Online fashion retailer ASOS and Primark are in continued negotiations to make their online clothing store design trial become a long-term arrangement. Primark have been selling clothes via ASOS in June but since then the low cost of the clothes and a lack of advertising mean that the retail partners have so far failed to make the joint venture profitable.
Nick Robertson, ASOS chief executive explained last week:
“We’re still trying to work out a way that we could do it. Could we sell things above a fixed price or we could do it so they buy an ASOS item with every Primark item? There’s lots of nuances.
“We have to see what they buy and what the returns rate is going to be. If we can make money at it, we’ll both look at each other and will say let’s go for it.”
Affordable and Popular
One of the reasons Primark have so far failed to produce their own stand-alone online retail website is the low cost of their clothes -a partnered with the rising cost of UK postage they have not found a way to make it profitable unless people are buying in bulk. So in early June they launched a trial retail partnership with ASOS, offering around 140 clothing items. Whilst the items sold well, getting off to what Robertson described as a “phenomenal” start, last month Primark announced that they would be ending the trial, due to lack of profitability.
How to make it Profitable?
Robertson explained that Primark’s price points posed a difficulty for ASOS, which operates a free delivery and return model. This effectively cost Robertson a significant amount for every Primark order placed on the website:
“If the average unit price of every order is so low that doesn’t give me any wiggle room to make money and they’ve got the same issue.
“The issue is not do they want do it – of course they want to do it. The issue is can we do it and can they make it profitable?”
The distribution costs were also high and meant that Robertson found that he could not sell Primark clothes overseas because distribution costs were so :
“It costs me three quid to send it to Australia, well the thing only cost three quid in the first place”.
The low cost of Primark clothes is the main bug-bear of the trial and so if they find a way to either combine the sales with other ASOS items or get a minimum order amount then they could still continue on the site and have the same success as other high street brands such as New Look and Jack Wills which launched on ASOS within the last eighteen months.
ASOS’ retail sales have recently reported a 40% rise to £753.8m and they now plan to invest £110m in the next two years including the opening of a supersized European distribution centre.
We hope ASOS can find a way to make it work with Primark – the demand is certainly there – they just need to come up with a creative and profitable solution for getting the goods to the customers and reducing those huge queues in-store.