and how the strategies stack up against each other.
So all you US value retailers interested in how things are done in the UK, pay attention. Here’s five ways in which the US and UK differ in the value arena.
1. The UK’s offering is relatively big, but it also knows its audience
Overall, the biggest online value retailers in the UK have fewer products than their American counterparts. For example, Sports Direct currently has 26,000 products online, Boohoo has 12,000 and Tesco F & F has 8,000. Compared to Walmart’s 34,000 (apparel) products, Target’s (again, apparel) 20,5000 and Forever 21’s 16,000, it seems dramatic. But don’t forget that the population of the United States is five times that of the UK. So in relative terms, the UK’s value market is huge.
But UK value retailers aren’t betting on offering size alone. Their price architecture is a lot tighter. Target’s apparel offering stretches all way up to $1,350 (it’s jewelry); Forever 21’s taps out at $250. While in the UK, George at Asda says goodnight at a sensible $89. Matalan does it at $114.
Assortment breakdown also differs between the two territories. In the chart above, we see the UK puts a 33% weighting on the tops category, whereas the US only gives it 24%. Instead, US retailers focus on the accessories category – 27% compared to the UK’s 9%. Beauty comes way down the ranking (as in, bottom) for UK retailers while earning a fourth-place ranking in the US.
The UK puts a 33% weighting on the tops category at value price point, while the US only gives it 24%
So what does that tell us? Well, if you’re a UK retailer entering the US market, push whatever it is you have that the domestic leaders may find it hard to address currently. Consequently, if you’re a US retailer it means keep an eye out and get ready to react fast if need be.
2. They operate to an entirely different retail calendar
Thanksgiving isn’t a thing. That means discounting, which peaks in November in the US, peaks at end of summer instead, in July.
Of course, any retailer heading into the US market will need to build Thanksgiving into its strategy, just as H&M has. (H&M in the US discounted 3,560 items on November 27, 2014, but just 737 in the UK). UK retailers have started to ramp up their Black Friday sales too. Over Black Friday weekend in 2014, there were 30% more US value market products discounted than in the UK. That’s a big move-on from the 87% difference in 2013.
New arrivals peak for the UK value market in July, also their biggest sales month. In the US, new arrivals peak dramatically in September – that’s driven by Kohl’s who historically drops huge levels of product into stores each September.
The big difference in the US & UK value retail calendars is the dramatic peaks & troughs of the US
The biggest difference between the two calendars lies in those dramatic peaks and troughs of the US, which are not emulated by the UK. When it comes to new arrivals, the UK maintains a relative consistency compared to the US market. There are strengths and weaknesses in both. The cadence of the US calendar certainly drives consumers and activates hype, whereas the UK retailers may struggle to lift consumer enthusiasm with such consistency.
3. Newness comes first in the UK
UK retailers are more trend-focused and that means prioritizing newness above all. Look at a retailer like Peacocks, where 68% of their current assortment arrived in the last three months, and 28% of that in the last month. Boohoo and George have similar rates of newness too.
Meanwhile, in the US, churn is a lot lower. At Target, only 22% of the offering debuted in the last three months and just 7% in the last month. Forever 21, though trend-focused, isn’t a match for the UK market on newness; just 37% of their offering arrived in the last three months, and 14% this month.
4. Replenishment is higher in the UK
The high rate of newness is made all the more remarkable when you take into account the UK’s replenishment rate. British value retailers replenish nearly 15% of their offering, whereas in the US that rate drops to 7%. High newness coupled with high replenishment shows us that UK retailers have a well-considered core offering. The US market data suggests a more fluid core. And a bit like a volcano, that’s not great. There are definitely some UK tactics to keep an eye on there.
British value retailers replenish 15% of their offering, whereas in the US that rate drops to 7%
5. UK pricing is watertight, but not the top conversation
We mentioned the price spread up top, but drilling down further into price data reveals some key categories where the UK value market is highly competitive. In women’s dresses, the UK focuses its attention on the $5-35 range, while in the US emphasis is tighter, ranging from $10-30.
In men’s jeans, the US value market operates within a $15-20 price range. The UK manages to lift the consumer up into the $20-25 range and even continues emphasis up to the $55 mark, by which point the US market has faded out.
And in that critical tops category, US and UK value aim for a similar $15-20 price point. But the latter bolsters its surrounding prices well compared to the US. Price architectures in the UK are all-inclusive. Retailers present value as well as encourage upward spend.
That’s reflected in the way UK retailers communicate with their customers. Price doesn’t take the lead, as you’d expect from a value retailer. Story is created around product, with well-picked trends lending themselves to editorials where savings are the byline.
In the US, newsletter communications are centered around promos and discounting. The words ‘deal’, ‘save’ and ‘X% off’ are bolded out in every Target newsletter. Old Navy likes ‘Ends Tonight’, ‘Final Hours!’ and flash sales. UK retailers such as Boohoo and George aren’t quite that direct. As a result, they build up a better rapport with customers who come to consider the first price as the real price.
As for what all this means for Primark, well it’s certainly not at a disadvantage. If it sticks to what it knows best (and why wouldn’t it?) it could find itself an import mainstay like H&M, Topshop and to some degree, Uniqlo. The only thing that remains to be seen is whether American consumers take to buying cheaper clothes more often. Or if they’ll relax their insistence on retailers shouting “savings!” at them, and get swept away a little more imaginatively. But if there’s one thing Hollywood’s shown us, it’s that they love a good story.
Katie Smith
