Poundland

1990–99: Formation and early history

Claiming to have introduced the concept of single-price retailing, Dave Dodd and Steven Smith founded the retail chain in April 1990 with a starting capital of just £50,000 and a turnover of £13,000 from 624 products on their first trading day. The first pilot store opened in December 1990 in the Octagon Centre, Burton upon Trent, after being turned down by big landlords who had reservations about allowing such a store to operate, given they could easily undercut every retailer in sight. It was soon followed by other stores, most notably on The High Street, Meadowhall.

By the end of the first year, Poundland was operating from several stores and had turned over £1million, with a profit of £6000. Growth continued throughout the early 1990s, with six stores by December 1991 and a further seven a year later. In 1995, Smith failed to plan for more warehouse space and retail growth pushed their storage capacity past its limits. In response to unacceptably high stock theft, a new 130,000-square-foot (12,000 m²) warehouse was built, although at a cost of heavy profit losses, from £850,000 in 1994 to £400,000 in 1995. The retailer managed to resolve their operational difficulties throughout 1996 when their new office in Hong Kong opened to support product sourcing and operations in the UK.

Early 2000s: Expansion and management buyout

Although enduring a troubled first few years, by the 2000s Poundland had become a multimillion-pound business, opening their 150th store in Northampton in mid-2006 with steady increases in gross turnover throughout the decade. Following a management buy-out in 2002 by Advent International for £50m, the company continued to grow with annual profit growth of 46% a year from £4.1m in 2006 to £12.7m in 2009. Chairman Colin Smith, speaking in April 2005 as Poundland revealed it had invested £20–25 million in building a 300,000 square feet (28,000 m²) distribution centre, said there was great scope for further growth, saying "We can clearly conceive this chain having 400-plus stores in future"; this target was reached in 2012 with the opening of their Haringey store.

Late-2000s: Economic recession

Poundland reported strong sales in a time of economic crisis, with 2008–2009 revenue just short of £400m, up from £330m for 2007–2008. Despite this, Poundland was not totally immune to the recession, having been forced to close down stores not financially viable, even if well-positioned. Such was the case with their store in West Ealing, where it is believed high rental costs were one of the reasons why the company pulled out of the area. Although the chain enjoyed strong growth and sales during the recession, then-CEO Jim McCarthy noted that there is a misconception that Poundland is a better business in a recession, when they're actually better during normal economic conditions, though are robust to manage well under any econonmic conditions.

When the rate of VAT was reduced in November 2008 to 15%, Poundland's prices remained fixed at £1, by reason that they have kept the same single price point of £1 for 18 years whilst absorbing duty and increased supplier costs and that savings would be passed on in other ways. Reports emerged in September 2008 that Poundland's owners, Advent International, were to put the retail chain up for sale, with figures showing that value retailers were seeing business boom during the economic recession, whilst noting that value-conscious customers were switching from traditional larger supermarket retailers for everyday necessities. The retailer had a good start into 2010 when they announced they had seen a surge in sales by nearly 35% over the 2009–2010 festive period.

Recent history

In early 2010, Poundland's then-owners Advent International were planning on cashing in on the resurgence in value retailers by preparing to put the chain up for sale. The report came as figures showed that value retailers were seeing a business boom in the current economic climate, with Barclays Private Equity expressing an interest in a potential take-over of Poundland for about £200 million. On Tuesday 4 May 2010, it was announced that Poundland had been sold to US private equity firm Warburg Pincus for £200 million and was the subject of an Initial Public Offering in March 2014.

The company acquired 99p Stores in 2015, which was followed by a drop in its share price from 350p to 150p; in August 2016 the now-struggling Poundland was sold to the South African company Steinhoff International for £610 million. Poundland's shareholders approved the takeover in September 2016. The business has converted the 99p Stores under the Poundland brand, while introducing 'Poundland & More' as new concept in the acquired stores.

Sales strategy

For much of its history, Poundland promoted their sales strategy through the slogan: "Yes, Everything's £1!", yet started selling items that cost more than £1 from the mid-2010s onwards; the Advertising Standards Authority received complaints that the slogan was thus misleading and required that the slogan ceased usage. For the vast majority of stock sold at the set price of £1, the company avoids the need to transmit pricing information to each store as well as the need to associate individual price tags with each item. Although the retailer encountered apprehension from some manufacturers worried about selling their brands in a discount environment, the store offers the alternative of selling the products under their own in-house brand. Running a store in which prices do not change presents challenges, particularly with inflation, however inflation has also meant that some products which used to have an RRP below £1 (and were thus cheaper to buy at other stores) have increased in price elsewhere and now represent better value at £1.

One tactic adopted by the company to workaround inflation is to decrease the amount of an item sold for £1; for example, a set of pencils could have a single pencil removed to reduce the production cost, but retain the same sale price. The retailer is able to dismiss concerns whenever the pound becomes weak, as this means shipping and freight costs also reduce, which counteract the impact of a weaker pound. Plans to expand the price offering (such as a £2 section, 50p section etc.) by then-CEO Jim McCarthy was decided against, after understanding the overwhelming message from customers was not to change the single price strategy as it was easily understandable.

Products offered

Poundland offer a range of approximately 3500 products, of which 1000 are branded products with the majority being food and drink. Stock typically is categorised as either ongoing core lines (products bought direct from the manufacturer), seasonal ranges or clearance stock, with 10,000 new products featured each year. Initially, unbranded products stocked by Poundland (accounting for roughly 70% of total stock) would carry the Poundland branding and logo; the retailer determined that they could increase sales by removing the Poundland branding and creating around 50 sub-brands, such as Beauty Nation, Kitchen Corner and Toolbox for its value line of DIY products. Some of the products sold under the in-house brand are supplied by manufacturers who are worried about their brand being sold in discount stores and would rather allow their products to sell without their own branding attached.

As well as their in-house brand line, the retailer also sells many products from other familiar brands, such as Colgate, Walkers and Cadburys. Poundland were reported to be Britain's largest seller of batteries in 2009, stocking familiar brands such as Sony, Panasonic and Kodak in quantities priced more competitively than their closest rivals, with their Kodak AA batteries being one of their best selling items in 2009. Poundland also sell large quantities of their stock to other retailers off-the-shelf, where it is cheaper for these retailers to pay £1 each for a bulk purchase than it would be to pay a discounted bulk-purchase rate elsewhere. Plans were announced in 2016 to start selling Pep&Co clothing items in Poundland branches, although similar to the retailer's contemporary sales strategy of selling items greater than £1, the clothing items would similarly cost more than the £1 single-price. Whilst some Pep and Co outlets would share store space with larger Poundland outlets, smaller stores will feature a minimal clothing offering.

Customers

Poundland estimated it served 7 million customers every week in 2016, with most in the C1, C2, D and E categories although claimed in 2008 that 10% of their customers were in the A/B social grade groups, an increase of 22% compared to 2007. The retailer has been keen in recent years to move away from their reputation of only appealing to low-income households, as they continue to expand into mainstream shopping centres and districts, targeting an increasing number of higher earning consumers. It was reported in March 2017 that around 85% of the country has at some point shopped in a Poundland store.

Where some high street shops reported a downturn in profits during the financial struggle, Poundland experienced encouraging growth attributed to rapid price inflation of many of the household necessities, such as increased bulk sales of items including toothpaste and tinned food.

Competition

Value and discount retailers experienced a boom in sales during the recession from the start of 2009, with several retailers operating with the same strategy as Poundland, such as independent businesses and smaller price-point retail chains such as Poundworld. Poundland have competition with retailers in their own sector, such as when in August 2014, they temporarily dropped prices in a store to 90p to compete with neighbouring 99p Stores, who in turn reduced their prices to 92p. Some consolidation has since taken place in 2015 with the acquisition of 99p Stores, its closest competitor in the sector at the time.

Other larger chains have felt the impact of discount retailers, with some budget-conscious customers switching from traditional larger supermarket retailers for everyday necessities. To lure customers away from larger supermarket chains, Poundland advertise reputable household brands at prices that undercut many competitors in an effort to entice customers into their stores; customers may then be inclined to impulse buy other products on offer such as own-brand that they may not necessarily have planned to purchase. Asda announced in January 2009 that many branded products such as Colgate toothpaste has been reduced to £1, in competition with Poundland who offered the same products at the £1 price point. Poundland introduced multi-buy offers to provide a larger quantity of the products for the same price of £1 try and retain their customer base. However, research conducted by The Grocer magazine in August 2009 found that of the 1300-odd supposedly discounted ASDA products, a third were the same price as in March 2008 and 173 products had been selling for less than £1 during Spring 2009.

Whilst Poundland's competition will primarily be other value retailers, the retailer may sometimes find they are competing with other retailers' own brand produce. It was reported in May 2010 that Poundland were selling rebranded lotions for £1, exactly the same products that Boots were selling under their own brand for significantly more. Boots responded to the findings by suggesting that the products available in Poundland stores were likely excess stock they had sold off below cost price which had been destined for overseas markets, with some inadvertently directed into UK distribution without their permission.

Store expansion

From 2000 until 2003, company growth was steady with a milestone 100th store opening in Shirley, West Midlands in 2003, yet in the following three years, store numbers had increased by 50% to 150 by 2006, as shown in the graph to the left. Growth then slowed again until early 2008 when the retailer took advantage of the economic downturn to further expand at an average rate of 3.7 new stores a month, from February 2008 to September 2009, opening their 200th store during this time. As of 2015, Poundland's UK and Ireland stores average 5,233 square feet (490 m²), and typically range from 1,700 square feet (160 m²) to 12,000 square feet (1,100 m²).

The retailer expanded into Northern Ireland and opened 6 stores there before Christmas 2009, selling locally sourced goods such as milk as well as their usual branded products. The company also celebrated a milestone when their 250th store opening on 21 November 2009 and had planned for another 17 before Christmas 2009. Following the acquisition of 99p Stores, the retailer announced they were to close 80 stores in November 2016, just 2 months after their takeover by Steinhoff International.

Financial performance

Poundland have seen encouraging increases in turnover year on year, helped by an increase of store openings and turbulent economic conditions in the mid-2000s. The company is listed on the London Stock Exchange.

International operations

Although price-point retailing and psychological pricing was first adopted in the United States during the 1870s by Frank Winfield Woolworth, the chain claims to have introduced this concept to Europe and in 2009, claimed to be the largest single-price discount retailer in Europe.

On 2 August 2011, Poundland announced plans to expand into mainland Europe under the name Dealz. The first 6 stores opened in Republic of Ireland in late 2011, creating 120 jobs and was followed by a store in the Isle of Man in December 2011. The name 'Euroland' was not chosen to avoid the impact of price volatility and allow for variation in price when necessary, as well as poor feedback from potential customers.

Criticism and litigation

Although the £1 price prevails throughout the stores, some branded products have been known to be offered cheaper at supermarket chains, such as a case reportered by the Daily Mirror newspaper in November 2009, who compared prices for branded products offered at Poundland with the same products offered at larger supermarket stores and found in some cases the larger supermarket stores offered better value.

Environmental concerns

In 2008, Poundland infuriated green campaigners by transporting Polo peppermints 7,300 miles (11,700 km) into the UK from Indonesia, rather than sourcing them locally. Despite Poundland being close to the Nestle Rowntree's factory in York, which has made the mint since 1948, Poundland insists it is cheaper for them to source the product from overseas, even taking into account transport costs, to ensure it can continue to provide its customers with value for money. It later emerged that the mints were transported by ship, not by air, so the environmental impact was less significant.

Health and safety

Although Poundland claim that they strive to provide its customers with good quality products while keeping the cost low, there are occasionally some products which fail to meet health and safety standards, and in some cases pose a health threat to the consumer. One such example occurred in February 2006, when dangerous car jump leads were withdrawn from sale across all stores. Although the cable gave the appearance of being heavy duty, it was found to only have a 3 amp wire in the centre following tests by council officers which, if used, could quickly overheat, melt and possibly catch fire. In October 2008, the retailer was forced to recall Halloween witch hats, as checks on the item revealed a small number of chemicals classified as unsafe for young children. Poundland also recalled Marshmallow poles in October 2012 when a customer in Scotland found an entire hacksaw blade in the package. In 2010 Poundland were fined £4000 after a customer suffered injury due to a defective fishing catapult. Additionally a further fine was received in the same year of £3,500 for selling lighters that produced a flame that caused the device to melt during normal use.

Aside from potentially unsafe products, Poundland has also been found guilty of blocking fire exits at a cost to the company of £3,000 in 2005, with a further breach in 2011 that incurred a fine of £20,000 and evacuation of the store due to poor fire safety.

Pest infestation

Poundland were previously fined £24,000 following an investigation of a store in Croydon, London. Customer complaints had been received by the local council, and inspectors allegedly found that hygiene was poor, the store had a widespread mouse infestation and that food which had been contaminated by mice chewing open the packaging and leaving droppings and urine inside, were then re-sealed and sold to the public. During the trial Poundland admitted failing to withdraw food unfit for human consumption, not protecting food from contamination, failing to control mice and failing to ensure the store was well maintained and clean. Additionally they admitted to failure to implement and maintain its own food safety management system.

In June 2015, Poundland were fined £10,000 following an investigation by Islington Council of a store in north London. Evidence of a widespread mouse infestation and that the company had failed to take appropriate action to remedy the situation was presented in court.

Staff ban on wearing poppies

In response to a news story about a member of staff being sent home for wearing a Remembrance poppy in 2011, Poundland posted a comment on their Facebook and Twitter social media stating "Poundland is not against colleagues wearing a poppy; however, colleagues are not allowed to wear one on the shop-floor simply as it does not abide by the uniform rules.".

Poundland backed down from the ban on 31 October 2011, and released the statement that employees will be allowed to "use their own discretion in wearing poppies" after hundreds of customers threatened to boycott the store.