Why Primark’s American dream won’t be as ill-fated as Tesco’s

The UK discount retailer’s stateside adventure looks more credible than others who went before it

Last modified on Tue 9 Nov 2021 16.39 EST

The US is the graveyard of UK retailers, runs ancient retailing wisdom that was reinforced when Tesco fell flat on its face, and lost the thick end of $2bn, by backing a venture called Fresh & Easy a decade ago.

Primark, AB Foods’ discount clothes retailer, is actually Irish, so won’t count towards the tally even if its new US push fails. But there are at least a couple of reasons why this stateside adventure, which will take store numbers from 13 to 60 over five years, looks a more credible proposition than Tesco’s ego-driven expansion.

First, ABF opened its first Primark in the US almost five years ago and spent time tweaking the format for local tastes. The chief conclusion, perhaps counterintuitive, is that stores should be smaller than European versions to achieve similar financial returns.

Tesco also claimed to have done its research, of course, but none of it amounted to waiting for profits before committing more capital. When early sales levels disappointed, the supermarket group concluded, optimistically, that what it really needed was more outlets to achieve efficiencies. An intended low-risk experiment quickly became a costly blunder.

Second, Primark is confident it scores better on price than local rivals while offering more fashion pizzazz. Tesco was in a different game. It was pushing an upmarket format that was unlike its UK model but looked similar to those of established west-coast chains such as Trader Joe’s and Whole Food Markets. It wasn’t offering anything new.

None of which guarantees that Primark will win in the US, but the refusal to offer an online transactional website – which has been cited for years to predict “peak Primark” – suddenly looks less and less of a danger. Retail property, for those who can bring in loyal punters, is very cheap these days.

Bitcoin yet to match gold’s veteran bankability

Bitcoin is soaring to new price highs because it is a hedge against inflation and a form of “digital gold”, says a currently popular refrain. It makes no sense.

The point about gold is that it has earned its reputation as a store of value (and not always reliably, it should be said) over a couple of thousand years and over many inflationary cycles. By contrast, digital currencies, in the grand sweep of economic history, have existed for about five minutes. That’s no basis on which to make inflation-protection claims.

Of course, buyers of bitcoins and other crypto currencies may believe they are protecting themselves against the profligacy of central banks. But a motive for buying doesn’t mean the asset has suddenly acquired the characteristics fondly imagined. How, for example, would “digital gold” proponents explain the near-50% plunge in bitcoin’s value between May and July this year? That investors were universally relaxed about inflation in those months? Come on, we know that wasn’t the case.

The unsatisfactory, but surely accurate, explanations for the latest burst of enthusiasm for bitcoin and its imitators seem simple. Appetite for pure speculation is alive and kicking; punting on crypto has become easier via innovations such as the first bitcoin exchange-traded fund in the US; and serious marketing budgets are promoting crypto trading.

Inflation-related theories may make the exercise feel high-minded, or even mainstream, but they have very little to do with it.

Sunak’s post-Brexit regulation may fall flat

The UK has left the European Union, so it is reasonable for the Treasury to want to unpick a few EU financial regulations. Not every piece of legislation that was created in Brussels was well designed. It is easy to see that the UK, as Europe’s leading financial centre (still), might wish to do a few things differently.

It’s just that chancellor, Rishi Sunak’s, language around this ambition does not inspire confidence. “Today’s proposals will support the future strength of the UK as a global financial centre, ensuring an agile and dynamic approach to regulation that supports the growth of the UK economy, without diverging from our continued commitment to high international standards,” said Tuesday’s high-level statement.

The worrying words in that sermon are “agile and dynamic”. Wasn’t roughly the same claim made about the “light touch” era of the 1990s that tolerated undercapitalised banks and timid regulators and culminated in the financial crash of 2007-09?

The nod to “high international standards” is intended to counter that objection, but let’s see. Agile regulators are great until they are bent out of shape by the people they are meant to be regulating.

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