The true cost of low prices


FAST FASHION: From its beginnings in Dublin in the late 1960s, Penneys has become an international phenomenon better known as Primark, but despite its successful high-volume, low-price strategy, questions continue to be raised about the labour conditions of High Street garment makers, writes Derek Scally

EVA AND HER three best friends look 17, are probably 15 and are dressed up to the nines, one even to the 10s.

They’ve skipped school and, looking like underage extras from Sex and the City, are hurrying through a sprawling shopping centre on the edge of Frankfurt.

Taking a corner at speed in stilettos, they squeal – “There it is!” – and break into a trot across the tiled floor.

“It all looks so normal,” squeaks one of the four, hair piled inexpertly on top of her head, as she steps into the just-opened Primark store. Eva and her friends disappear into the fray and can soon only be heard, audibly gasping in delight.

“Ohmigod! . . . €11! . . . Oh the leggings!”

“I knew about the store from friends who went to Ireland and England but I didn’t realise it was all so cheap,” says Eva a few minutes later, fingering a pair of leopard-print stilettos. “This is going to be huge.”

Eva is a dream customer: young, excitable and with a passion for the fast fashion pushed by Primark, which trades in Ireland as Penneys.

Two hours earlier Breege O’Donoghue, a company director from Dublin, welcomed a crowd of shoppers to Germany’s second Primark store with a promise: no tricks and “ kein schnick schnack”, loosely translated as “no bells and whistles”.

Now, downstairs in the staff room, she is examining the first sales data.

“It’s all going very well,” says O’Donoghue, a grand, middle-aged woman with dark hair and eyes that are warm, intelligent and hard.

She has been with the company for three of its past four decades, starting as group human resources chief and now director responsible for marketing and human resources. A close confidant of company founder Arthur Ryan – “a unique individual” – she lives and breathes Primark. Today she’s wearing Primark too: a ruffled top in this season’s must-have purple – “great value for €35”.

She warms up within minutes to deliver the gospel according to Primark. The company’s success, she insists, is to keep it simple or, as she puts it, “keep close to the knitting”. Primark listens to what customers want and gives it to them, she says. Soon the air is alive with buzzwords from focus groups: quality, price, value for money, popular sizes and fashion for all the family. “It’s a model that works in good times and bad,” says O’Donoghue.

Like its customers, Primark is a follower of fashion rather than a leader. The subsidiary of Associated British Foods is a volume business with a high-turnover product developed by buyers and trend-spotters on scouting trips from Miami fashion shows to Tokyo clubs.

Back in Dublin, designers boil these findings down to their commercial essence and place huge orders with suppliers. What took the company into the stratosphere was the arrival of fast fashion, spurred on by weekly fashion magazines, that sees copies of catwalk clothes land in Primark stores in six weeks or less.

With a low advertising spend and no celebrity endorsements, Primark undercuts high-street rivals such as HM and even attracts the attention of publications such as Vogue.

Adding to the recent Primark hype are product surveys, such as one from consultants PricewaterhouseCoopers last year that found no clear link between quality and price of high-street clothes. The survey tested ladies’ jeans and polo shirts ranging in price from £7 to £123, putting them through 15 different trials, testing garment quality.

“It may not have been the cheapest clothes that won,” noted the report, “but it was often the second cheapest.”

From humble beginnings on Dublin’s Mary Street in 1969, the company moved into Britain four years later. Its rapid UK expansion in recent years was followed in 2006 by a push into Spain. The company has opened 16 stores across the Iberian peninsula, with more to follow.

In late 2008, Primark moved into Holland, while Portugal, Germany and Belgium saw their first stores open last year. Now at 196 stores and 30,000 employees, Penneys-Primark is anxious to maintain what O’Donoghue calls its “Irish DNA” and brings all foreign managers to Dublin to learn their trade.

So what are their plans for Germany, Europe’s largest retail market?

“We’re not saying we’re going to roll out a business in Germany; we don’t know,” says O’Donoghue. “We’re testing the market and we are not in any particular rush . . . I think it’s part and parcel of our Irish culture to respect similarity and difference.”

Primark knows the road to retail success in Germany is littered with well-known corporate corpses. Gap closed down after a joyless decade in 2004 followed, two years later, by the retreat of the mammoth that is Wal-Mart.

Primark’s expansion drive has pushed profits up 8 per cent to £252 million for the year to last September. But rocketing profits have brought with it uncomfortable scrutiny from anti-sweatshop campaigners.

In 2006, Primark was rocked by the War on Want campaign’s “Fashion Victims” report, revealing that garment workers in Bangladesh worked in appalling conditions for up to 80 hours a week, in violation of local law.

Stung, the company said it was working to create improvements. In 2008 a Panoramainvestigation found little improvement. Once again, Primark promised to do better and now says it employs seven people, including a director, in its growing ethical trade division. Employees are given ethical training, while suppliers are subject to independent annual audits.

“We were shocked because in that case we had been let down and the trust was broken,” says O’Donoghue. “In that case, with those three suppliers, we did not place any further orders.”

So Primark has turned over a new leaf?

“There has been a change in that, two years ago, Primark wouldn’t even admit there was a problem,” says Simon McRae of the War on Want campaign. “But the litmus test for us is: have workers’ wages improved? Are unions allowed? Are workers working 80 hours or more? Those things haven’t changed.”

The less appealing side of the Primark-Penneys business model has, it seems, preceded it to Frankfurt. In the shiny new store, fiftysomething woman Zarah Froni is folding up a sweater with pursed lips. “There’s nothing for me here, it’s very cheap in every sense,” she says.

It seems that sweatshop associations are as much a part of the Penneys-Primark experience as the fashion awards it has accumulated. But is it fair to target the company because of its low prices? The company doesn’t think so, implying that it is the only retailer to pass on to customers the low prices made possible by mass production in Bangladesh and elsewhere.

“Irrespective of what is on the label, the workers are paid the same,” says O’Donoghue. “Our factories are shared by 98.3 per cent of our competitors,” a figure she says is based on an audit by consultants Ernst Young.

So everyone in clothing retail is as bad as each other? Strained laughter in the Frankfurt staff room.

“Clearly in the market place we’re in there’s a market rate for production. That’s the kind of business we’re in,” says O’Donoghue.

Has she visited any supplier factories?

“No, I haven’t,” she says.

Is she not curious about conditions – “keep close to the knitting” and all that?

“It’s not part of my brief to go, I’m quite satisfied with what I hear and what I see on video with the standards of the factories,” she says. “It’s the job of the buyers and the ethical trade team to visit the factories.”

War on Want says Primark auditing is superficial and pointless: factories are often given advance notice of visits and they say workers are coached to give the answers the visitors want to hear. Primark brushes off War on Want’s criticisms, saying it uses unannounced visits where there is a concrete suspicion of poor practices. The market rate monthly wage for a production line worker in Bangladeshi factories is, in some cases, as low as £19 a month: there, less than half the living monthly wage; here, the cost of an off-the-shoulder top.

“Wages are low because they are kept that way through a global competition that engages workers, factories and whole countries in a race to the bottom,” wrote the leading Let’s Clean Up Fashionreport last year. “ a race where the winners are those that can produce as quickly, cheaply and flexibly as possible. Workers who organise to oppose this system face dismissal, unemployment, arrest and harassment from employers and governments keen not to lose the fickle investment that the garment industry provides.”

Researchers for War on Want visited a factory in Bangladesh which it says supplies High Street garment retailers, and found people working up to 84 hours a week who experience regular harassment, and who are not permitted join a union.

One 21-year-old worker, Ratna, told War on Want: “My husband has a terminal illness. I have paid for his treatment, but can only afford to see our small daughter once in two years. How can I afford the travel costs after meeting all our expenses? Prices have soared sky high. Everything is costly.”

Primark disputes the accuracy of this report and says it is investigating the claims as part of its efforts to improve labour standards and wages through the voluntary Ethical Trade Initiative.

But War on Want is disillusioned by promises to improve and campaigners have asked the British government to intervene. Primark has dismissed as “unworkable” War on Want’s call for the provision of a legislative basis to existing voluntary ethical trading guideliness, that might level the playing field among clothing retailers. But O’Donoghue says: “It would help if all retailers helped tackle supply chain problems.”

The campaigners are careful not to call for a boycott, conscious this would only hurt the people they want to help. Instead they have launched the “Love Fashion Hate Sweatshops” campaign to raise public awareness.

Wandering around the Frankfurt shopping centre, there’s a good chance Primark will do well with the price-conscious Germans. This is, after all, the country that gave the world Aldi and Lidl. “If these are the permanent prices and not opening offers, I’ll definitely be back,” says Butaouas, a headscarfed woman in her mid-30s in the Frankfurt store. “It’s better quality than HM and better-priced.” Nevertheless, consumer research firm GfK says Primark will have its work cut out with fickle German customers.

“Discount prices are nothing new here and, in the last three years, we’ve seen that low price alone doesn’t work anymore,” says Thilo Lohmüller of GfK. “Now people want information about their products. Primark needs to build trust with customers about how they achieve lower prices than the competition in a morally and ethically proper way.”

Whether shopping at Primark in Germany or Penneys in Ireland, anti-sweatshop campaigners say it’s an unfair, three-sided deal: with every sale, the company gets its margin which, inflated by high sales volume, is transformed into substantial profits. The customer gets a low-priced, fashionable garment. Subsidising all this, at great cost, is someone who can least afford it: the person who made the garment.

“This is consumerism on the cheap, allowing young people to buy into the pop culture at low cost, but someone always pays,” says Peadar King, an Irish documentary maker who has investigated Indian child labour in the textile industry.

Trying to explain the bigger picture to fashion-obsessed teenagers has little impact, he says. Those who need to be challenged, he argues, are the middle-class shoppers trading down to Penneys-Primark, encouraged by fashion journalists who push a €21 off-the-shoulder top as a “smart buy”. It seems that, standing in the way of real change, are twin barriers of apathy and complicity.

During his Indian travels, King remembers asking Prof Shantha Sinha, an Indian children’s rights activist, why she thought the garment trade refused to shed its sweatshops. “The reality is the West doesn’t care,” she told him. “This is about Indian children and Indian children don’t matter.”

Then there’s the complicity: everyone’s hands are dirty, whether you’re wearing a high-end blouse or a Penneys fleece top. In the garment industry, it seems that no one is ready to be the first to push their suppliers for higher ethical standards. “It’s a total cop-out to say we can’t do anything because others aren’t,” says Simon McCrea of War on Want.

“The reality is that the power is with the companies. Primark can set down conditions for suppliers.”

Unsurprisingly, Penneys defends its business model, one validated every day by the customers who vote with their feet, and their cash. It says it is working to improve conditions: this year’s Let’s Clean Up Fashionreport gave it better marks than other retailers, but said “they still have a long way to go”.

“We spent more than £3 billion in development countries last year so we say we helped over two million people,” says O’Donoghue. “We would say trade is better than aid.”

An hour after their arrival, Eva and her friends have left the brightly lit store and are waiting on the platform of the shopping centre train station. Besides the girls, eight other people on the platform are carrying Primark bags. It’s clear from the four girls that their enthusiasm for the shopping experience is real. Like millions of teens across Europe, it’s their favourite pastime.

The money they left behind in the store – though in small quantities – is real too. They don’t know why their clothes are cheap and they don’t care. Why should they? They’re 15 and Bangladesh is a long way from this windswept shopping centre in Frankfurt.

And what about the clothes they bought? Sitting on the train, one of Eva’s friends slips on a pair of leg-warmers, dangles her legs this way, then that, sighs and remarks: “I don’t really know if I want them now.”