What: Though Primark looks as if its in the same trade as its budget rivals, beneath the seams, its business model couldd not be more different.

Why its important: The store's strategy has its limitations, especially with respect to new growth, but for now it is proving to be effective.

The Economist has looked at the case of Primark, the low-price fashion chain with over 380 stores across several countries, owned by Associated British Foods, a huge conglomerate, part of the Weston family empire. At first glance Primark looks like its rivals H&M or Zara.

However, whereas the latter have embraced speed (emblems of “fast fashion”) and moved aggressively online to follow their customers, Primark has stuck to the “stack-it-high-sell-it-cheap” approach which it adopted at its foundation over 50 years ago. Nor has it moved online. It argues that customers would prefer to be less cutting-edge if they can make big savings.This approach penalised the company during Covid lockdowns when it is estimated it lost some £3 bn in sales. However, it is making up for it now with the familiar queues outside its stores.

The fundamental aspect of its approach is to keep costs very low: sourcing is mainly from low-wage countries such as Bangladesh. It uses the same factories as global brands but is willing to be placed in fashion’s off-peak periods when factories are glad of the business. Primark was unwilling to go online because of the costs. It has practically no marketing costs and runs no promotions. Thus, although gross margins at 41% are lower than rivals’, EBIT is in line with the industry standard of 12%.

How Primark makes money selling $3