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Graham Soult on Poundland: ‘the new Woolies’

Growing numbers of shoppers are becoming seduced by Poundland’s offer of drinks, dog food and de-icer – all priced at exactly £1 – but what are the factors driving this retailer’s phenomenal rise?

Arsenal footballer Jack Wilshere recently tweeted that his new local Poundland in Hitchin was the “worst shop I have ever seen”. Jack may be outside Poundland’s target demographic, but the Hertfordshire town is representative of the chain’s recent march into more upmarket locations.

Only last week, Poundland opened its doors in Hexham, a town that has traditionally lacked discount retailers. Meanwhile, the chain continues to grow elsewhere in our region. High-street stores in Bishop Auckland and Peterlee have opened in recent months, while another in Ashington is imminent. With its recently opened store at Durham’s Arnison Centre, Poundland is showing that it can work a retail-park format too.

For a company only set up in 1990, Poundland’s growth has been astonishing. With a UK store count now at 360 and rising, the chain has added 200 shops in the last three years alone. Much of this expansion has been through mopping up space vacated by collapsed or downsized retailers, such as Woolworths, Ethel Austin and TJ Hughes. The economic downturn – leading to a surfeit of quality retail space, and lower commercial property costs – has created an environment in which successful retailers can grow quickly and affordably.

None of this expansion would make sense, however, unless Poundland was thriving – which it is. In the last financial year, turnover grew by a quarter to £642 million, while profits rose by a third. Poundland’s single-price competitors – such as 99p Stores and Poundworld – are also growing both stores and sales. So, what is it that customers like so much about these discount chains?

One of the main drivers for growth has been shoppers’ changing perceptions of single-price retailers. Go back a decade or two, and many people would have been embarrassed to set foot in a store like Poundland. It wasn’t always that way, however – people often forget that when Woolworths launched in Britain in 1909, it sold ‘Nothing Over 6d’, so was effectively the forerunner of the modern pound shop.

The single-price retailers have overcome the snobbery factor by enhancing the quality and range of their products, improving their store environments, and investing in better marketing – as well as benefiting from healthy word-of-mouth recommendation. In the present economic climate, cash-strapped shoppers appreciate Poundland not just because it offers cheap prices, but because its stores are clean and bright and there’s room to get a pushchair around the aisles.

What of the future, then? At its current rate of expansion in the UK, Poundland will, before too long, have stores in most of the locations where it wants them. However, its newly launched fascia in Ireland – Dealz – provides a basis for future growth across the eurozone as its British presence reaches saturation.

Poundland may be the new Woolies, but it seems that there’s plenty of life left in the format yet.

This was posted in Bdaily's Members' News section by Graham Soult .