Why Poundland is struggling during a cost-of-living-crisis

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This article discusses the challenges faced by pound shops and budget retailers in the UK amid rising costs, inflation, and changing consumer behaviors. Here’s a summary of the key points:

### Challenges for Pound Shops and Budget Retailers:
– **Increasing employer costs:** Budget retailers have seen a rise in costs due to government budget changes and inflation. These costs are hard to absorb or pass on when prices are fixed low, like £1.
– **Inflation impact:** A £1 in 1990 equates to around 40p today, squeezing profit margins for pound shops.
– **Changing business models:** Traditional single-price models, like selling everything for £1, are less viable now.

### Case Study: Chris Edwards and OneBeyond
– Chris Edwards, who built Poundworld and sold it for £150m, launched OneBelow in 2019 with a £1 or less price model.
– The business later transitioned to OneBeyond, with prices mostly over £1, due to post-pandemic supply chain disruptions and rising freight costs.
– Edwards emphasizes experience, negotiation skills, and product mix to keep the business profitable.
– His strategy includes sourcing cheap UK stock, sacrificing profits on some items to attract customers, and importing goods from China to gain margins.

### Lessons from Past Failures:
– The Poundworld chain expanded rapidly but collapsed after being sold to American investors who lacked expertise in discount retail.
– Wilko, another budget retailer, went into administration in 2023.
– Poundland experienced difficulties by drifting from its core £1 offer and introducing unpopular products like Pepco clothing.
– Industry experts believe simplicity in pricing and clear business focus are key for budget retailers to succeed again.

### Industry Trends:
– The number of budget retail stores in the UK grew significantly from 2009 to 2015 but has since plateaued.
– The 2009 recession and the fall of Woolworths allowed discount stores to thrive with cheaper rents and increased consumer demand.
– Discount supermarkets like Aldi and Lidl have attracted a broader customer base with low prices and loyalty schemes.
– The pandemic shifted much of budget retail growth to out-of-town retail parks.
– Online extreme discounting now poses additional competition for brick-and-mortar budget stores.

### Current Strategies and Outlook:
– Poundland has started a turnaround, closing unprofitable stores and negotiating rent cuts.
– Budget retailers are focusing on core offers and simplicity to regain customer trust and profitability.
– Despite tough conditions during the ongoing cost-of-living crisis, seasoned retailers like Chris Edwards believe experience and good sourcing remain vital to survival.

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If you want me to help with a specific aspect—e.g., more details on the history of budget retail, Chris Edwards’ strategy, or the impact of economic changes—please let me know!

Read the full article from The BBC here: Read More

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