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By opening its second-biggest store in the world in Spain, Primark,
owned by Associated British Foods, signaled its confidence in its
future in Spain after 10 years of quietly building up a chain of
around 40 stores there.
There was not much quiet about the debut, however, as the new store
was mobbed by hundreds of shoppers eager to grab fashion essentials
at bargain prices in a country where 22 percent unemployment has
strained family finances.
"Being on Gran Via and in such a large space is obviously a symbolic
step for Primark. It's the icing on the cake for the new king of
low-cost clothing retailing in Spain," said Carlos Hernandez, a
Madrid-based retail consultant.
The new store is in the Gran Via 32 building on one of Madrid's main
arteries which now has a more swanky look thanks to years of
renovation work on the once-delapidated 1920s and 30s multi-story
buildings that line the street.
The building also houses Primark's nearest rivals -- Mango, Hennes &
Mauritz <HMb.ST> and Inditex's Lefties and, ironically, is owned by
Inditex's founder, Amancio Ortega, the world's fourth richest man.
Around 300 people queued outside the store, with dancers wearing
black "I love Primark" T-shirts and carrying balloons to entertain
customers.
The building features a glass-domed patio lined with balconies,
featuring laser screens promoting the store's offers: dozens of
styles of bags and brimmed hats, 11-euro stilettos and 28-euro camel
coats.
In the shop was Victor, a 25-year-old who studied design but is
unemployed, wearing a black T-shirt with a Palestinian scarf wound
tightly about his neck.
"I've come for the hype really. Primark do trends very well and
their logoed T-shirts are great, though the quality of their stuff
isn't great. But it's cheap," he said.
"Primark was popular even before (Spain's economic) crisis, because
there isn't anywhere you can find jeans for 9 euros," he said,
shouting to be heard above the in-store DJ's set.
In Spain, only just beginning to emerge from a deep recession, cheap
mass-market retailers are seen as appealing to price-conscious
shoppers.
Cheap oil, weak inflation, tax cuts and low interest rates are all
helping to put some money in consumers' pockets, and retail sales
are recovering. But the outlook remains tough for many.
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"This is a good moment to expand again, particularly in the low-cost
segment, as salaries are and will continue to be low in the years
ahead and growth will come particularly from these low and
low-to-mid retail segments," said Hernandez.
Demand for cheaper fashion has also put some pressure on Inditex,
which owns the Zara, Bershka and Massimo Dutti store chains and has
overhauled Lefties, its discount arm which it says sells leftover
Zara stock although the clothes are branded under the Lefties name.
But largely speaking, estimates Bernstein analyst Jamie Merriman,
Primark's around 6 percent Spanish market share has hit smaller
players more than Inditex.
"Spain is very interesting given that it is Inditex's home turf, but
so far there has been room for both retailers and we're seeing
continued consolidation. There is a surprising number of small
retailers that are losing out," she said.
“This opening reflects the boom in mass-market fashion, with Primark,
Inditex, Mango and H&M all doing very well in Spain ... Why? Because
tourism is doing very well," said Robert Travers, a retail property
partner at Cushman & Wakefield.
Showing signs of a recovery, Spanish consumer confidence has shot up
17 percentage points in a year, according to state pollster CIS,
with the tourist industry also doing well thanks to a weak euro and
security concerns elsewhere.
(Editing by Greg Mahlich and Adrian Croft)
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