Poundland - Multi-price...

16 March 2017

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Following on from the Poundworld note, where they've gone towards to a multi price strategy, with their Poundworld Plus format.

Poundland have recently added an 'OMG' range in to their offer near the doorway, providing further value and presumably a fight back against the likes of Home Bargains and B&M who aren't restricted by the single price point.

The Poundland version of multi price looks and feels better to the customer and could almost become an Asda style with £1/ £2 / £3 price points with a focus on providing value within that framework.

Of course single price remains crucially important to both of the single price retailers, but multiple pricing is becoming the norm and the need to diversify the offer, provide value and not land lock themselves against retailers without the price restrictions.

So the OMG! offering at the front of store features leading branded lines fixed at £2.

It's effective in a sense of the range being in one area - a la the 'bargain buys' area in Home Bargains and also B&M, who operate a similar 'spot deals' space in the doorway.

However Poundworld intersperse their multi price lines all over the store, within host category and then in the bargain wall too. It didn't work from what I saw, confused matters and I felt it was an opportunity missed.

But Poundland feel sharper; not affecting the core price point / message and also enabling bigger packs to be sold at a higher fixed price.

£2 is a decent price point and customers understanding the value proposition will see that 750g packs of Cornflakes represent good value.

In addition, there's no 'extra value' packs to confuse the value mechanic. It's all core pack sizes at £2, enhancing the value based, round pound model.

The falling GBP vs. USD continues to impact margin though, and the non food business particularly will be under pressure. The margins are healthier in this arena but it will still impact the wider business.

Moving to multiple price points in non food will drive value forward, the ability to range £2 / £3 lines will allow Poundland to push their seasonal offering forward and not be locked in to thinning margins and a potential reduction in range.

Their core business remains strong enough, with a wide variety of products at £1. But it can be a little downmarket, not really doing justice to the quality of products on offer, both in brands but also own label.

One feels that they almost need to go through a 'reboot' a la Iceland (as we've seen) and move away from the novelty characters fronting their ranges (Charlie Dimmock and Tommy Walsh from 90's gardening shows, however Jane Asher is a timeless name synonymous with baking).

Iceland have done a great job of repositioning their business towards a level of 'affordable affluence'; a nicer look and feel, core pricing and ranges underpinned by awards and credibility.

Poundland could look towards redesigning their stores and signage with this Iceland in mind, making it a place that you 'want to go to' rather than being a place that you may 'have to go to'.

The danger with Poundland (or anyone else) being a place that you feel that you 'have to go to' is that when someone else comes and opens up, be it in the area - new retailer, discounter, cheaper etc. The customer then has little loyalty and is likely to trip off to the newcomer and switch spending.

Not through nothing that Poundland do wrong necessarily.... It's just that customer isn't engaged enough, bar feeling they 'have to shop there'.

Of course Poundland will still attract customers who like to visit for the treasure hunt feel, and save money by visiting occasionally. However moving to multi price with headline brands and fixed pricing will certainly attract new customers.

But enhancing the store look and feel, messaging and signage (not just smart design, but retaining the focus on value) will also bring new customers through the doors who will likely be very impressed and convert some spending in to Poundland, away from B&M, Home Bargains and even Aldi and Lidl perhaps?

In stores, they're broadly not bad, not great here admittedly; an own goal with the header boards, but a decluttering exercise would be beneficial around the shops.

Clipstrips (the hanging strips with products on) are all over the store and they're important for sales, but too many = clutter.

As noted, seasonal is very important for single price / discount retailers. It works to get people in to the stores and have them spend more money with the retailer.

A sharp, rotating offer enables footfall and sales to be generated, with the hope the customer wanders around the store and spends even more. However fixing prices at £1 with the sterling weakness means less for your money.

Merchandising is a consideration when retailing higher priced lines though, it has to be sharper which ties in to a sharper look and feel in store.

Baking is a category that Poundland perform well in, but the structure of price restricts the range. Again, adding further layers of price can show value in other ways, with lines at £2/£3 which could then rival bigger supermarkets and Non food retailers.

So expect multi price to start to arrive in to seasonal, which will enhance the offer anyway, as Poundland can show value at the £2+ price point.

Classic single price fixture here, spot buys, grey market, tertiary brands make up the range and add to that level of 'disruption' in the fixture.

A rotating range means that customers are enticed in to the store, never quite knowing what they'll find. Big brands form a key part of this too, Health / Beauty particularly.

However it doesn't provide a level of security around range, if a customer visits each week and seeks out value. They want a level of stability with the range to be able to switch the shopping, however a lack of shelf labels means there doesn't look to be much guarantee around what is always sold, and what comes in and out of the range.

There is some evidence of 'star' lines perhaps with these labels dotted around, but this has created another challenge....

21 pack Kit Kat in the OMG area are £2, whereas 8 pack in the core run is £1. The core range then looks poor value, however that's assuming the OMG lines are limited supply and special buys in their nature.

But the rest of the range appears to be up for grabs, which is good in a sense of Poundland being 'traders' and able to react and add range in at short notice.

But if they're to grow and add customers who want to rely on the chain, then a level of stability in range and perhaps, some more rigour would underpin their business nicely.

Alongside that repositioning.... It's worked wonders for Iceland, both in product and indeed, store feel. Could Poundland bring a little bit more glamour to the bargain / variety store sector too?

From the Grocery Insight newsletter archive, first sent to subscribers on 16 March 2017. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.