Today it was announced that yet another major key retailer will be closing all of its stores later this month, with the total loss of 5100 jobs and closure of 335 in all. Not a great read, and even more surprising that a discounter has been unable to survive. In the current climate, the discounters are the drivers of our high streets and retail trade, with Home Bargains (my old stomping ground) and B&M Bargains both being the darlings of both the high street and out of town retail, even Poundstretcher seems to tread water and live to see another year of retail trade.
Faced with the very tough price point of £1, Poundworld was fighting against like for like rivals Poundland. So what has caused the downfall of Poundworld when Poundland can continue to bring in sales, new customers and meet that magic £1 price point?
I could write a much longer blog piece about this, but in a succinct post, here are my reasons why I think the mega retailer Poundworld lost the edge:
- Lack of differentiation / USP – in a shop full of products selling at £1, and in a market place of heavy players in the discount sector, it’s very difficult to stand out – certainly not on price anyway. So the retailer must offer a number of ways to stand out – store environment, good customer service, good levels of stock. Poundland had the edge (for a discounter) on this over and above Poundworld, creating much more pleasant shops, well trained staff and no empty shelves. They invested heavily in good store fixtures and fittings, and decent locations, and ensure that the green shops stood out more than the blue shops.
- A different price point – Poundland spotted back in 2015-16 that they needed to escape the lock in of the £1 selling price, trialing lines at various higher price points. Poundworld didn’t do this until very recently. The Poundworld customer, although surprised initially, is now familiar with different sectors of the shops, displaying clothing, electricals and housewares at price points often as high as £25-30. Read more in a short article here
- A nimble, forward focused head office team. Of course being one of those team members myself, I know how great leadership and foresight can have a positive affect on retail sales. Leadership that steers the team, and being allowed as a buyer or merchandiser to expand your product range, trial new suppliers, products and categories without having the M&S style sign off procedure (of 10 meetings and 30 committee members to ALL agree you can do something) gives the buyers autonomy to take risks, react to market trends and customer demands. And it pays off. At Home Bargains, this was certainly the case, and during my time there, it was, and still is a very successful team of buyers. My contacts of suppliers report back the Poundworld were a little hesitant and slow to make decisions, meanwhile their competitors have found the product, designed packaging, ordered it and have moved onto the next big thing.
- Brexit – we’re all blaming Brexit in some way, but honestly, Brexit HAS affected the prices of almost all of our goods… well those not 100% produced from scratch in the UK (of which there are very few non food lines). Since the Brexit announcement, the exchange range between the pound and dollar has suffered, and consequently all of our imports are costing us more… raw materials in Asia have increased, labour rates in China have increased, and when we go to pay for the goods (in USD), the total cost is around 12-13% more than it was pre Brexit on exchange rate alone. So the sourcing of products for a retailer to sell at £1, whilst maintaining the same margin became the impossible task for buyers. Other retailers with differing price points can absorb some of this, and even nudge their prices up a little, but Poundworld found themselves stuck. What once was the maximum cost price of 58p… absolutely no more, now becomes difficult to source at, meaning that many of our poundlines have discreetly been easing up to £1.29 or more, simply because it is extremely tough to source at below 60p.
It’s sad to see so many jobs lost, so many doors close on premises, but as a small business we need to take what we can as key learnings. As smaller retailers, we use the downfall of others to our advantage and understand what went wrong with these retailers, and how we mustn’t make the same mistakes. Go back and re-read the above, turn the negatives into positive action points for you and your business… how can you be more nimble? You know you can be reactive and make quick decisions, but do you really do this? Or do you sit on a quote for 2-3 months? Time to speed it up! Don’t lose YOUR edge as a retailer.
Be nimble, keep a close eye on your costs and retails – increasing your prices to maintain your profit, and most importantly nail your USP…your niche… your point of difference. You absolutely don’t need to be a retail giant to be different and better than others in your market.
If you are looking for ways to master your niche, understand your costs and profits, and focus on your USP, then why not join me over in my new VIP retail Biz Club? It’s a membership club created for retail, by retail. A place to gain training, masterclasses and support in all things retail. It’s £10 each month, and a great investment in your business, one that can reap in far more than £10 in sales and profit. My VIP members are seeing real results already. >>FIND OUT MORE HERE<<