Primark's pricing model puts US retailers on alert
It might be months before Primark can claim a firm foothold in the US clothing market, some analysts are already predicting that its aggressive pricing strategy could spell success for them – and losses for others. Oliver Chen, a retail analyst at Cowen & Co., views Primark as a new threat to a broad range of stores. Sanford Bernstein analysis flagged that Primark’s prices are drastically lower than any other US competitor in fast-fashion. And Stacey Widlitz, president of SW Retail Advisors, told CNBC that American Eagle, Aeropostale and Abercrombie & Fitch should all be paying attention to how consumers react to Primark’s pricing structure. Widlitz thinks that Primark has a much broader appeal than the 18-35 market thought by many to be its target market. He said. “On any given weekend, the store is swamped with families stocking up on basics, fashion, and home.”

Primark sells retail goods very cheap, between 20 to 40 percent less than U.S. stores, and one analyst notes it's not good news the Irish company is now in America.

The U.S. retail sector should be bracing itself for one of the biggest changes it may have to deal with since the recession economics of several years ago: the Irish are invading the industry.

Specifically it’s the Irish retailer Primark and its arrival in the U.S. as it opens its first American store in Boston later this month. Its formal arrival could mark a turning point for U.S. retailers already in a competitive space and just weeks to go before the lucrative holiday season, according to a CNBC.com report.

The concern is tied to one major aspect: merchandise pricing as Primark, a fast-fashion operation,

"We believe the flagship was easy to shop/navigate and offers a compelling one-stop shop for a busy mom, a teen interested in treasure hunting for outfits and accessories, or a father looking for functional work clothing," Oliver Chen, a retail analyst at Cowen & Co., told CNBC.com.

Primark sells stuff cheap: towels sell for a few bucks, jeans and sweaters all well under $20. The CNBC.com report states Primark prices, compared to U.S. retailers, are between 20 to 40 percent less mid-range U.S. retailers such as Old Navy and Forever 21.

The cheaper pricing is due to the fact that Primark makes its own clothes and so its cost margins are much less which leads to the cheaper prices. It also has no online ecommerce operations, which industry analysts state has kept its marketing and operations costs much lower than U.S. competitors.

"We view Primark as a new threat to department stores (Macy's), mothers shopping for family (Kohl's, Old Navy), and teen retailers given prices and full teen collections. Aggressive bra and sleepwear prices and children's key items may also impact L Brands and children's retailers (Ascena Retail Group and others)," Chen wrote in a note to investors.

Yet Primark will need a few years and many more stores, likely in the hundreds, to have a strong impact on the overall U.S retail space, noted the report.

"U.S. retailers should be worried given impressive depth and breadth [of Primark's] offering, daily replenishment strategy, elevated store service and alluring styling (basic apparel + trendy accessories). Existing retailers will need to intensify focus on differentiation through brand loyalty, omnichannel and assortment,” wrote Chen.