Why Primark’s new click and collect service will not be a simple win for the fast fashion giant

Primark fans in the UK struggled to get their first online fast fashion fix from the Irish retailer recently. Its website crashed on the day it launched a “click and collect” service to allow people to buy certain items online for collection in-store.

But, despite its initial popularity, Primark is only conducting a limited trial of this model. This is a smart move given the outlook for reduced spending patterns due to the cost of living crisis.

Similar moves have certainly had mixed results for other companies in recent years. The strategy worked for low-price US store Target, which claimed sales soared by more than 500% when it offered click and collect during the 2020-21 holiday season.

On the other hand, low-cost supermarket Lidl abandoned its attempt at click and collect in the UK in 2020, although its competitor Aldi has so far stuck with its version. Indeed, it’s almost expected of a modern retailer to sell both online and in physical stores, but Primark’s click and collect strategy is not a straightforward website offering.

As well as only being offered at 25 of its 191 UK locations, some of the 2,000 children’s items on offer via the service are not available in the stores themselves. This is a canny product area to trial, however, since parents of fast-growing kids navigating a cost of living crisis may well want cheap clothing for school and play.

Primark’s click and collect service does not allow customers to relax at home while their shopping is delivered to their doors. But it does mean shoppers can make sure certain desired items are available when they travel to the store. “Stock check” features typically cannot guarantee this because inventory is often wrong.

A click and collect model offers several other advantages to sellers:

• It saves both the business and its customers from paying for postage on returns, with our research showing that, although such services create additional costs due to returns, having customers return items to a shop is more cost effective for the retailer.
• Less packaging is needed because items do not have to survive one or more trips through the post – a company might claim that this is environmentally friendly but it also reduces the costs involved.
• Customers might pick up additional items when collecting or returning click and collect items.
• When customers click, collect and return to the shop, research shows there are less opportunities for customer fraud compared to other online sales models.

Hidden click and collect risks

But click and collect is not problem free. A major headache for retailers offering this kind of service is making sure stock is available to meet demand in the specific shops for which click and collect is available.

This avoids racking up transport costs or disappointing too many customers. In the US, Target manages online customer expectations with emails and texts that aim to avoid disappointment and suggest alternatives.

A click and collect retailer also risks hidden costs and damages relating to returns. When people “click but don’t collect”, shops are left with items on backroom shelves. This requires administrative and logistical effort to arrange refunds and return products to warehouses or other stores where they may have more chance of being sold.

People might also “click lots and only keep one item (or none)”. This can happen when shoppers order several sizes or colours to try on and return the rest before leaving the shop. Again, this could saddle the retailer with extra costs and little associated income. And these days, the rising cost of living could create choosier shoppers.

Given the many risks involved with this kind of scheme, starting with a limited service is sensible. Primark can then gauge if returns – a major cost area relating to click and collect – could wipe out any additional profits it might make with this new venture.

Managing returns

While having customers return items to its shops will be more cost-effective for the business than postal returns, this pilot will help Primark work out if it can keep the overall rate of returns and its costs down. It will also be able to weigh up the benefits of additional impulse buys while click-and-collect customers are in the shop, versus the cost of staff time taken up with order disputes and returns.

But offering an online-only product range means items returned to stores will not necessarily be resold from there. Instead, returns could be sent back to the warehouse for processing. And this is where the real test for Primark’s new online model lies: can it afford the cost of returns?

If the company expands this service to all of its stores and offers other routes to returning goods, it is likely to find itself in the same situation as some mid-range shops recently. The scale of returns affected bottom-line profits for some businesses and created the need for separate returns distribution centres or to charge for postal returns.

Of course, there are also environmental implications when any fast fashion empire attempts to boost sales. Many mixed-fibre textiles sold by such retailers are difficult to recycle. While good quality textiles often get re-gifted, resold or donated, cheaper items may simply end up in landfill in developing countries.

Primark has also argued that this move is about “believing” in the high street. But this is not a completely altruistic move. It is a strategy to get shoppers into stores to buy more, without taking on the costs of major IT upgrades for customer and inventory management.

Managing such operational risks while navigating the ongoing kickback against fast fashion – albeit countered by egalitarian claims for making clothes affordable for all – makes click-and-collect a much more complex proposition than it might appear to be on the surface.

Lisa Jack is a Professor in Accounting and Financial Management at Portsmouth Business School in the Faculty of Business and Law.

This article is republished from The Conversation under a Creative Commons Licence. Read the original article.