Analysis: Primark confronts sustainability concerns that hit German sales

Despite ongoing political uncertainty in the UK, Primark built clothing, footwear and accessories market share – it now stands at 17% – as sales advanced 2.5%, driven by space expansion.

This year, Primark opened its biggest branch, in Birmingham, that showcases its full product range alongside experiential elements including a nail salon, restaurants and cafés and a barber.

In the US, the value fashion retailer now has nine stores and recorded “strong” growth during the financial year – with plans in the pipeline to open in some of the most sought-after retail spaces in America.

However, despite all its overseas success, like-for-like sales at the Eurozone arm of the business fell 2.9%, which it attributed to “weak performance in Germany”.

So, why is Germany lagging?

Primark’s full-year results showed that a cookie-cutter strategy – no matter how successful in one location – isn’t always the best plan; something Primark owner Associated British Foods finance director John Bason speaks frankly about.

“We have had a problem in Germany,” he admits. Problems with its ranges and in-store standards being below the expected level played a part in the hit on numbers.

But Bason points out that one of the driving factors in the loss in sales was “misconceptions by a number of German customers around ethics and sustainability”. 

German stores account for nearly 20% of all of Primark’s selling space and made a big impact on full-year figures.

“It’s made an impact on the group like-for-like numbers,” Bason explains.

Sustainability agenda

Consumer concern came as sustainability rockets up the agenda globally, as activist Greta Thunberg makes headlines and Extinction Rebellion protesters take to the streets.

In the UK, Primark – along with many other fashion retailers – came under scrutiny from MPs who called for transparency and action on what social and environmental impact the clothes and shoes they sell has on the planet. 

The parliamentarians actually placed Primark as among the retailers ‘most engaged’ on such issues, ahead of retailers such as Amazon, Next, JD Sports and Asda.

“We’re telling the German consumers all about the ethics of Primark and what we’re about”

John Bason, Associated British Foods 

But Bason is also aware not enough consumers know about that – especially those in Germany.

“There’s a difference between perception and reality, which is the case here,” he says.

And GlobalData analyst Chloe Collins says retailers need to learn about local customers’ needs and preferences before trying to expand to other territories. 

“Success is not guaranteed in every market,” she says.

Along with downsizing some of the German store estate, making sure its customers know Primark cares – and more importantly is doing something about it – will be top of the retailer’s agenda.

Primark hired former H&M country sales manager Christiane Wiggers-Voellm earlier this year as its new managing director in Germany to oversee the new marketing strategy.

Bason says the new campaign will show the consumer that Primark is heading in the right direction – with a huge focus on its use of sustainable cotton. This year already Primark revealed a fivefold increase in its sustainable cotton programme – with targets set to reach 100% sustainable cotton usage across all its product categories by 2022.

“Sustainable cotton has been a growing and important part of the products that we sell – and it really does over-index in Germany,” he says.

On message

Out of Primark’s top 10 stores that stock the most sustainable cotton products, five are in Germany – something which wasn’t made clear enough with the German consumer.

“It’s around local marketing campaigns to show that Primark cares. So, we’re telling the German consumers all about the ethics of Primark and what we’re about,” Bason says.

The sustainability issue isn’t anything new and the problem is making itself known time and time again from climate change groups, politicians and teenagers across the world.

Although Primark’s other European operations grew, German consumers spoke with their wallets when they thought Primark wasn’t in line with their values.

Now Primark has a clear strategy to turn things around, it will be facing the issue head-on to change German consumers’ minds on what it stands for.

If one of the biggest retailers in one of the biggest retail markets in the world can have performance knocked by the impact of just 30 of its 373 stores worldwide, it shows why all retailers need to take the sustainability agenda seriously.