Digital journey of 3 fashion retail giants

2020 took me by total surprise. In January I was sitting with my calendar, planning all the trips and marketing activities for the year, and then in March everything in Ireland locked down for an indefinite period because of the pandemic.

For me the transition of working from the office to working from home was quite easy. I have a computer-based job in a digital agency, where everything is cloud based., but this unique event caused by Covid-19 made me think about my favourite brands – how did they cope with the transition, as they too had to adjust their sales process overnight?

The industry I decided to look at was fashion retail. I chose Primark (known as Penneys in Ireland), H&M and Asos. First, because these are the brands I like and am very familiar with as a customer. Secondly, because Primark does not have an online store, H&M has both – web ecommerce shop and distribution stores, and Asos – a purely online retailer, are one of the biggest online retailers in Ireland and Europe.

Business during the "new normal" - survival of the fittest?

I decided to look at the numbers, starting with companies' performances during Covid. According to Central Statistics Office, there was a decrease of 35.9% in the value of retail sales in April 2020 when compared with March 2020 and there was an annual decrease of 44.8%. But how did our research participants compare?

Primark

Sadly, Primark has gone from hero to zero. From a BBC interview with George Weston, the CEO of Associated British Foods (Primark holding company), we learned that the business "has been squarely in the path of this pandemic... From making sales of £650m each month, since the last of our stores closed on 22 March, we have sold nothing.” Furthermore, he admitted that without furlough support from European states, many of Primark's 68,000 staff would have been made redundant. The company has also written down the value of its clothing stock by £284m.

H&M

H&M’s net sales for the three months to May 31st fell on average 50 per cent compared with a year earlier, to 28.7 billion crowns (€2.7 billion). In Germany, sales are down 46% so far in the second quarter, while in its second-biggest market, the US, sales are down 71%, the group have reported. However H&M’s online sales jumped 36 per cent.

Asos

At the same time as H&M was losing revenue but growing online sales, Asos sales rose 10% in the lockdown period. The British group, which is focused on the 20-something demographic, said on July 15th its sales were £1.01 billion, up from £919.8 million in the same period last year. While UK sales fell 1 per cent, international sales were up 17 per cent. Asos said it saw a steady improvement through the period, reflecting increasing warehouse capacity and an underlying improvement in demand. Its active customer base increased 16 per cent to 23 million and the number of items sold rose 15 per cent. Most impressive, I think you’ll agree.

Digitalisation as a strategic priority

The 2020 Covid-19 pandemic is an extreme scenario that no one was expecting to happen. However, being dropped in it, the importance of a digital presence was outlined like never before. The difference between companies’ performance was simple. If you are online and selling – you are making money; if you are not – you lose everything.

This is not only about being online and having an eCommerce portal. It is also about the difference in digital readiness between the three companies. The numbers above suggest that Asos, who has growing sales, was the most digitally prepared, and Primark, with no online presence other than a brochure site – the least. Is that really the case, and if yes – why? To answer this question, I decided to look at how these companies prioritised digitalisation over the last 5 years.

Living in the Information Age has its perks, one of them being having an easy access to companies’ annual reports. This is where I went looking for strategic priorities of Primark, H&M and Asos, hoping to understand how much of their resources did these companies allocate to their digital infrastructure.

See the results per brand in the tables below. All digital initiatives are highlighted in pink. As you go through the tables, look at the position of the strategic priority and you will notice some interesting shifts.

Primark

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As we see, digitalisation was not a priority for Primark over the period reviewed. The low-cost retail brand focuses mostly on growth, product quality and value for money. In 2015, 2017 and 2018 the brand focused on social media online experience, mainly through Twitter and Instagram social marketing and influencers’ partnerships. In 2016 the only reference to their digital plan I could find was regarding the “store experience” initiative, when Primark aimed to establish WIFI in its stores. Throughout this period, these initiatives have never been firm’s top priority, relegated to 3rd or 4th positions.

Primark’s 2019 report was very special, because “digital” was not within their strategic priorities at all. In the whole report for Associated British foods “digitalisation” is mentioned once in agri-food business section. In Primark specific section, the word “digital” was brought up only twice, both in relation to placing the customer in the center in their digital social media campaigns.

See annual reports here.

H&M

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H&M started to look into digital in 2016. That year the “Expansion and future development” priority included digitalisation among other initiatives. From 2017 digitalisation was prioritised by the company more and more, and within the last 3 years raised to become H&M’s top priority. While sustainability, and product quality remain in focus, digitalisation is tightly connected to the firm’s ambition to create and deliver the best customer offering online and offline.

See annual reports here.

Asos

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With Asos we see a completely different table. From a distance we see that it has way more pink than the previous two, which clearly indicates many more digital initiatives that constitute a strategic priority. Not too surprising for an online only brand. There are still a couple of interesting findings. First, what surprised me most was how early Asos started talking about engaging content (2015), mobile first (2016) and bespoke technology and infrastructure (2017). Secondly, look at 2019! Purely Digital measures are only mentioned within the third strategic priority, while all the other positions are taken by purely business performance KPIs. I think this is because by 2019 Asos has managed to truly indoctrinate digital into its DNA and set up solid digital platform, which enables them focus now on performance, scalability and growth.

See annual reports here.

Is digital the new panacea?

If you are an online only business, digital is not a choice for you, it is it’s core. However, if you are operating both online and offline, your priorities may be different, as we learn from H&M and Primark. That is absolutely justified, because your products and services are your bread and butter, and the reason your company exists. However, having a website means having a window into your business at any time, from any location. It is like your 24/7 shop, that will educate, convince, inspire, and if you add eCommerce and transactions - even sell.

In the case of retail, having an eCommerce shop is not only about the website and excellent digital technology. It also means having to develop supply chain management organise and manage the stock and organise delivery and distribution lines. That’s a lot of work. Is it worth it? Will it pay off? That’s not an easy question to answer and would require a case by case analysis to define what is best in each scenario.

What we do learn from these three examples (and other businesses to be fair), looking at their performance during Covid, is that having a good website and strong digital presence nowadays is a must, while having a digital commerce platform is something that all retail brands should at least strongly consider. Having an eCommerce site may not only become a big revenue source, but it can serve as a risk mitigating factor in situations like 2020 pandemic.

There are no quick wins

Another learning we can take with us is that there are no quick wins in the digital transformation journey. Looking at the timelines and priorities, we can follow a clear path over the course of 5 years that companies took from social media marketing, through increasing online presence, creating eCommerce platforms and infrastructure, and finally seeing the performance and enjoying the benefits of the digital platform. Combining all 3 timelines, we see the digital journey took - for Asos (or will take for H&M and Primark) as long as it did. Time is of the essence, the sooner you start planning your digital roadmap, the better. However, it is also a good idea to take stock on what you have, and use your existing infrastructure as a starting point to inform your next steps. Whatever you do, do something and take advantage of the lessons being forced on us by the current Covid situation. It’s the only way we can prepare for the future.

Would you like to begin your digital transformation journey? Contact us.