Following the Steinhoff owned PepKor acquisition of Poundland in August 2016, Retail Remedy were invited to a briefing at Poundland, Woolwich to discover what we can expect for the price sensitive shopper on the High Street.
The Woolwich Poundland store was chosen as much for its future as its past: formerly a 99p store, across the street from an existing Poundland, and before that an M&S, it is now a Poundland, and significantly, one of the first to have a Pep&Co shop in shop.
Bricks and mortar retailing is in decline
Pep&Co, set up by Andy Bond, burst onto secondary High Streets in 2015, with the ambitious but delivered plan to open 50 stores in 50 days. Now with 88 stores, the next target is 100, which will be realised 674 days after opening their first. No mean feat at a time when we are told bricks and mortar retailing is in decline.
Now with the acquisition of Poundland, and the ability to run the two brands under PepKor UK, the next milestone on the horizon is 100 Pep&Co shop in shops by the Autumn of this year. Pepkor has a strong leadership team, premiership quality even, but hopefully not with the short tenure ‘premiership’ is normally associated with.
So, what did we learn?
Poundland – Loving the Pound
The road ahead looks positive, starting with addressing the legacy issues of Poundland and the 99p stores acquisition. The fact that the remaining un-integrated 99p stores has now been placed into administration, demonstrates the priority of this. Additionally, it was communicated that of those stores, most were unprofitable and no 99p stores colleagues are losing jobs.
We have commented previously that the inclusion of higher priced items in Poundland was a risk, and could derail the simple pricing mechanic for which Poundland is famed. The theme of “loving the pound” and ‘simplifying multi price” was high on the agenda of the briefing.
The bulk of Poundland sales come from items priced at a pound, but when Poundland add simple price points outside of this, which still drive great value to the customer, then it does work.
Expect price points of 50 pence, £2 and £5 to appear in Poundland stores, but expect them to be clearly defined, segmented in separate bays and ends and expect those items to represent great value. In doing this, Barry Williams said, “we can access other products in other categories”.
More on the agenda for Poundland is creating more Toblerone. Famous for selling 170gms of great branded chocolate at £1, everyone inside Poundland is passionate, almost obsessed, about Toblerone. But what other lines can they become famed for, obsessed about and convert to best sellers?
Ultimately the customer will decide: items that represent great value, that they shop Poundland for, the cross-town deals that people talk about and keep coming in for. With these high volume unit sales, comes even better purchasing from suppliers and greater margin opportunities.
The potential “Toblerone” of the future could be reading glasses at a £1 and quality phone charging cables at, you guessed it £1.
Simple but effective, focused retail processes
The introduction of a new availability process for the top 600 lines sold in Poundland, means store colleagues and managers can highlight the best sellers, and ensure 100% availability to the customer. Items on the top 600 list are highlighted on the shelf edge, have space flexed to ensure greater shelf fill, and are subject to daily reports to check for missed sales and potential issues.
Why 600? Well they account for 40% of the trade, and could be worth 2% LFL this year; simple but effective ways to drive sales, much like Poundland itself.
The next challenge is product, how to generate more new products and ensure the store is always fresh. The price lever has been pulled to the max, so product needs to be the differentiator. From what we saw today, there are plenty of reasons to be optimistic.
Helping customers discover Pep&Co
Fashion for the whole family and aimed mainly at Mums with kids, the Pep&Co brand is price conscious. There was concern at bringing the shop in to Poundland, but so far it has been well received. Poundland stores are often alongside stores such as Primark, Select and independents, so the customer is already there.
Pep&Co’s biggest challenge is customer awareness. Still a brand in its infancy, and although a great success story, there are still only 88 stores to date. It is hoped the integration into Poundland will help spread the word. The target, as well as 100 full Pep&Co shops by Autumn this year, is also 674 Poundland stores selling 5-6 bays of Pep&Co basics.
The team are anxious to show that Poundland has brought in a fashion retailer, and not that Poundland is now selling clothes. Although Pep&Co does range some £1 price points such as the kids school polo shirt, the highest price point is £20 and 95% of the range is under £10.
The focus now is continuing to simplify and drive Poundland, whilst growing and integrating Pep&Co. GHM has now gone and all the stores have become Poundland which does help to simplify the offer. At a time when UK Inflation is increasing, Poundland’s answer is give the customer a fixed price retailer. Makes sense.