Poundland's decision to shift from a 'single price retailer' to a 'simple price retailer' should offer the business potential scope 'to deliver a more varied and arguably stronger value proposition', a leading retail analyst has said.
Clive Black of Shore Capital was commenting after Poundland announced the pilot of a new pricing structure, which will see the introduction of permanent sub-£1 prices for the first time, as well as £1.50, £3 and £4 price points.
'Next Stage'
The group described the move as the 'next stage of its transformation', adding that the new pricing architecture will enable it to 'extend ranges to cover a larger proportion of the volume items demanded by customers'.
Commenting on the move, Shore Capital's Black said in a briefing note that the move 'does not come as a surprise', with the group's Dealz estate in Ireland already offering products at a myriad of price points.
'The move to more flexible pricing should give Poundland potential scope to deliver a more varied and arguably stronger value proposition, albeit shoppers will need to be brought along, plus bolster cash margins,' Black wrote.
'Furthermore, if rolled out across its estate, then the competitive intensity within the discount channel in the UK and Ireland, so bringing Aldi, Lidl and Savers into the pool, could intensify a notch, something that the value-based supermarkets will also, no doubt, be keeping an eye on too. Indeed, it is probably fair to state that the incumbent multi-price general and grocery discounters are no slouches.'
Core Focus
Troubles at Poundland's parent, Steinhoff, have led the group to curb its expansion strategy somewhat in recent months, Black noted, which in turn has 'permitted a focus upon the core offer, which to be fair management has executed well in recent times. Like its competitors, we shall watch the trial activity, any wider roll-out and the competitor response with interest'.
The trial will run across 24 stores in the Midlands in the short-term, with the group assessing whether to roll it out further.
The first store to offer the new pricing architecture is the group's Park Street outlet in Walsall.
“Our customers are among the savviest in the country. We know that and it’s why we’re moving at the pace they dictate to become the simple price retailer they want us to be," commented Barry Williams, Poundland's managing director.
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Dayeeta Das. Click subscribe to sign up to ESM: European Supermarket Magazine.
