The original founder of the Poundland retail chain, Steve Smith, has said that current market conditions, such as high rents, wage increases and operating costs, have created a perfect storm for retailers on the UK high street.
Smith, who now heads up Poundshop.com, an online single-price retailer, also said that consumers now have less time to go shopping, while town centres are beginning to look identical, with the same assortment of retail brands.
"Most lease rents increase every three to five years, knocking small independent retailers off the high street," he said. "Wages have increased and pensions have been implemented, affecting rising costs to run a business. Many independent retailers have closed down because they have no buying power to compete.
"Brexit and higher product cost inflation has led to squeezed margins, so businesses have to buy product wisely, which we do," added Smith.
Nearing The End?
Poundworld looks to be on the verge of shutting its doors for good, with administrators Deloitte saying that all stores could close by 10 August, affecting 2,339 staff across its network.
Poundworld fell into administration in June, with Deloitte appointed to find a buyer for all, or part, of the chain – a process that has proved challenging.
As Smith noted, if Poundworld, whose operating model was based on streamlining costs, can't survive the current retail environment, which retailer can? He believes that online presents an opportunity for retailers struggling with overheads.
Online Opportunity
"As a result of the dying high-street brands, the future of retail is e-commerce," Smith said.
"Poundshop.com doesn’t have any high-street stores, as I believe customers already know our products, most of which consist of essential products, like Colgate toothpaste, that people need weekly. Where the average spends in a high-street pound shop stores is around £5, online, it is around £40, due to convenience, discounts and delivery options. Customers can place an order 365 days a year and any time they want. With many people now working shifts, it makes it difficult to go shopping on the high street," he said.
Smith noted that there are still many towns that do not have a pound shop, which increases the opportunity for Poundshop.com to increase its sales.
"We are seeing customers from as far away as Spain, Germany, [the] Netherlands and France," he noted.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
