The CFO at Primark insists that the company invests on strategies that promote sales and investing in online sales platforms and delivery does not facilitate sales compared to the traditional mode of sales – this is physical visits to the store. Primark managed to be one of the largest clothing and accessories retailor in the UK as it maximizes on attracting a larger market base from its target population (Peters, & Simaens, 2020). The company is able to achieve this by opening stores in convenient locations and offering unbeatable discounts to their customers. Due to the high levels of discounts they offer, the company reduces the costs of operations to maintain a high profit margin and maintain quality products in the market. During the COVID-19 lockdown period, the company made losses as customers could not visit the stores. However, they have insisted on maintaining their current business model, as they believe that as soon as the lockdown was lifted, they would go back to business, thus there was no need to invest in other business model and abandon one that worked for them.
Compare and Contrast Business Operation Model with Competitors
Primark faces competition from Zara Company and Woolworths Holdings Limited in the retain fashion industry. These companies compete in the same industry for a larger market share thus the need for competitive business strategies (Gómez, 2019). Zara’s business strategy focuses on technological innovations to promote their products to local and international clients. The technologies help the company locate clients and collect data on their tastes and preferences to be in a position to manufacture quality products at relatively competitive prices. Use of technological platforms such as the internet and E-commerce has allowed the company to reach global markets with ease. This platform allows clients to pay before delivery thus availing liquid capital to promote the company’s daily operations. In addition to this, the company has created solid relationship with manufacturers so that they can avail quality, unique products at competitive prices thus creating a larger customer base for the company. Zara attracts middle and high-income earners who have little concern about prices but instead focus on quality, fashionable, and unique clothing and accessories.
Woolworths, on the other hand, is an umbrella company that includes multiple business personalities operating under a single business model. To maximize on clothing sales, the company bundles their products and services to ensure that they make multiple sales as opposed to selling a single product (Gómez, 2019). The company’s business model aims to move volumes in the fashion industry thus focusing on quality and fashionable products. It also aims to control the middle and high-income earning market who are less sensitive to price of their commodities. However, the company has adopted credit facility that allows clients to pay for commodities over an extended duration. This helps the company move volumes, sell highly priced accessories, and maintain a larger customer base across all economic classes. The company creates customer loyalty by offering coupons, discounts, and redeemable points on specific fashion products. This is reinforced through technological advancements such as AI in their applications to maximize customer’s experience. These advancements provides Woolworths with information on customers tastes and preferences to reduce overall advertising costs. It has also embraced E-commerce to promote online sales and promote customer satisfaction. I promotes accessibility and convenience to their customers as they can buy products and get them delivered to the customer’s location. This promotes sales volumes, as clients are not limited by location of the company stores. Woolworths business model allows it to attract and maintain customers thus presenting stiff competition to Primark in the clothing and fashion industry.
Soft Systems Methodology
Primark’s business model lacks a business contingency plan in case of a pandemic like the COVID-19. During the lockdown period, the company did not make sales. Instead, they made losses as they had to pay some of their employees as well as the rental spaces. During that period, company’s in the retail fashion industry ventured in online sales by improving on their communication and delivery system. Primark was however not ready to venture into the online platform industry as one of its strength was offering unbeatable discounts to its customer. Investing in online platforms and delivery services would thin their profit margin due to increase in operational costs.
Primark may develop certain challenges when transitioning from the traditional business model to the hybrid business model. The transition will affect the business operation objectives by, increasing cost of operation, increase dependability on other platforms to make sales. However, this will promote flexibility of the business, maintain and improve quality of the products and increase speed in delivery of the goods sold. The hybrid business model will incorporate both the traditional business model whereby customers visit the stores as well as have access to the products on online platforms (Nikhlis, Iriani, & Hartomo, 2020). Finally, the business model will require an increase in workforce to increase customer interaction and promote customer satisfaction.
To solve the situation, the company should develop business models that offer a contingency plan. The plan should focus on minimizing expenditure and promote sales by availing the products to customers. It should also maintain quality of the products and the prices to retain the customer base they have created. The plan ought to incorporate technological advancements such as online platforms, and effective delivery systems. Also, the company ought to create beneficial relationship with suppliers so as to gain access to raw materials at relatively lower prices thus increasing their overall profit margin. These adjustments will help the company promote online sales thus increasing local and international sales.
To mitigate the challenges that the company may face from transitioning from the traditional business model to hybrid model, the company ought to focus on strategies that will help them increase their sales and reduce operational costs. These costs will be reduced by incorporating innovative technologies that will avail the products to the final consumer with ease. These technologies will should also offer an advertising platform for the company to promote knowledge of the online platform to the consumers. Finally, the execution of the hybrid model should not interfere with the current sales of the company. Instead, it should help increase sales through reaching a wider customer base.
Recommendations for Primark
Primark customers are attracted to the company by the huge discounts offered as well as the quality of the products. The company has also been able to keep up with fashion at discounted prices thus making it easy for them to retain these customers. The stockholders of the company, on the other hand, benefit from the large market share that they have in the UK and the increased profits as the company sells volumes. Employees enjoy the benefits that come with business growth such as job security and bonuses. Therefore, the hybrid business model should promote business growth through increasing sales, lowering operational costs and maintaining high quality products and low prices for the final consumer.
First, the company should embrace E-commerce and online sales platform as it helps the company attain a larger market share and minimize hiring a large employee task force. This platform should target the middle and high-income earners who are willing to spend on quality and convenience. The products sold online should help the company compensate delivery costs thus embrace the concept of product differentiation. The products sold online should be a higher quality and unique designs that will increase the customer share in UK and other countries globally. This way, the online platform will compete with other companies in the retail fashion industry.
Secondly, Primark has opened multiple shops around the country to promote accessibility to their customers. These stores should be used to avail the products to the customers at a slightly lower time compared to other companies within the same sector. Since the stores are located in convenient locations, the company can also offer discounts on the online platforms for customers who will physically walk to their shops rather than request for delivery. This strategy will help the company increase sales as more customers will physically walk in the stores. Therefore, the online platforms should be improved to act as advertising platforms to facilitate customer flow in the physical stores. This way, customers who prefer to shop online will only be those with higher income as well as those in areas that the company has not introduced physical stores.
Finally, the company will have an increase in customer flow as it will be able to operate in their physical stores as well as online platforms. Increase in the flow of products will increase their bargaining power among suppliers. Therefore, they will be in a position to improve on purchase products at relatively lower prices thus increasing their profit margin. The online customers, on the other hand, will avail capital for the company especially when they are allowed to pay before delivery. The money paid upfront will help the company grow its online platform and facilitate product promotion through online advertising and price discount.
Comparison of Costing Solutions
There are four common costing strategies incorporated by businesses in the retail fashion industry namely, premium pricing, skimming pricing, economy pricing and bundle pricing (Kienzler, & Kowalkowski, 2017). Currently, Primark uses the economy pricing strategy as it targets customers that are looking to save on the products they purchase. The company therefore targets customers between 20 and 35 years who try to keep up with fashion trends and save. Economy pricing enable Primark to sell volume, as they are often cheaper compared to their competitors. To achieve profits, the company has to move volumes and minimize operational costs.
To adopt hybrid strategy, Primark should change their pricing strategies to adopt skimming pricing strategy. Skimming pricing is a strategy whereby a company charges a high price for new products until other competitors duplicate the product where the price of the product stabilized by forces of demand and supply (AlJazzazen, 2019). This strategy will complement the differentiation of products sold online and those sold on the stores. Any new product developed should be sold at a higher price on the online platform whereby delivery will be made within the shortest time possible to attract more clients to purchase the product. When other competitors duplicate the product, Primark will be in a position to discount the product and restock it in the stores. This way they will be in a position to move volumes, make larger profit and cut out competition from other companies in the retail fashion industry (Kienzler, & Kowalkowski, 2017). The skimming pricing strategy will increase profits for Primark and increase customer share to levels that will maintain the increased operation costs. In the long-run, the company will have a competitive advantage over other companies in the retail fashion industry.
Using the 7 SSM steps
Primark’s Business Model Plan
AS-IS model and TO-BE business model after Primark invests in online sales.
Primark fashion retailer currently operates in physical stores whereby customers physically visit stores to make purchases. The physical stores lacks contingency plan in case of a pandemic like the COVID-19. AS-IS model is mapped as a physical store whereby customers visit store to search for item, collect and pay physically.
TO BE Process
TO-BE process is the end-result of Primark’s online sales system.
Role of Managers in Implementation
Primark managers should formulate an execution plan I regards to the resources available in the company. Managers run the daily operations of the company, they are therefore aware of the niche that exist within the company and the ways in which online sales affect the company. Secondly, managers play supervisory roles among employees; therefore, they should inform the employees of the changes in the sales platform and the adoption of the online sales platform. Appropriate communication with the employees ensures that they become knowledgeable and well versed with the required skills to achieve the goals of the company (Haryono et al., 2021). The manager should also ensure that they have allocated each employee with the responsibilities that match their skill set to ensure smooth running of the online sales platform and ensure creativity after execution of the plan. Thirdly, the managers should monitor the performance of the online sales platform through analyzing overall online sales made and the feedback from Primark’s customers and the level of satisfaction it offers (Kienzler, & Kowalkowski, 2017). Positive feedback from the customers represents satisfaction towards the online sales platform while an increment in the online sales are an indication of acceptability and popularity of the online platform. Thus, Primark’s managers will ensure that the online sales platform is functional and increases overall sales of the company.
Plan for Implementation
Primark carries out its sales through physical stores where customers visit to shop and purchase fashion wears. The current business plan facilitates traditional sales strategies thus the company may need additional resources to adopt the hybrid business strategy that facilitates offline and online sales (Müller et al., 2017). To achieve the hybrid business strategy, Primark ought to inform their customers of their hybrid business plan and their establishment of the online sales platform – this will help the company get the feedback of the customers before they invest in the idea (Iamratanakul, 2018). Secondly, the management should select and train employees that will help manage sales on the online platform and a customer care team that will improve customer’s experience. The role of the customer care team is to ensure that the complaints, recommendations and suggestions of the customers are addressed and that the ordered products reach the customers in time. Thirdly, the designed platform should be designed to attract middle-aged customers and slightly older citizens belonging to middle-high income-earners, to ensure that they increase online sales and increase profitability of the company (Kienzler, & Kowalkowski, 2017). The plan should ensure that customers seeking discounts are served while those seeking efficiency are able to purchase through the online platform.
Resources Needed or Implementation
Primark’s online sales platform is a new concept that the company had not invested before. The platform requires investment in new resources to ensure that the company operates smoothly, meets the needs of the client, and does not interfere with the current offline sales strategy. One of the most crucial resources include training employees to ensure that they have the skill set needed to run online sales platforms (Prieto‐Sandoval et al., 2019). Primark fashion retailing company realizes profits by minimizing operational costs, thus, training employees will ensure that the company does not incur costs of hiring additional workforce. The company may have to hire a skilled IT employee to ensure that the system is operated effectively and ethically (Agnihotri, & Bhattacharya, 2020). Secondly, the company requires development and running of an online sales platform that is user friendly and attractive to the customers. The cost of development of the platform is part of the required resources for smooth implementation of the business plan. Thirdly, the company will require a delivery system for customers who will require door-to-door delivery service. The system should be an outsourced external business entity offering delivery services to minimize interference with the offline business plan (Hristov, &Chirico, 2019). Finally, Primark is likely to incur advertising cost to market the online sales platform to the customers and ensures that it competes with other companies in the retail fashion industry.
Supply Chain Cost
The cost of the supply chain is expected to decrease after the introduction of the online sales platform due to an increase in the sales volume. The new online platform is expected to increase overall sales of the company and enable the company to spread branches in other countries (Nouri, Nikabadi, & Olfat, 2019). An increment of sales volume will increase volume of purchases thus gaining bargaining power and lower the supply chain cost. In the end, the company will be able to offer discounts to the online customers after issuing product discounts. The company will also offer deliveries to customers with ease and at relatively lower costs.
Online sales platform aims to achieve customer satisfaction and improve overall sales for the company. Improving distribution coverage up to 80% ensures the customers get the products they order with ease and at lesser time than the competing companies in similar industry. Secondly, improving customer service to 95% will ensure that the customer is able to air out their recommendations so that the company is able to meet the needs of the consumers (Rafiq et al., 2020). Finally, stock availability at the distributor will ensure that the customers receive their ordered products within the shortest time possible. Customer satisfaction is achieved gradually by meeting their needs in the platform.
Effectiveness in Online Sales Platform
Primark Company may not be able to adjust easily to the new hybrid business process from the traditional business model. The new model adopts new business ought to increase overall sales thus the need to increase distribution strategies to ensure that the products reach the customers with ease and within the shortest time possible. The sales and distribution process should be in line with the level of operation of the company while the sales forecasting accuracy index is low as the company has not operated online business platform (Terziev, & Georgiev, 2017). The business should derive data from other companies with varying processes to aid in sales forecasting.
Learning and Growth of the Online Sales Platform
Sales of the online platform is likely to increase gradually as more people become aware of the existence of the online sales platform. As the platform is embraced gradually, sales will also increase gradually to help the company determine strategies that may allow an increase in sales of the fashion wear to the target population (Benková et al., 2020). The competency of the platform is also achieved gradually as the company is likely to implement the online business strategies gradually to promote efficiency and minimize associated risks. Primark’s online sales platform will achieve the needs of the clients and the vision for the company gradually thus the trend in the graph.
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